Start a Vc Fund

							The Government Seed Fund
      January 2006
          Background
The Burst of the high-tech Bubble +
Security Situation = Fewer
Investments Particularly in Start-
Ups

The Need: Sharing Investor Risk to
Encourage Investments and Increase
the Number of Start-Up Companies
     The seed program
An additional and separate vehicle
to support new start-up companies.
The Government‟s matching
investment shares the risk with the
investor.
The investor also enjoys the
equivalent of a stock option at the
opening price
      Seed Program (cont.)
Funding Source:
 VC Fund or Corporation Active in VC
 or Tech Company Investing in Like
 Industries
 Has the ability and manpower to
 guide the management of the new
 company
 Has sufficient available funds
      Seed Program(cont.)
Start-Up Company:

 R&D Company in Existence for not
 more than 6 Months OR Whose Total
 Expenditures have not Exceeded 1
 million NIS (companies in Bio-
 technology till the pre-clinical stage)
 First Round – excluding financing for
 feasibility study.
       Investment Model
Essentially Like VC Investment in the
Private Sector.
Ensure that Government and Investor
Interests Overlap.
Determine a System that will Yield a
Return to the Government for a Successful
Investment.
Ensure that the Government will be able
to Sell its Holdings to a Third Party.
The Government‟s Investment
Up to 5 Million NIS per Company per
2 Year Period that will Finance up to
50% of the Approved Work Program.

The Expenditures Supported will be
Those Related to R&D.
The Government‟s Investment
 The seed fund and the investor will
 put up matching funds.
 Preferred shares will be issued as
 follows:
 – Preferred shares „A‟ – Investor
 – Preferred shares „A1‟ – Seed Fund
   (nonvoting + no right to appoint
   directors)
 – Ordinary shares – Entrepreneurs and
   workers
        The Government‟s
        Investment(cont.)
Preferred Shares “A1”:
  Liquidation Preference (incl. Merger,
  Purchase of Shares and Properties).
  Dividend Preference
  Rights of Conversion to Preferred
  Shares “A” or ordinary shares.
  Full Ratchet Protection Against
  Dilution of Shares.
     The Investor‟s Option
The Investor will be given an Option
to Purchase the Government Shares
Anytime Within the First 7 Years.
Within the first 3 Years the purchase
is at cost plus “regular” interest.
For Years 4 till 7 at cost plus “higher”
interest.
           Privatization
The Sale of the Government‟s
Holdings in the Start-Up Companies
does not Entitle any of the investors
the right of first refusal if a 60 days
notice of sale was given and the
investors did not express interest in
purchasing the seed fund shares
           R&D Law
With reference to transfer of know-
how and manufacturing rights, the
company will be bound, as are all
those enjoying government support
by R&D LAW
   The approval procedure
The Investor – can apply to be
approved even without a specific
company he wants to invest in.
The Company - can‟t get approval
without an approved investor
investing in it.
          Board Members

Mr. Eli Opper – Chief Scientist, Moital
Mr. Chemi Peres- Managing Director, Pitango
Mr. Shlomo Shalev- Senior VP Investments,
Ampal
Mr. Rafi Nevo – CEO, Treatec
Ms. Chana Gad – General Accountant, Moital
Mr. Avi Feldman – Vice Legal Advisor, Moital
Mr. Ran Kiviti – Manager Tmura Fund, Moital
 FOR FURTHER INFORMATION
           Please contact
           Mr. Itamar Dar
       Seed Fund manager
  Email: itamar@ocs.moital.gov.il
          Tel: 02-6662457
Web: www.moital.gov.il/madan