israeli innovation nation- jon medv… · cb insights 2013 report 0 100 200 300 400 500 2009 q1...

Israeli Innovation : Lessons for Oz

Jon Medved [email protected]

The Next big things from Israel

How can Israel-Oz collaborate?

Update from Startup Nation

• “FOR a country with so many wars, Israel still has an economy with the power to astonish” THE ECONOMIST, APRIL 3 2008

2005-2010 average Israel growth: 4.2% 2009 ISRAEL: + 0.9% OECD: -4.3% 2010 ISRAEL: +4.5% OECD: +2.7% 2011 ISRAEL’S : +4.8% US: 1.8% 2012 (estimate) ISRAEL: +3.2% Group of 10: +1.2% I

“Israel: the power to astonish”

“Israel Safest as Investors Discount Threat of War” “Israel produced better risk- adjusted returns than all

other developed stock markets in the past decade”

• Israel beats Hong Kong and Norway and all others with Risk adjusted return of 7.6% for past ten years—less volatile than Norway, HK

• This “Bloomberg Riskless Return Ranking” shows the TA-25 Index returning the highest among 24 developed-nation benchmark indexes (Israel total gauge returned 161% over the decade)

• TA-25 dividend yield of 3.53% vs. 2.66% of MSCI developed countries is “very attractive” according to Jacob de Tusch-Lec of Artemis Investment Management

• “Israel has very well-capitalized banks and an economy that is well-balanced…This is not an economy that was built on cheap leverage

More news: Bloomberg – 2/20/2012

this is a safe business model” according to de Tusch-Lec.

BusinessWeek, March 8.2012

Israel Beats All Comers in Job Creation

A combination of fast population growth, robust exports, and sound monetary policy has allowed Israel to create jobs faster than the U.S., the European Union, Poland, and even Brazil. Bank of Israel Governor Stanley Fischer says the country is now near full employment.

The Israeli model in crisis? Venture capital, company exits…

A crisis in Israeli venture capital?

While Venture is down, angels are flying

Meanwhile, angel financings have exploded…

VC is indeed down, as it is worldwide.

IVC VC Report 2012

Meanwhile, dealflow grows…

2011: $376M.

2012: $550M.

2011: 545 deals 2012: 575 deals Bottom line:

Israel’s high-tech sector is as

strong as ever.

“Despite a decrease in capital raising… foreign VCs… and private investors are gradually increasing

their activity.” – Koby Simana (IVC)

The rise of angel investing

Financing High-Growth Firms: The Role of Angel Investors Report:

“Angel investment is the most significant source of outside equity

for seed and early stage start-ups.”

The role of angel investment

1) Big $

“Angels invest not only for a potential financial return, but in many cases, to give

back by helping other entrepreneurs.”

Angel investing needs to becoming more visible, formalized and professional…

2) Big development impact 3) Still overcoming frictions…

“[the crunch]… will result in over 1000 seeded startups being orphaned…”

CB Insights Blog December 19, 2012

“Companies we never really got to know are simply starting to fade away…”

Pando Daily November 2012

Source CB Insights 2013 Report

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2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4

Series A Deals Seed Deals

# global startup financings – CB Insights 2013

The divergence’s size is remarkable. In Q3 of 2012 alone, there were 300+ more seed deals than series A fundings.

Meanwhile, commitments to venture funds are down, VCs are shrinking in both deals and $ amounts.

Where are the financiers for

Israel’s early stage companies?

The role of angel investment – impending ‘crunch’

Can we build these anymore?

Do companies exit too early?

Crisis in the Israeli model?

“Israel’s start up economy is hotter than ever. But a question haunts entrepreneurs there: Why are Israeli start-up hits generally so small?”

VentureBeat April 15th, 2012t

“…it would be better off creating its own homegrown multinationals…”

Haaretz’s Ora Coren Sept. 29, 2012

“To exit or not to exit… the billion-dollar question”

Haaretz headline Sept. 29, 2012

Source IVC Research Center 2012 Pricewaterhousecoopers Israel Exit Report 2012

Average M&A size increasing…

2008: $32Mn/deal 2010: $51Mn/deal 2011: $81Mn/deal 2012: $111Mn/deal 0

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$32M $40M

$51M

$81M

$111M

Trends: Average deal size growing. Entrepreneurs, management maturing. Sophisticated, developed companies with serious revenue streams.

“Recently, we are seeing Israeli companies grow, and become world leaders in their areas. We are seeing companies with revenues of over $100 million. We did not see these in the past. They were being sold much earlier, often pre-revenue.”

Rubi Suliman PwC High-Tech Partner

“…the average deal size has grown nearly 3½ times, from $32 million in 2008.”

Wall Street Journal Israeli 2012 Tech Exits Top $5.5B

Jan 7th, 2013

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M&A of Israeli firms

Volume # Deals

“Cisco announced definitive agreement to acquire NDS… for approximately $5B”

Cisco Newsroom July 31st, 2012

$ (

bill

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Exits by the numbers

Crisis in the Israeli model?

Multinational R&D explosion Are R&D centers good or dangerous?

R&D Centers in Israel

50% of hi-tech workforce

in multinational centers

300 centers around Israel

Huge players in the economy:

Cisco purchase of NDS: $5B Cisco: 13 acquisitions

Broadcom: 10 acquisitions

Intel/Iscar : 10% of Israel’s

exports

Sources: 1 Intel Israel exports doubled in 2012 – Globes February 17th

Who is buying (2005-2012)

http://www.bmc.com/

http://www.broadcom.com/index.php

http://www.cisco.com/en/US/hmpgs/index.html

http://www.juniper.net/

http://www.cadence.com/index.aspx?lid=home

http://images.google.com/imgres?imgurl=http://www.cs.cf.ac.uk/ccgrid2005/hp-logo.gif&imgrefurl=http://www.cs.cf.ac.uk/ccgrid2005/&h=239&w=292&sz=18&tbnid=XV5whVrwpJTQvM:&tbnh=94&tbnw=115&prev=/images?q=hp+logo&start=3&sa=X&oi=images&ct=image&cd=3

http://en.wikipedia.org/wiki/Image:JohnsonandJohnsonLogo.gif

http://www.sandisk.com/Default.aspx

http://www.ca.com/

http://www.netapp.com/

Who is buying (2005-2011)?

Israel’s role in the tech world

Israel’s global reputation

Israel’s Competitive Edge1

Country Rank 1st 2nd 3rd 4th

Total Expenditure

on R&D Finland Sweden Japan

Flexibility &

Adaptability Hong Kong Australia Brazil

Entrepreneurship of

Managers Malaysia Colombia Taiwan

Availability of Scientists

and Engineers Japan USA India

Venture

Capital Availability USA Hong Kong Taiwan

Info Technology Skills Iceland Denmark Sweden

“Foreign Direct Investment in Israel Doubles” According to the UN World Investment Report, investment in Israel totalled $11.37 billion in 2011, 106% more than in 2010.2

- Globes.co.il headline, July 9th, 2012

Sources: 1 IMF World Competitiveness Yearbook 2011, WEF – Global Competitiveness Report 2011 Competitiveness Report 2011-2012 2 Globes.co.il July 9th 2012


Desktop-Pentium

Notebook-Centrino

PCB Inspection

Chip Manufacturing

Cell Phone

Cordless Phone

Billing

Call Centers

Voice Mail

VOIP

Computer hardware

Telephony

http://www.appliedmaterials.com/index.html

http://www.comverse.com/

http://www.nice.com/


Flash Memory

DVD

LCD/Plasma

Satellite TV

CableTV

Compression

Instant Messaging

Security/ AntiVirus

Firewalls

SW Performance

Point of Sale

Comparison Shopping

Software/Internet

Consumer electronics

http://www.zoran.com/

http://www.nds.com/homepage.html

http://www.m-systems.com/

http://www.optibase.com/

http://www.harmonicinc.com/index.cfm

http://www.retalix.com/index.html

http://www.symantec.com/

http://www.rsasecurity.com/


Medical/Life Sciences

Generic Drugs

Spinal Cord

M2A/PillCam

Stents

Drip Irrigation

Electric Cars

Drip Irrigation

Geothermal

Desalination

Solar Generation

Water Management

Enviro/cleantech

http://www.medinol.com/index.html

http://www.givenimaging.com/Cultures/en-US/Given/English/

Intelligent solutions to save resources

Aquaculture and advanced agriculture

Climate/geography facts: • Half of Israel is desert • Less than 20% arable land • Water crunch…

But… • Israel 95% produce

independent • Significant citrus exporter,

world’s largest date exporter, etc…



Kibbutz wins $500 million tender for Chinese dairies

Jerusalem Post Headline August 22, 2012

High-efficiency techniques allow farmers to make more with less.

“In Israel’s desiccated Arava valley… temperatures topping 45 degrees C – they breed fish”

Stock Journal Farming Fish in Israel’s Deserts

August 22, 2012


Israeli aquaculture


Israeli aquaculture

History of fish farming evolved from pre-1948 kibbutz days Today, aquaculture in Israel is a big business with high-tech investments leading the world in ultra-high efficiency/”green” seafood. The future: • Desertification in China + growing

animal protein needs • Water crunch • Potential oceanic fish population

collapse

Small farmers are now netting $70M annually in tilapia, carp, and bass alone.

Meanwhile, total Israeli production is surpassing 20,000 tones annually.



Israel-India Aquaculture/Agritech news: • 2008 plan: Israel building 20 “Centers of Excellence” farms in India • 2008-2010 agricultural support plan • May 2011: India and Israel create $50 million agriculture fund

Models for cooperation:

Israeli delegation visiting Indo-Israeli Agricultural Center of Excellence for

Vegetables, Andhra Pradesh, August 2009

Israeli Ambassador to India Alon Ushpiz and Haryan Regional Agricultural Minister at Indo-

Israeli Agricultural Center of Excellence for Vegetables | April 2012


Agri/aquatech: companies to look for

Big companies with international traction

Paired with India’s Rasi Seeds to develop drought-resistant rice crop

Currently approaching 25% of the Indian drip irrigation market

Industry focus: freight and logistics Intelligent solutions to save resources

- Automated marketplace… Ebay for B2B - Freight Forwarding Exchange launched 9/2011 with a $9B top-ten global beta customer - Create a “Kayak-like” site for freight forwarding


Industry focus: water tech

World leader in water management

“OECD: Israeli technology can alleviate global water crisis”

Ynet News Headline

June 7th 2012

Akron, OH

Buenos Aires

Cyprus

Israel Shenzhen

Beijing

Karamoja, Uganda

“Israel should be proud of being at the forefront of green innovations for water management; these innovations can be decisive in managing scarce water resources”

Angel Gurría Chair of OECD June 6th, 2012

% wastewater reclaimed for use – top countries

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Israel '22 Israel '12 Spain Italy USA

Existing Mekorot strategic partnerships with municipalities and state/provincial governments As of summer 2013

Industry focus: water tech Intelligent solutions to save resources

How does Mekorot do this?

Israel-China cooperation: • OECD: with no new measures, by 2050, 60% of Chinese and Indians will

be under “severe water stress” • 2012 – Israel has world’s largest MOU on water tech sharing with

Chinese government – includes IP protection

Israel-India cooperation: • 2008 MOU on rural water cooperation • February 2012: Joint water technology R&D deal signed in Jerusalem • “Centers of Excellence” agricultural learning centers established

throughout India using Israeli water saving best practices Israel-US cooperation: • Mekorot strategic partnerships across multiple states • Desalination advising along west coast • US military – advanced desal equipment suppliers (IDF and Israeli firms)


Water technology at work globally:

Models for cooperation…


Water tech: companies to look for

SaaS-delivered advanced “control panel” to monitor water networks. Big data + deep analytics = ending leakage, reducing water transport energy, saving water $15.5M from Giza, Gemini

Making a water network “as smart as a computer network”


Water tech: companies to look for

Generating renewable, low cost electricity from moving water in pipes. Predictable green energy without environmental impact of typical “hydro” solutions Riverside, CA 2012 – success Portland, OR 2013 – success San Antonio, TX 2014? New York State 2014?

$750K+ raised by OurCrowd in 2012 in $5.75M round

• Israel is like Silicon Valley or

Boston-Compact Geographical

entity-2hrs to any deal

• Informality is a way of life-Bibi, Dudu,

Muki,Chemi

• Risk taking is endemic

• Failure tolerant

• Pioneering Ethos

• Immigrants drive the process

• International networks and experience

• We go “global” from day one

Why Israel? It’s the Culture…

• Partners with G-d in creation • Everyone questions authority-”every ------- a king” • Flat, anti-hierarchical social organization • Strong academic environment, entrepreneurial universities-45% post high

school have degrees • There are no “unknown millionaires”-a real community • Building startups has become the national sport; entrepreneurs-the new

cultural heroes

Why Israel? It’s the Culture…

• Best and the brightest assemble in the elite units-technical and fighting

• Elite unit pedigree first question and most important resume item

• Units are outfitted with the latest “toys”

• Learn how to build products fast and cheap

• Value placed on development and applied research

• Work as teams, take risks, and lead

• Cutting edge technologies in sw, communications, security, electro-optics, video, distributed networking, etc.

• Meet friends and partners for life

• When they come out-they are “ready for bear”

The Israeli VC’s not so secret weapon

Why Israel? It’s the Army

Technion-Cornell beat Stanford and

others in stiff competition.

Campus will generate $23B in

economic activity over 3 decades.

Will be most important civic initiative

linking Israel and US cities

• 99 year lease - $1 • To spin off 600 startups • 8,000 permanent jobs • 20,000 construction jobs • 280 faculty • $100M grant from NYC


Technion-Cornell Partnership


• Independent study in 2010 conducted by Stax Inc. found:

• Nearly 100 companies with Israeli founders or Israeli licensed

technologies in Mass. (in 2012 has been upped to 137)

• In 2009 the impact of these companies:

• $2.4B in direct revenue in Mass.

• $7.8B in total revenue in Mass. including the companies that

service them

• 6000 Mass. high-level knowledge jobs direct

• 21,000 Mass. jobs including companies that service them

• Mass-Israel relationship = 2.1% of Mass. GDP

• Now concerned about competition from other states as they

“aggressively chase Israeli innovation for economic growth”

• Note 18 top level state missions to Israel in past 2 years source: http://www.cjp.org/local_includes/downloads/46889.pdf

“If people want to see the future of the world economy, they should look at Tel Aviv — home to hundreds of startups and research centers.” President Barak Obama, March 21 2013

President Obama calls Israeli technology: “inspiring….remarkable”

UK-OZ cooperation

OZ-Israel Cooperation

UK management expertise

OZ-Israeli cooperation

The UK has been oil-rich Israel has been resource poor. Not anymore.

Advantages: - Jumpstarted innovation

economy - Fueled search for post-

fossil fuel technologies

When will this expertise come to the City? Its already here..

What’s next out of Start-up Nation?

• Exposure to top dealflow • Professional due diligence • Legal issues/termsheets

handled by firm • Preempive/other rights

• Independence, self-selection • Low fees • No large upfront

commitment • Relative speed and ease

OR

Investors’ traditional dilemma

BUT BUT • Large Commitment • Hefty management fees,

carried interest fees • No control, no choice

• Very limited dealflow • Term sheet negotiations • Limited due diligence

capabilities • No protection, no rights

Venture Capital Angel Investing

Professionalism and Experience of a venture fund, flexibility and choice of angel investing.

Problems solved, challenges overcome

OurCrowd’s value to investors

• Infinitely scalable • Accessibility to a wide range

of investors • Frictionless – easy and simple

investing • The promise of deal

automation

• Do startups need $100 investors?

• Do they want to manage thousands of investors?

• Potentially suspect deal quality

• No post-deal management or support to companies

• Murky regulatory situation… awaiting the SEC

Crowdfunding

Promises Pitfalls

OurCrowd cracks the crowdfunding code

• Access to quality dealflow • Professional diligence and negotiation – rights protected • Limited to accredited investors • Aggregate investors into one entity • Manage investments, take board seats, support companies • Operate legally under today’s regulations

OurCrowd’s crowdfunding model:

100+ potential deals per month

Screening by investment team

Meetings with management

Ongoing in-depth diligence

Prep

• Large volume of quality dealflow

• Startups from across the Israeli tech sector

40+ deals

20+ deals

5-10 deals

2-3 deals

Deal #1

Deal #2

OurCrowd – Deal sourcing

web email referral we find you

OurCrowd – 6 Point Investment Checklist

1. Great team: Successful startups are founded by great people. We pay special attention to successful serial entrepreneurs

2. Market: The startup must address huge market growing like a weed. No arcane ideas addressing niche markets.

3. Easy to understand: We look for investments with a simple value proposition Easily understood by us AND by “our crowd”. We like technology, but we like real value added solutions even better

4. Traction: Investing in early stage companies, but not just ideas or pre-prototype We want to see an early version of the product Traction can come in many forms: users, customers, partners, revenues

5. Sponsorship: Investing in startups/building early stage companies is a team sport The right board, advisors, strategic partners or angels is critical. We think partnering with other smart investors is a big plus.

6. We seek “deals” and are value-sensitive

Investing with OurCrowd Investor experience from accreditation through deal closure

Step 1: Accreditation online Israel Criteria: 12M NIS holdings AND

either financial expertise or investment history

Step 2: Receive notices of top deals or browse offerings Email, call with investor relations Focus on transparency and communication


Investors have access to OurCrowd and third party analysis and

comment, as well as extensive opportunities to “meet” the team.

Step 3: Review diligence

Step 4: Invest alongside OurCrowd $10K minimum, investing per terms negotiated by OurCrowd

Step 5: Follow your holdings Personal portfolio OurCrowd Rights and Privileges Company news, quarterly updates


Step 6: Support your companies (coming soon) Provide introductions and bizdev support, help us spread the word

Step 7: Follow-on investments (coming soon) We retain preemptive rights and make them available to our investors

Jon Medved - Washington Post: "one of Israel’s leading high tech venture capitalists” - 12 exits >$100M - Co-founder, CEO of VRNG - Founder & GP at Israel Seed Partners, $260M managed

Elan Zivotofsky - 15yrs experience in Israeli investing - Managing Partner at Prelude Israel - Former Head of Technology Banking, Lehman Brothers Israel - Top-ranked Israeli tech research analyst for Goldman Sachs

Steven Blumgart - Co-director of Glencore's aluminum division - Senior executive, management committee at Glencore 1998-2012

Pini Lozowick - General Partner at Alta Berkeley - Among first employees at Broadcom, Dir. Marketing - Chairman of Provigent - Founder and GM of Verisense - 5 exits = total value $3B

Our Team

Our Team

Zack Miller - VP BizDev at Seeking Alpha - Leadership positions with Lending Club, LearnVest, Covestor, and SigFig - Author of Tradestream Your Way to Profits (Wiley, 2010)

Robbie Citron, CFO - 25 years of experience - Partner and CFO of Jerusalem Global Ventures - Financial Controller and Company Secretary of Hanson PLC’s Israeli branch

Gadi Mazor - Serial entrepreneur - Founded 3 wireless companies - Advisory board for Blackberry - Talpiot 8200 - Wireless advisor to US Senate

Evelyn Rubin - JVP – focus on semiconductor industry - Senior editor Seeking Alpha - Cipher IT - Business development at OurCrowd

Our Team

Liora Katz - Israel Seed Partners - Founding team at VRNG - Founding team at OurCrowd

David Arnovitz - Founder, VP R&D @ S1 - Cofounder, Pres. SecureWare - VP Ops @ Shalem

Jay Kalish - CEO Patir Tech - VP IR @ Allot - General Counsel @ Teledata - General Counsel @ e-SIM

Sigal Widman: HR Consultant - Comverse - GP Israel Seed - HR Benchmark Capital - VP HR Gemini Fund

Our Team

Audrey Jacobs - M3 Solutions - marketing - PR international advocacy organizations - VP Business Development at OurCrowd’s first US office

Neil Cohen - Rothschild Bank - Cofounder Israel Seed - Oxford University

David Stark - Blackstone Group - Givati Rotem Brigade - Summa cum laude, Wharton

Danna Mann - VP Biz Dev at JVP - Head of Marketing at Estee Lauder

Recent Press Coverage

Press

“5 Most Important New Companies”

Forbes Online | April 2nd

“How do you invest in Israel without a lot of money? Try crowdfunding venture capitalists” IBT | March 22

“An Israeli company trying to change the way startups are funded”

CNN Business 360 | April 30th

Press

Two 1-hr long radio spots

CNN April 2013

South African Business TV

What’s next – what we’re seeing…

Cleantech 6%

Cloud/Storage 5%

Communications 6%

Consumer 4%

E-Commerce 8%

Fintech 5%

Gaming 4%

Information Security 5%

Internet 9%

Medtech Health 14% Mobile

11%

Online Education

2% Optics/Semis

5%

Social Media 8%

Software 8%

Deal breakdown by sector

Fireblade: biggest crowdfunded round ever

April 2

“5 Most Important New Companies” – Forbes

April 2

1000+ accrediteds

May 5 $12M+ May 20

Milestones

OurCrowd pitch deck - May 23, 2013 66

Launch Feb 5

$10M Apr 20

325+ unique commitments

May 14 First US company funded – now $1M+

March 5

First follow-on financing March 15

Highlights of OC Portfolio

OurCrowd pitch deck - May 23, 2013 67

Backing Serial Entrepreneurs

Zvi Schrieber (3 exits)

Founded TradeuM ($500M exit), Unicorn (acquired by IBM), G.ho.st

Richard Demb

Popcorn Indiana brand (Goldman Sachs)

Bob Rosenschein (2 exits)

Founded Answers.com ($127M exit), Accent Software ($400M on NASDAQ)

Backing Serial Entrepreneurs

Eitan Bauch and Avi Yehuda (3 exits)

Collectively sold startups to Intel, F5, Salesforce.com

Jeff Pulver and Jacob Ner-David

VoIP pioneer, founded Vonage, VOX, FWD, investor in Twitter and Foursquare

Founded Delta Three ($1.8B NASDAQ), founded Nomadiq (sold to Omnisky)

Leading co-investors backing OC Portfolio

Crowdbuilding

Customers Distributors

Partners Resellers

Other markets Press contacts

Next round funding “Capital is important, but the most important thing for a company like Lucid Energy is customers. Our Crowd has delivered on both. Not only have they exceeded our financing objectives, their network has introduced me to potential customers in China, Brazil, Italy and South Africa.”

Gregg Semler CEO, Lucid Energy

New Basket Product

– Provide way for investors to structure an automated portfolio based on repeated requests

– Will provide guaranteed allocation, minimum of 100K at 10K per deal

– One time funding, one time paperwork

– Will have right to say no for 7 days

– Can increase per deal commitment (no guaranteed allocation)

– Will make up to $10M available

– Significant interest in UK, South Africa, Australia

israeli innovation nation- jon medv… · cb insights 2013 report 0 100 200 300 400 500 2009 q1...

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