Promoting High-Growth Entrepreneurship in Israel

Transcription

1 Promoting High-Growth Entrepreneurship in Israel Giving Machines a Prime Sense Orna Berry, Chairperson Venture Partner, Gemini Israel Funds November, 2009

2 2 Main Contributors To Israel s Technological Edge R&D Proximity to Product Markets Far Close Direct Contribution Higher Education Corporate R&D Start-Ups Indirect Contribution Defense R&D

3 Themes of Relevance of Israeli Experience Israelis must focus on exports as local market is too small for large R&D spending (except defense) US, Japanese, Chinese and Indians can develop for the local market hence innovation can be in more than just product development Israel has no alternative but to be globally competitive, but US, Japan, China and India has plenty of alternative As to the product it is an exercise in market anticipation or market making high risk Technology assessment and cost provide confidence in product offerings (but still requires market understanding) Transferring from academia/defense to industry it is about the people and their skills So diversity of thought in people s minds is key 3

4 4 Creativity The process of having original ideas which have value (Sir Ken Robinson) Creativity is the key for human kind development Driven by Urge to change Dreams/aspirations Diversity/multidisciplinary Building the right team Not limited to Start-ups Value

5 5 What drives Creativity Problem solving - be first Risk encouraging environment No fear from being wrong - correct quickly Israeli start ups are technology driven: Far from mass markets Strong technological background (Academia, Defense) VC guidance

6 6 Creativity - Israel s core natural resource Creativity & technology were key for securing our physical survival Creativity is the key of our financial survival Creativity is Israel s main natural resource High-tech/All employees: 9% High-tech/All export :32% - THE growth engine High-tech/All GDP: ~18% (w/exits) 45%

7 7 Creativity in Israel Climate High ranked Academia the tools Practice from defense industry and multi national companies Venture Capital financing (US mainly) Talented creative and motivated people Learning to question everything Pioneering Spirit, Persistence - Homa Umigdal

8 8 Some Israeli innovations success stories Pentium (Intel) Centrino (Intel) Mobile Telephony (DSPC/TI) Telecom Billing (Amdocs) Call Center Logging (Nice/Verint) Voice Mail (Comverse) Instant Messaging (ICQ, Ubique) PC Board Inspection (Orbotech) VoIP (Vocaltec/AudioCodes) Generic Drugs (Teva) Agriculture (Netafim) Stents (Medinol) Firewall (Check Point) SW Performance (Mercury) Chip Metrology (Applied Materials & KLA-Tencor) Anti-Virus (Aladdin, Commtouch) Regeneration of Spinal Cord Cells (Proneuron) Flash (M-systems, Saifun) DoK (M-systems)

9 9 Success Factors *Avnimelech and Teubal (2006), page 13.

10 Products of their Time Prime Sense Turning Science Fiction Into Science Fact Tom Cruise in Minority Report (2002) - just a few years later, this technology exists The Nintendo Wii has been revolutionary for gaming What does it do? Prime Sense develops a chip and optical technology that enables a computer to see the world in 3D; ie, to discern depth and movement and react accordingly. A major focus is a device for video games that allows players to carry out the actions of the characters on the screen rather than merely pressing buttons to control them. But Microsoft is taking the interactive experience to a much higher level with Project Natal for the Xbox Steven Spielberg: It s not about reinventing the wheel, it s about no wheel at all Numerous applications: computer gaming, TV control, air conditioning, automotive, etc 10

11 Products of their Time Confidela The Problem of Document Control Huge issue for variety of sectors: eg semiconductor, finance, law, government Once a document has left the organization, eg via , it is impossible to control what happens to it (until now) Issue receiving more and more publicity In 2007, UK government lost disk with personal data of 25 million taxpayers What does it do? Confidela provides a service that enables users to more securely share documents electronically - such as via , over the Internet or with a flash memory drive - by allowing them to monitor and control how those documents are used, shared and viewed. Twitter business plans leaked after employee s account hacked Tens of thousands of Hotmail, Yahoo! and Gmail passwords posted on Internet Existing document control products expensive and cumbersome to use Confidela service based in the cloud 11

12 Products of their Time Xjet The Clean-Tech Movement Huge concerns exist around the world about global warming International attempts to persuade countries to reduce their emissions of greenhouse gases (eg Kyoto) Many countries have initiatives to encourage clean-tech development What does it do? Xjet develops inkjet printers for printing silver grid-like contacts onto solar cells for the collection of the electricity that is produced. The machines can cost-effectively carry out large jobs at a high speed and without the drawbacks associated with existing products. The US plans to allocate more than $60B China plans to increase the amount of renewable energy it uses to 15% of its total consumption by 2020 Feed-in-Tariffs Xjet is perfectly positioned to benefit 12

13 Products of their Time TaKaDu Preventing Water Loss TaKaDu sprung up in Israel, which has huge concerns about water However, this is a worldwide problem even in the UK, water restrictions are imposed during dry summers IBM estimates that non-revenue water (NRW) amounts to $14B-$18B annually What does it do? TaKaDu provides a software-based service for detecting and preventing leaks at water utilities. The company s software works by applying the concepts used in the management of complex networks, such as in telecom or computer networks, to the water sector. Over 15% of municipal water is lost on average - in many cases the figure exceeds 20% Expenditure needed to mend pipes, repave roads and fix other damage caused by seepage often exceeds that of the lost water This all costs water providers millions of dollars a year 13

14 Products of Their Time dbmotion American Recovery & Reinvestment Act What does it do? dbmotion provides software that enables healthcare organizations to share clinical information without needing to centralize the data or replace existing infrastructure. This allows doctors access to a patient's entire medical history and profile, including to test results and sensitivity to medicine. This helps them to make educated decisions more quickly. The US government plans to invest $19B in computerized medical records as part of the ARRA, which President Barack Obama signed in February. Governments around the world the world have similar initiatives, including in the UK, China and Singapore. 14

15 15 The Case of Israel Israel s development of an innovative Information and Communications Technology (ICT) sector is an interesting case exemplifying the potential and the limitations of a high-tech strategy as a lever for economic growth

16 16 The Beginning After two decades of extraordinarily rapid growth, the Israeli economy had reached an impasse by the early 1970s Israel has little natural resources, but plenty of highly skilled human capital, and scientific and technological prowess How to mobilize these assets for economic growth?

17 17 Establishing Policies In the late 1960s, the notions of high-tech and the knowledge economy were not part of the lexicon The Israeli government made a crucial strategic decision: - it would jump start and breed a science-based sector by providing broad financial support for commercial R&D - this policy would make up for market failures The first manifestation of the new strategy was the creation of the Office of the Chief Scientist in 1969

18 18 The Office of the Chief Scientist (OCS) The key instrument is the Matching Grants Program administered by the Office of the Chief Scientist (OCS) at the Ministry of Industry, Trade & Labor, the main government body in charge of innovation policy Criteria include: - the technological and commercial feasibility and merit - the risks - the potential of these projects for generating expertise

19 19 Government Initiatives A series of novel programs were set up The most important were: The BIRD Foundation The Technological Incubators Program The Yozma Program for jump-starting the venture capital sector The Magnet Program for creating consortia of industry and academia

20 20 Hi-Tech Growth The following facts and figures summarize the staggering development of high-tech in Israel since the early 1990s: During the 1990s: - the ICT sector grew at an average rate of 16% per year - it accounted for 5% of GDP in 1990 and 14% in it contributed a full 1/3 of the growth of GDP ICT exports grew by a factor of SIX during the 1990s They reached $15 billion by 2000 And accounted for 1/3 of total exports

21 21 Establishing the Venture Capital Industry The Venture Capital sector became the 2nd largest in the world after that of the US The R&D/GDP ratio reached a peak of 4.6% in 2004, the highest in the world The number of high-tech companies is estimated at 4,000 Israel is number 4 in terms of the number of patents per capita granted by the US Patent Office to Israeli inventors - it comes after the US, Japan and Taiwan

22 22 In my visits to universities around the world, I mostly hear how they ve been able to duplicate US technology; the Israeli universities I visited aspire to innovating well beyond that. Professor Yannis Yortsos, Dean of Engineering, Viterbi School of Engineering, University of Southern California, May 2009 Thank You!