Some key success factors for creating a VC industry

Transcription

1 Some key success factors for creating a VC industry a. Entrepreneurial environment b. Government support c. Professional management d. Professional investors e. Success stories f. Luck Common mistakes (cultural gaps, domain expertise, diversification, )

2 Human Capital Academic & Research Institutional Centers The world's highest per capita number of engineers Leading Technological Institutions Military Unique Role of the Army Culture Defense establishment is a major contributor to R&D and significant customer Risk taking is endemic, Pioneering Ethos Innovative, Creative drives Yozma Proprietary

3 Government Support Policies supporting Investment and entrepreneurship Encouraging legislation: R&D and Investment grants, tax benefits and exemptions to foreign investors R&D budgets, Chief Scientists Office incentives Incubators Program Initiation of the YOZMA Program

4 Ingredients for Success The Israeli Experience Entrepreneurial spirit Technological expertise Government Involvement Market failure conditions Government as a catalyst Risk sharing Yozma Predetermined exit conditions No government control Indirect investments (funds) Professional VC funds Capable to raise funds Choosing the right investments Managing the investments Building value for exit

5 The Evolution of the VC Industry Sporadic VC activity Growth of start-up companies Intense R&D activity but failure in marketing Severe lack of capital Need for professional management Yozma Proprietary 1992 VC 2005 ~60 Venture Funds $10B raised by VCs $21B M&A deals #3 in Nasdaq Cisco, IBM, Intel, Microsoft American & ROW VCs

6 Capital Raised by Stage (2005) Seed 8% Late Stage 15% Early Stage 24% Mid Stage 53% Source: IVC Research Center

7 iv. Over 40% are still up and running Technological Incubators in Israel lessons learned a. The program administrated by the OCS, Ministry of Industry, Trade and Labor b. Goals: establishing start-up companies from innovation ideas c. Means: i. Professional guidance and administrative assistance ii. Financial support: 85% of the budget provided as a conditional loan - absorbing a large portion of the risk iii. Physical premises d. Outcomes: i. 24 incubators today, many of them owned by large investment groups ii. iii. As of today over 1100 projects matured ~60% left the incubators and have successfully attracted Private investments amounting a total of ~$2B

8 VC Fund Structure Investor 1 Limited Partner VC Fund Limited Partnership Fund Manager General Partner Portfolio Companies Yozma Proprietary

9 VC Management 1 Partner per 8 companies Experience: business management, operational, VC Education: engineering, Science, MBA Compensation: 2.5% management fees 20% of the profit (carried interest) Yozma Proprietary

10 The Role of VC in early stage companies Board level Assist/support management Recruit senior management Build Business Plan Help raise more capital Entice EXIT Step-in at crises.

11 Yozma Venture Capital Mission: To create a venture capital market in Israel Method: To entice the private sector and foreign investors to set up new VC funds. To secure an obligation of the new VC funds to invest in start- up companies in Israel (by participation in IC of the new funds) Accomplished through: Establishment of a $100M investment company Investment of $8M in each drop-down fund (minority position) A 5 year option to Yozma s partners to buy out the Government s share at predetermined conditions Use of proceeds: Establishment of 10 drop down funds together with strategic partners. 15 Direct investments Results: The Israel Venture Capital industry has been established 8 out of the 10 drop-down funds have exercised their option and bought out the Government. 9 out of the 15 companies Yozma has invested in directly, went public or have been acquired

12 Yozma Drop-Down Funds FUND CAPITAL MANAGED ($MM) Original size Today Eurofund Gemini Inventech JPV Medica Nitzanim-Concord Polaris Star VERTEX Walden ,035 Yozma Proprietary

13 Venture Capital Raised by Israeli Funds $B st Wave: Establishment of Yozma rd Wave 2nd Wave: Yozma Funds Raise Continuation Funds Recovery Total raised: ~$11B exclusively allocated to investments in Israeli technologies

14 Israeli High-Tech Companies Going Public Source: IVC Research Center

15 M&A of Israeli High-Tech Companies Source: IVC Research Center

16 International companies in Israel Cheap labor Academic Institutes 70 s, 80 s 90 s Business Opportunities (greater than the country risk ), Skilled Workforce, M&As IBM Intel Motorola National Semiconductor Yozma Proprietary IBM Sun Intel Cisco Motorola J&J National Semi. Sun Compaq Lucent Microsoft Toshiba Applied Mat. AOL 3Com Alcatel Nortel Acer Samsung HP TI Guidant GE SAP Qualcomm Hitachi CA Infineon Marvell Avaya Vishay EMC Oracle Boston Sci. Siemens Broadcom KLA

17 Capital Raised from Venture Capital Funds by Israeli High-Tech Companies

18 Foreign VCs Investing in Israel 133 Foreign VC Funds Invested in more than one company in Israel from (Partial List) Accel Partners Advent International Alice Ventures Alta Berkeley Amadeus Capital Ampersand Venture Management Apax Partners BancBoston Ventures Battery Ventures Benchmark Capital Bertelsmann Ventures Bessemer Venture Partners Boston Capital Ventures Merrill Lynch Venture Capital Global Catalyst Partners Greylock Partners HarbourVest Partners Hummer Winblad Venture Partners JAFCO Kodiak Venture Partners Lightspeed Venture Partners Menlo Ventures Mercator Ventures Meritech Capital Partners Merlin Biosciences Mission Ventures MPM Capital

19 Foreign VCs Investing in Israel 133 Foreign VC Funds Invested in more than one company in Israel from (Partial List) Canaan Partners Charles River Ventures ComVentures Convergent Capital (France) CSK Ventrues DEFTA Partners Deutsche Venture Capital Draper Fisher Jurvetson Earlybird General Catalyst Partners Genesis Campus NEA New Enterprise Associates New Frontier Nexus Group NIF Nikko Antfactory Nokia Venture Partners NVCC PolyTechnos Venture-Partners Sequoia Capital Siemens Venture Capital West Steag Partners GmbH Venrock Associates

20 Contribution of VC & High Tech to Economy- Inflow of Funds Total Life Sciences Capital Raised and invested by Israeli + Foreign VC s (~50%) $16B ($1.6B) Sale of Israeli Cos. to Foreign entities $23B ($2.4B) IPO s on Foreign Exchanges $ 6B ($1.7B) Total (excluding exports) $45B ($5.5B)

21 OPEN JOINT STOCK COMPANY RUSSIAN VENTURE COMPANY (RVC) GOVERNMENT FUND OF VENTURE FUNDS

22 RVC LEGAL PLATFORM Address of Mr Putin, President of the Russian Federation, to the Federal Assembly of May 10, 2006 We need an innovation environment that would allow mass production of new knowledge. This will require a special infrastructure: technological and implementation areas, technology parks, venture funds, an investment fund all this is underway. Master action plan following Mr Putin s Address Order 838-r of June 7, 2006, Clause 10 Russian Government Regulation No. 516 of August 24, 2006

23 RUSSIAN VENTURE MARKET BEFORE RVC WAS CREATED NO INVESTMENTS INTO RUSSIAN INNOVATIONS А) RUSSIAN INVESTORS ARE UNACCUSTOMED TO VENTURE RISKS B) NO SUCCESS STORIES OF RUSSIAN VENTURE BUSINESS ACTION LIST А) GIVE A LEAD: SHARE RISKS WITH PRIVATE INVESTORS B) CAP THE RETURN OF GOVERNMENT: ALLOW PRIVATE INVESTORS A HIGHER RETURN AT THE SAME RISK LEVEL

24 RUSSIAN VENTURE MARKET WITH PARTICIPATION OF RVC NEW VENTURE FUNDS RUR 30 BILLION INVESTMENTS INTO INNOVATIONS 200 NEW INNOVATIVE COMPANIES 1000 NEW TECHNOLOGICAL PRODUCTS ON THE MARKET

25 WINNERS OF THE 1 ST COMPETITIVE SELECTION DECLARED BY RVC VTB ASSET MANAGEMENT CLOSED JOINT STOCK COMPANY CLOSED-END MUTUAL FUND = RUR 3,061,000,000 BIOPROCESS CAPITAL PARTNERS LIMITED LIABILITY COMPANY CLOSED-END MUTUAL FUND = RUR 3,000,000,000 FINANSTRUST CLOSED JOINT STOCK COMPANY CLOSED-END MUTUAL FUND = RUR 2,000,000,000

26 RVC BOARD OF DIRECTORS 5 HERMAN GREF MINISTER FOR ECONOMIC DEVELOPMENT AND TRADE OF THE RUSSIAN FEDERATION CHAIRMAN OF THE BOARD DMITRY LIVANOV RECTOR MOSCOW STATE INSTITUTE OF STEEL AND ALLOYS RUSSIAN FEDERATION ESKO AHO PRESIDENT SITRA NATIONAL INNOVATION FUND FINLAND YIGAL ERLICH CHAIRMAN AND MANAGING PARTNER OF THE VENTURE CAPITAL GROUP YOZMA ISRAEL IGOR ARTEMIEV CHAIRMAN ANTI-TRUST COMMITTEE RUSSIAN FEDERATION KONSTANTIN REMCHUKOV EDITOR-IN-CHIEF INDEPENDENT NEWSPAPER RUSSIAN FEDERATION ALEXEY KOROBOV CEO RUSSIAN VENTURE COMPANY RUSSIAN FEDERATION

27 Thank You