Venture Capital in Israel

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					                                      Venture Capital in Israel

With 10 $ billion under management and more than 100 active funds, Israel’s venture capital industry has
made remarkable achievements and stands just next to the US. In the first quarter of 2008, 135 Israeli high-
tech companies raised $617 million from venture investors – both local and foreign. The amount raised
was the highest in seven years, 52 percent above the amount raised in the first quarter of the previous year.
Ninety-six companies attracted more than $1 million each. Of these, 29 companies raised between $5
million and $10 million each, 14 companies rose between $10 million and $20 million each, two companies
raised between $20 million and $30 million each, and two companies raised more than $30 million. In 2007,
Israeli venture capital funds raised a total of $1.1 billion and projected to raise $800 million in 2008.




The Beginning -
Venture capital (VC) is funding invested, or available for investment, in an enterprise that offers the
probability of profit along with the possibility of loss. In Israel, venture capital industry took roots in 1993
as a result of the Government initiative to transform Israel into a research and hi-tech driven economy.
When Israeli Government decided to establish a Fund of Funds known as the Yozma Programme
(Initiative in Hebrew), there was only one venture capital fund operating in Israel. Though Israel had
relatively high level of R&D activities at the time with both civilian, military and government R&D
support programs that were in place, the overall conditions were not ripe for venture investments. Yozma
programme brought a dramatically positive change in the perception of foreign VC investors and their
attitude towards investing in Israel. Foreign companies contributed 60% of the US $ 20 million venture
capital investment in Israel in 1993.

Structure-
Israeli Venture Capital Funds have structure similar to their US counterparts. A fund has a predetermined
life horizon (usually10 years) and operates as a closed fund with fixed capital. Israeli VC's enjoy certain tax
benefits provided they meet a number of prerequisite conditions set by the government. A venture capital
firm may have more than one fund in existence, as the funds are typically considered closed funds. After a
few years of operations, a venture firm may raise an additional fund for the purpose of continuing
investing in technology-oriented companies.
Why Israel?
 Israel is among world leaders in Science & Technology. Many Fortune 500 companies have established
  R&D centers in Israel.
 Highly Educated Workforce – Israel is home to a number of world class Universities and Technology
  institutes with 24% of the workforce holding University degrees and 135 engineers per 10000 people.
 Israel Defense Forces – Highly trained members of IDF have pioneered a number of cutting edge
  technologies, which were originally developed for military purposes later adapted to civilian use.
 Israeli culture and Immigration – Israeli society has entrepreneurial spirit and an aptitude towards
  Science and Technology. Israel is made up of immigrants from around 70 countries, thus offers multi-
  lingual workforce to Multinational companies.

Government Initiatives –
The Office of Chief Scientist (OCS) of the Ministry of Industry, Trade and Labor is responsible for
implementing government policy regarding the support and encouragement of Industrial R&D. Israeli
Government offers –
Major Support Programmes – The R&D fund offered by Israeli Government has annual budget of $300M
which is spent on 1000 projects being undertaken by 500 companies. The programme grants upto 50% of
R&D expenditure.
Pre-seed Stage Programmes – Include technological incubators programme which provides R&D grants,
R&D infrastructure and business guidance to novice entrepreneurs. Other pree-seed support
programmes include Tnufa, Nofar and Heznec.
Generic R&D – Include supports the formation of consortia involving academic institutions and industry.
Among other initiatives are – Long term R&D Support for large investors in R&D and a number of Bi-
national Funds and Multi-national agreements.

Opportunities for India –

According to Israel Venture Capital Center report Israeli VCs invested $50 million in foreign companies
during 2007 (in addition to their investments in Israeli high-tech companies), compared to $60 million in
2006 and $95 million in 2005. Three of the 39 investments were First investments and the remainders were
Follow-ons. After making remarkable progress in IT scene, India along with China is catching up fast in
the area of Venture Capital. That opens a number of opportunities for Israeli companies in India and vice
versa. A number of Indian multinationals are expanding their activities all over the world. Israel which is a
proven destination for world class basic and applied research could be an ideal place for Indian companies
to offshore their research activities.

For further information, please visit: www.ivc-online.com or contact Ms. Efrat Zakai, +972-3-640-2337,
efrat@ivc-online.com . Also you can contact the trade office at the Consulate in Mumbai or Embassy in
New Delhi.

				
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posted:8/14/2012
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