Israel Eco system and timing by Yariv Levski

Yariv LevskiCurrent status@ Israeli startup scene

My name is YARIV LEVSKI,

I live in Tel Aviv

1 Wife2 Kids1 Exit

Hobbies: Triathlon

Let’s Start

Today I will be talking about

Horses,Startups and Israeli Eco System

Question:Who wins a running competition,The man or the horse?

The man vs. the horse competition:

• Started after a Pub dispute

• 35 Km, takes place in Welsh

• 1ST Race at 1980

The man vs. the horse competition:

For 23 years, the horse won

On 2004 the man won! (also 2007)(both times – it was very HOT weather)

How can a man win against a horse?

What is the advantage for man In a HOT weather?

We sweat better than a horse(Better abilities to climate our body)

Some Research Insights

Startup Genome: Why do startups fail?

Confirm whether they are solving a meaningful problem

Seek validation that people are interested in their product

Refine business model and improve efficiency of customer acquisition

Drive growth aggressively

DISCOVERY VALIDATION EFFICIENCY SCALE SUSTAIN RENEWAL

Startup needs to be able to scale properly

Scaling properly:Customer, product, team, business model and funding

What were the results?

The research presents2 kind of startups:Inconsistent - scales prematurelyConsistent - scales properly

Companies that scaleprematurely are

$Classifies as Inconsistent

$And companies that scale properlyare classified as consistent

1,100,000

3,400,000

Average funding raised

Team size

Inconsistent startups have 50% larger teamsbefore scaling and 50% smaller teams after scaling

50%larger teams

50%smaller teams

BEFORE scaling AFTER

Funding

Inconsistent startups raise 3 times more money in the efficiency stage and 8 times less money in scale stage

EFFICIENCY SCALE

3 timesmore money

18 times more money

Customer Acquisition

45% of startups that scale prematurely spend more than 15,000$ per month on customer acquisition before optimizing their conversion funnels & acquisition costs. 80% of consistent startups spend less than 15,000$

15,000$per month

45%Spend more

80%Spend less

User Growth

Inconsistent startups grow 10-12 times faster in discovery stage, 1.5-2 times faster in validation stag.7-8 times slower in efficiency stage and 16-26 times slower in scale stage.

SCALE

16-26times faster

EFFICIENCYVALODATIONDISCOVERY

7-8times faster

1.5-2times faster

10-12times faster

Users (not paying) - how many reached more than 100,000?23% of consistent startups exceed 100,000 users.

99% of consumer focused startups that scale prematurely stay below 100,000 users.

100,000Users

99%Don’t break the mark

23%exceed

Users (paying) - which phase they acquire Paying customers?Enterprise startups that scale prematurely have 75% more paid users in Discovery and Validation stages compared to consistent startups.

consistent startups have 50% more paid users in the Scale stage that inconsistent startups.

SCALEVALODATIONDISCOVERY

50%more users

75%more users

75%more users

Efficiency in programming of lean productinconsistent startups write 3.4 times more lines of code in the Discovery stage and 2.25 times more lines of code in the Efficiency stage.

EFFICIENCYDISCOVERY

3.4timesmore code

2.25times more code

What is the focus on Discovery phase?77% of startups that scale prematurely focus 50% or more of their resources in Discovery stage on product development. 45% of consistent startups focus their energy on customer development.

DISCOVERY

Spend

50%Of their resources on product development

77%

45%

Focus on customer development

Startups that succeed in scaling properly Simply invest more resources at theRight Moment (and not before)

Exactly like the manthat wins the horse:They know how to sweat and cool their body before losing energy and dehydrate

Israeli Startups: Facts & Numbers

First,

Let’s start with some numbers

Source: IVC Research Center

Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13

479

565

518

573

485 477 488 494474

493

660

Capital Raised by Israeli High-Tech Companies ($M)

34% 36%24%

27% 26% 28% 27% 29% 30%

25%

66%

64%

76%

73%

74% 72% 73% 71%70%

75%

77%

23%

Israeli VC Fund ShareOther Investors

Germany France UK Israel

343399

656

967

Great eco system that attracts foreign capitalVC investments Y2D H1 2013 ( in Millions$)

Source: DFJ Esprit & Go4Venture Advisers mid-year analysis of European Venture Market

Money in, money out - the ratio

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1.1

1.9

2.8

10.1

3.32.7 3

2.3

5.2

9.7

11.5 1.3 1.6 1.8 2.1

1.1 1.3

2.1 1.9

Capital Received (M&As and IPSs) Capital Raised by Israeli High-Tech companies

what is the biggest trend in Tel Aviv?

So,

Building Big Companies!

(Meaning Hugh valuations)

Biggest deal this year

Google buys WAZE:

1 Billion $

650 M$1 B$ 250 M$221 M$

405M$480 M$ 475 M$650 M$

150 M$ 120 M$235 M$ 800 M$

The next big companies exits

Israeli companies with revenue over 50M$ / valuation over 500M$

What’s the

secret sauce?

No local Market(8M people)

Commercial relations with our neighbors: 0

We build international companies

From Day1*

*Save From China Israel is #2 country in NASDAQ

What’s the

secret sauce?

What’s the

secret sauce?

R&D centers all every important US company Government money supports R&D Biggest Patents per capita Biggest VC money per capita Failure - isn’t failing Presence of almost every important US VC Army as incubator of management and

technology

With new records of valuations in exits, the investors become more and more

patience to build big companies

As in Startup Genome,

The eco systems supports the startups

that reach scaling

BTW,This is why Startups Genome ranked Tel Aviv as2nd place best Ecosystem in the world

Tel Aviv Entrepreneurs are NOT smarter than anywhere else

They just have more capital to scale if they succeed.

This makes a Hugh difference and allows to grow big companies

My advice (in a nutshell)

Make sure that you raise capital only after Reaching the scaling phase.

Don’t raise significant amount when

you’re not ready to scale.

That is the best way to

grow the company well,

And eventually earn enough money to

buy a horse..

Thank You.Current status@ Israeli startup scene