The Israeli Hi-Tech Industry - European Commission · Israel entered the 2008 crisis after 4 years of high growth (20%) The Israeli banks are relatively in a good shape - the exposure

Tel Aviv January 2014

The Israeli Hi-Tech Industry Itay Zetelny

EY - Partner

2

EY Israel

3

EY Israel’s Unique Market Position

VC Backed Market Share by Round Type VC Backed Market Share by Sector

Companies traded in the US Stock Exchange – among the Big Five firms in Israel

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The Israeli economy

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The Israeli Economy – Highlights

► Israel entered the 2008 crisis after 4 years of high growth (20%)

► The Israeli banks are relatively in a good shape - the exposure to

financial instrument was and is still relatively low, and their capital ratio is

over 10%

► Israel didn’t have a real-estate bubble - prices did not go down

► The dollar exchange rate has a very strong influence on the economy

► Israel has no debt (on a net basis)

► Israel became a member of the OECD in September 2010

► The OECD praised Israel's scientific and technological progress and

described it as having "produced outstanding outcomes on a world

scale."

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The Israeli Economy – Highlights

► More than 50% of Israel's export derive from the high-tech and life

science industries

► The largest generic pharmaceutical company in the World is an Israeli

company (“Teva Pharmaceutical Industries Ltd”)

► Levitan & Tamar – the largest discoveries of natural gas fields in the

world in the last decade (16 TCF & 8 TCF)

► The recent gas exploration has the potential to enhance the Israeli

Economy

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GDP (nominal)

Population

Export of goods and services

Unemployment rate

Real GDP growth (local Currency)

Rate of increase in exports (exc. Diamonds)

Import of goods and services

Source: Bank of Israel and central bureau of statistics (*Per IMF)

$ 193 billion

7.3 million

6.0%

4%

18%

$ 75.5 billion

Inflation rate (year-end)

USD-Exchange rate fluctuation

Foreign investments

3.8%

(0.9%)

$ 10 .7 billion

2008

$205 billion

7.5 million

$63 billion

9.5%

1.1%

(9.9)%

$58 billion

3.9%

(2.1%)

$10.8 billion

2009

$218 billion

7.6 million

$ 72 billion

8.4%

5.0%

10.8%

$68 Billion

2.7%

(4.9%)

$18 Billion

2010

$ 72 billion

$233 billion

7.8 million

$80 billion

7.1%

4.1%

$82 Billion

2.2%

$7.5 Billion

4.7%

2011

4.6%

The Israeli Economy - Highlights

2012

3.1%

6.9%

1.6%

$248 billion

7.9 million

$82 billion

4.2%

$85 Billion

$0.8 Billion

0.1%

2014* 2013*

$250 billion

3.8% 3.3%

6.8% 6.8%

2.1% 1.6%

8 million

(6.54%)

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The growth of the High-tech sector in Israel

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The Jordan River

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Sea of Galilee

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The Dead Sea

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Quality VS Quantity

Quality

Quantity Quantity Quantity

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Expenditure on R&D

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Examples of Israel High Tech environment

► More than 50% of Israel's exports are from high-tech and life science industries

► Israel is No. 3 in the number of foreign companies traded in the US (after Canada & UK)

► Israel is No. 5 in VC’s & PE investments in High Tech, bigger then any individual European country.

► The largest generic pharmaceutical company in the World is Israeli company (“Teva Pharmaceutical Industries Ltd”)

► The largest producer of Generic agriculture crop protection chemicals in the World is Israeli company (“Makhteshim Agan Industries Ltd.”)

► One of the worlds major chemical companies is an Israeli company (ICL - “Israel Chemicals Ltd.”)

► Five of the 100 defense companies in the world are Israeli companies

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► My phone was bleeping telling me I had voicemail ► I returned the call using my Panasonic Cordless phone

► I had to send an urgent email so I used my Blackberry ► Arriving at the office I switched on my Notebook

► I went to my usual new sites and surfed the net

► I was presenting that day, but needed to bring an

updated presentation

This morning I got up and…

Israeli Technology is Everywhere

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The ecosystem

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Israel’s Eco-System & Business Environment

2nd time Entrepreneurs

University technology Students

Foreign Technology Firms

EntrepreneurialCulture

Incubators / Angles

Israeli Defense Forces

CorporateR&D

Research from Academic

Institutions

Start up’sSpin Offs

Availability of

Technical

People &

Management

Expertise

Existing

Technology

Infrastructure

GlobalHi-tech

Companies

Government Support

Seasoned VC & PE Community (local & foreign)

Immigration

Social Atmosphere that Celebrates Entrepreneurship

/ Micro VC’s

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Current industry status

The entrepreneurs’ investment flow

3500

600

50

Pre seed Incubators, accelerators, F&F

Seed Angels

A Micro VCs

B+C VCs

IPO M&A

IPO M&A

$1.6b invested in Israeli innovation each year

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Access to funding

Crowdfunding R&D Grants

Accelerators Micro loans by VC’s

Israeli VCs Foreign VCs Entrepreneur, friends, family

Business Angels

Seed/early stage VC funds

Bank loans and guarantees

Late stage venture capital funds + PE

Public stock markets

C:/Documents and Settings/naomi.olmert/Desktop/Crowdfunding.wmv

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Indices - IP and finance

Financing Intellectual property

Publicationsvs GDP

Trademarksvs GDP

Patents vsGDP

Patentsfrom

universitiesvs GDP

% educatedout of

population

Level ofuniversities

Education and R&D 2010

Finland Irland Israel

Holland UK US

OECD ,GII, IMD, World Economic Forum

1265$

43%

15% 40%

Investment inR&D per

capita

Foreigninvestmen %

Venturecapital vs

GDP

% of gov.funding out oftotal funding

% of industryfunding out oftotal funding

R&D financingby otherinstitutes

Level ofuniversities

Level of R&D and sources of finance 2010

Finland Irland IsraelHolland UK US

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Israel Is the 3rd Biggest Investment Hotbed- 2011

• USA

3209 deals

$32.5 B raised

• United Kingdom

274 deals

$1.6 B raised

• France

217 deals

$1.0 B raised

• Germany

120 deals

$665 million raised

• Switzerland

35 deals

$347 million raised

• Israel

141 deals

$1.6 B raised

• China

323 deals

$5.9 B raised

• India

155 Deals

$1.5 B raised

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VC Backed Exits

Israel US$ M

Source: Dow Jones VentureSource

4800

2885 2389

1327 1523 1409 1607

2668

839 781 530 610

201320122011201020092008200720062005200420032002VC backed M&As

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Israeli Technology M&A Deals

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Success Stories – Industry Breakthroughs

► USB Flash drive - Invented by M-Systems

► Firewall – Invented by Check Point ► Instant Messaging – ICQ

► Voice Mail - Developed by Comverse

► Pill Cam- Invented by Given Imaging

► Waze – Social navigation system

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Multinational Companies with R&D Centers in Israel

► AOL ► Alcatel-Lucent ► Athena SmartCard ► Avaya ► Agro Logic ► Applied Materials ► AT&T ► AutoDesk ► BMC Software ► Boston Scientific ► Broadcom ► Computer Associates-CA ► CEVA ► Cisco ► Convergys ► Creo ► eBay ► EMC ► Freescale Semiconductor ► GE Medical Systems ► Google ► HP (including HP Labs) ► IBM ► Infineon

► Intel ► Interpharm ► Kulicke & Soffa ► Nokia Siemens ► Marvell Semiconductor ► Microsoft ► Motorola ► Medtronic ► Oracle ► Paypal ► Perrigo ► Phillips ► PMC ► Qualcomm ► Red Hat ► Samsung ► SanDisk ► SAP ► Siemens ► Sun Microsystems ► Teledata Networks ► Texas Instruments ► Vishay ► Yahoo

► Foreign multinational corporations have some 108,000 employees

► They sell goods and services totaling $27 billion a year

► 70% of exports by multinational corporations in Israel are for the parent companies abroad

► Countries of origin: U.S. (46%), Europe (46%) and the rest of the world (8%)

► As of 2011 there are some 245 development centers by foreign companies

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Maturity of the company

Maturity of the technology

Bi-National Funds

OCS R&D Fund

Nofar

Magnet

OCS Traditional Industry

Tnufa Bi-National Agreements

Eureka!

Multi-National

Cooperation

Magneton

Multinationals framework agreement

FP7/H2020

OCS “Generic” program

Incubators

Generic Applied Commercial

Government support Ea

rly s

tage

M

atur

e

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Thank you [email protected]