Sustainable Israel: Pioneering Solutions. Wednesday, April 28, :30 p.m. 3:15 p.m.

Transcription

1 1 Sustainable Israel: Pioneering Solutions Wednesday, April 28, :30 p.m. 3:15 p.m.

2 Direct foreign investments in Israel $US millions 10,542 5, Source: Dan Ben David, Taub Center and TAU. Data from Bank of Israel and CBS 2

3 Private sector-funded R&D As a percentage of the GDP 3.4% 2.4% 2.1% 1.7% 1.7% 1.1% 0.9% 0.7% Israel (2005) Japan (2004) S. Korea (2005) U.S. (2006) Germany (2004) France (2004) Canada (2004) U.K. (2004) Source: Dan Ben David, Taub Center and TAU. Data from National Science Board, OECD and CBS 3

4 Economic growth in Israel vs. G7 Accumulative growth, GDP per capita* 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 164% 77% 84% 104% GDP per capita in constant prices, adjusted to purchasing power Source: Dan Ben David, Taub Center and TAU. Data from Penn World Tables, OECD and CBS 4 G7 Israel

5 Industrial production by technological intensity 120 High-Tech Medium-Low Tech Medium-High Tech Low-Tech Israel U.S. Canada EU average Sources: Makov report (2007), CBS (Israel 2008). EU average: Italy, Belgium, Denmark, Finland and France. 5

6 Funding challenges: Fuels alternatives Public grants, guarantees and tax incentives Valley of death Valley of death Angel investor Venture capital Project finance Technology incumbent Seed/ Start-up Early stage Expansion Late stage Basic R&D Initial investment in demonstration projects R&D IP, standardization, and regulation Achieving commercial scale operation Bringing down cost Supply chain improvements Investment in facilities Mezzanine and bridge financing for IPO or M&A Scaling up Credit enhancements Source: Milken Institute 6

7 Renewable-based electricity production 2005 and 2010 goals Sources: Noa Yehezkel, Energy Development in Israel, Koret-Milken Institute Policy Briefs, November

8 Change in public expenditure per student, , percentage of GDP 25.9% 12.3% 13.5% Higher education High school Secondary Pre-school 6.7% 0.7% 8.3% 8 2.0% 25.7% Source: Dan Ben David, Taub Center and TAU. Data: OECD OECD Israel 8

9 Inequality in Israel, Source: Dan Ben David, TAU. Data from Israel Social Security Institute 9

10 Ratio of employment/working age population Ratio of emp ployment/working age population Weighted average Sources: World Bank, March 2007 and CBS 10

11 Percentage of Non-employed men As a percentage of men ages Source: Dan Ben David, Taub Center and TAU. Data: OECD, CBS 11

12 Percentage of non-employment in Israel By sectors, Men Women Men Women Men Women Men Women Jewish, non ultra orthodox Jewish, ultra orthodox Arabs OECD As a percentage of total population ages Source: Dan Ben David, Taub Center and TAU. Data: OECD, CBS 12

13 Milken Institute Israel Center s Mission Accelerate Israel s economic independence Bridge social and economic gaps Establish Israel as one of the top developed markets as measured by standard of living and income by 2020 Transfer financial technology to increase the impact of government policy and philanthropy 13

14 14 Milken Institute Israel Center Key areas of focus Financial innovation and global competitiveness Urban and regional revitalization Environmental finance

15 15 Milken Institute Israel Center Core tools and programs Koret-Milken Institute Fellows Program Financial Innovations Labs Solutions-oriented research Workshops, seminars and private events Public conferences

16 Milken Institute Israel Center Partners President s s Office Ministry of Finance Prime Minister s Office Ministry of Tourism National Economic Council Israel Securities Authority Ministry of Industry, Trade and Labor Bank of Israel Ministry of Environmental Protection Municipality of Jerusalem 16

17 17 Koret-Milken Institute Fellows: Research to Results More than 12 pieces of major legislation have been enacted Research has been leveraged to channel millions of dollars into the Israeli economy Fellows have gone on to great success in the real world

18 Koret-Milken Institute Fellows: Leveraging the Milken Institute's work Fellows participate in Milken Institute Israel Center projects and events, building high-impact networks and learning from senior experts and leading entrepreneurs Example: Fellows participated at a Milken Institute Israel Center project on market liquidity with the Tel Aviv Stock Exchange, attending an invitation only discussion with senior investors and bankers. Fellows also contributed to the project s research report, Israel And The Global Equity Market 18

19 Koret-Milken Institute Fellows: Leading public debate Fellows are involved in key conferences and professional meetings where their research is presented and often frames the discussionssion Example: Three outstanding Fellows, interning at the Ministry of Finance, the Israel Securities Authority and the Bank of Israel, presented their research and sparked the debate at a special Globes Israel Business Conference attended by Israel s leading regulators and market makers 19

20 Koret-Milken Institute Fellows: Advancing cutting-edge technologies Fellows recommend regulation that will encourage use of renewable energy, enhance R&D investments and grow IP-intensive industries Moshe Kaplinsky CEO, Better Place Israel Alumna Noa Yehezkel, Ministry of Finance Hezi Kugler, Director General Ministry of National Infrastructures Example: Alumna Noa Yehezkel promotes Israel s renewable energy market and energy efficiency by continuing the critical work she begun as a fellow in her new position at the Ministry of Finance 20

21 Northern Israel Development Project Financial Innovations Lab held after the second Lebanon War (summer 2006) results in 3 clear recommendations: 1. Develop a Northern Israel Recovery and Redevelopment Finance Facility for infrastructure and public-private projects. 2. Expand the Koret Israel Economic Development Funds for small-business development. 3. Develop a northern Israel small-business collateralized loan obligation. 21

22 22 Northern Israel Development Project More than 100 worthy investment projects were identified as the first pool of investments to be made by the Northern Israel Recovery and Redevelopment Bond Authority.

23 23 Northern Israel Development Project Building a risk retention model to support economic development and the establishment of a tourism district i t in Northern Israel

24 Northern Israel Development Project Tourism Improvement District 24

25 The Milken Institute Israel Center 25

26 Milken Institute Israel Center Accelerating Medical Innovations Financial Innovations Lab, December 2007-May 2008 Tomorrow Israel s Presidential Conference May

27 27 Accelerating Medical Innovations The idea gathered momentum with Milken's think tank [in a Financial Innovations Lab] set up for president Shimon Peres, around Peres's 2008 Presidential Conference. Milken's group included Ministry of Finance officials. Israeli Biotech's Last Chance? February 4, 2009

28 Less than 2 years after a Financial Innovations Lab The Ministry of Industry, Trade and Labor adopts our report, prioritizes Israel s Health IT industry in its work plans and begins to promote Israeli companies at big U.S. events and targeted industry seminars across the U.S. All less than a year after the launch of the Health IT project (a follow up on a lab recommendation) 28

29 29 Milken Institute Israel Center Financing archaeological preservation and conservation December 17, 2009: Financial Innovations Lab and field tour I intend to present the government with a work plan that will reverse the neglect of heritage sites. We initiated a national plan to rehabilitate and strengthen infrastructure at heritage sites. I call it the Heritage Plan. We are going to preserve tourist sites, archaeological sites, historic buildings and museums. -- Israel s Prime Minister Benjamin Netanyahu, Herzliya Conference, February 3, (a month and a half after the Financial Innovations Lab)

30 Milken Institute Israel Center River Revitalization Revolving Fund November 6, 2008: Financial Innovations Lab, tour and seminar for the MOF 30

31 31 Milken Institute Israel Center Regional Water Management Financial Entity November 5, 2008: Financial Innovations Lab

32 Michael Granoff Head of Oil Independence Policies Better Place 32

33 33 GM Collapses Into Government s Arms -June 2, 2009 Investors, grab this bargain while you can. Nov. 14, 2009

34 34 Israel: World s largest EV charging network Commercial/Public Parking Single Family Residence Street-Side Parking Parking Garage

35 Tokyo taxi demo As of February 25,

36 EV customer services Customer charging SLA-based services for enrolled users Plug & charge with automated billing Roamers supported by toll-free service enrollment, credit card billing Customer support Instant messaging Alerts & charge plan override 24x7 call center Customer services Road-side assistance Trip planning Charge scheduling Battery switch scheduling 36

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38 Israel visitor center Rendering 38

39 Stanley Gold President Shamrock Holdings Inc. 39

40 Main indices 10 years accumulated returns ( )* Source: Bloomberg * Converted to US dollars

41 Prof. Eugene Kandel Head, The National Economic Council Prime Minister s Office State of Israel 41

42 42 Dr. Ora Dar Head of Life Sciences Sector, Office of the Chief Scientist, Ministry of Industry, Trade and Labour, State of Israel Life Sciences Funds Joint Venture of the Israeli Government and Private Sector

43 Number of Israeli life sciences companies A decade of rapid growth From 250 companies in 1998 to almost 800 companies in 2008 An average of 55 new companies being formed per year over the last decade % ofalllife life science companies 300 operating in Israel today are less 200 than 6 years old Source: ILSI Database

44 The opportunity of the Israeli market High potential for a bio-pharma industry in Israel Excellent academic infrastructure World leadership in # of granted patents per capita Rapid growth in life sciences R&D companies Human capital Global success and positioning; blockbuster products in the market Available institutional capital The government as a partner a proven success Chief Scientist granting system Yozma, public-private investment funds enabled the growth of the high-tech industry 44

45 Innovation: U.S. granted patents per capita Millions Number of bio-pharma patents per million capita Source: Analysis: ILSI 45

46 Innovation: U.S. granted patents per capita Millions Source: Analysis: ILSI Medical device patents per million capita U.S. Japan Germany U.K France Canada Israel S. Korea Taiwan 46

47 Life sciences funds 1. Shortage in capital, financing tools, business models, managerial expertise 2. Long life cycle 3. High risk/ high reward nature 4. Fragmented industry Academic excellence Innovation Advanced companies Human capital Mature companies Early stage funding Therapeutics products High % of seed companies GAP 47

48 Structure of Israeli life sciences fund Israeli Government = Limited Partner Selection Management Company (GP) Israeli SPC Benefits US$24-36M Investors = Limited Partners > US$76-100M Israeli Life Sciences Fund (an Israeli limited partnership) PC 1 PC 2 PC 3 PC 4 PC 5 PC 6 48

49 Government benefit Although fund s return is negative private LPs receive positive return Total Fund IRR -30% -20% -10% 0% 10% 20% 30% 40% Standard VC Private + Government -30% -20% -10% 0% 8% 16% 24% 32% Life Sciences Funds Private Partners Government -16% -86% -4% -84% +8% -82% +20% -80% % % % -10.5% % % +34.2% % Assuming Leverage Ratio of 1:4 49 Return of Limited Partners is based on 5% hurdle rate of 5 year as of investment compounded annually 4

50 Israel life sciences funds roadmap 05/08 Milken Institute Financial Innovations Lab 11/09 Standard venture capital structure LPs: Israeli government and the private sector Total government commitment > $104M Critical mass investment in bio-pharma Government benefits: upside sharing, downside protection Distribution waterfall + 5% hurdle rate favor LPs 3/10 Four experienced management teams passed the pre-qualification threshold All received $24M government conditional commitment 5/10 Selection of management team RFP (current status) Each must raise, during 12 months, a minimum of $76M $8M bonus to the fund with most investor commitments 50