Israels Success Story of the Tech -Industry by Edouard Cukierman and - PowerPoint PPT Presentation

Israel’s Success Story of the Tech -Industry by Edouard Cukierman and Yair Shamir Hong Kong, July 2015

Key Success Factors of Israel’s Technology Cluster 1. Education and Universities 7. Attractive 2. Government Investment Support Environment Israel Cluster 3. Technology 6. Entrepreneurial Sector Expanding Spirit Globally 5. VC and Access to Global 4. Defense Financial Industry Markets

1- Education and Universities: brainpower that can be leveraged  Largest number of academic degrees per capita (64 per 1000 people) (1)  Highest expenditure on education in the world (9.2% of GDP) (2)  12 Israelis won the Nobel Prize, 8 within the last decade (3)  Israel invests more than 4% of its GDP in R&D, which is the highest ratio of any country in the world (1)  Israel is blessed with an exceptional entrepreneurial workforce, ranked 3rd in the world (4)  c.1 million people from the FSU emigrated to Israel since early 90s (20% of engineers and 3% of scientists), representing 16% of the economically active population (5) Investment in Education % GDP (4) Number of Engineers Per 10,000 Employees (1) 9.2% 140 7.0% 6.4% 6.4% 6.2% 5.9% 5.7% 5.5% 5.3% 5.0% 4.7% 4.0% 85 65 53 38 35 35 34 28 25 22 19 Source: Ministry of Finance, Israel, 2013 (1) Source: Technion, Israel's Institute of Technology (2) Source: Worldbank Report 2012 (3) Central Bureau of Statistics, Israel, 2013 (4) Ministry of Absorption, Israel, 2012 (5)

1-1 Israeli Innovation Model: “The Tech Transfer” from University to Industry Creation of institutionalized basis for scientific research Technology transfer: the secret engine • The tech transfer from universities to industries has created the institutionalized basis for scientific research Dr. Albert Einstein, on his visit to the Technion, 1923 • Israel is the world’s pioneer in tech transfer since 1959 • 2 of the world’s top 15 tech transfer companies Yeda, Weizmann Institute of Science (1959) • 7 out of the leading 25 world’s blockbuster drugs  have been developed in the Weizman Institute US$ 400M in 2013 in licensed product revenues  Yissum, Hebrew University of Jerusalem (1964) • $8 billion in licensed product sales  US$ hundreds of millions in tech transfer  revenues Dozens of spinoffs  Source: ITTN

2- Government Support in Israel  Government spending on high-tech education one of the highest in the Technology world (1) Education  Highest spending on R&D as a percentage of GDP in the world (1) 4.5%  Military as Talent Incubator for young 4.0% entrepreneurs, engineers and 3.5% scientists Military 3.0%  Managerial experience at young age Budget 2.5% fosters entrepreneurial culture 2.0% 1.5% 1.0%  Incubators Chief 0.5%  R&D grants Scientist 0.0% Co-  Yozma VC Fund & Health Fund Investment with VC Industry  Jewish Agency Immigration  Gvahim Support  MASA  Nefesh B’Nefesh (1) Source: WEF Global Competitiveness Report 2013-2014

Leading Global Innovative Enterprises Decades of history producing robust and continuous flow of leading global innovative companies Company Sector Size Position Solar Energy Raised US$615m in equity; received Global leader in design and development of solar thermal US$1.2bn power technology with 1.8GW of power under contract with California’s two largest utilities grant from US Dept of Energy Security Software Market cap: US$9.6bn World leader in network security solutions. Pioneered industry with Firewall and inspection technology Medical Technology Market Cap. US$550mn Revolutionized GI imaging with invention of the PillCam, enabling a capsule-camera endoscopy Water: Desalination Estimated valuation c. US$1bn Leading global player in development, engineering, production & operation of advanced water desalination plants Industrial Technology / Acquired for US$5bn valuation by Warren Leading producer of cutting edge precision carbide metal cutting tools Process Buffet Agritech: Crop Acquired for US$2.4bn by ChemChina Leading worldwide manufacturer and distributor of crop- Protection protection solutions Digital Technology/ c.25% stake acquired at company value Manufacturer of anti-collision driver safety solutions that help of US$1.5bn by BlackRock, Fidelity, drivers avoid traffic risks Software Wellington, Sailing Capital, Enterprise Rent-A-Car Flash Memory Acquired for US$1.65 billion Invented USB Flash storage drives Agritech/ Water: Micro Acquired for c. US$900mn Leader in smart drip & micro-irrigation solutions irrigation Geothermal Energy Market cap. US$900mn Leading geothermal technology company globally Pharmaceuticals Market Cap: US$40.6bn #1 global generics company specializing in generic and propriety branded pharmaceuticals Mobile Application Acquired for US$1.1 billion by Google World's fastest-growing community-based traffic & navigation app, pioneer of crowd sourced maps, traffic, road info

3 -The high-tech sector is the growth engine of the Israeli economy • In 2014 Israel’s manufacturing exports represented 78.6% of total exports and amounted to US$ 45.8 billion (excluding diamonds), compared with US$ 7.7 billion in 1990 1990 Manufacturing Exports 2014 Manufacturing Exports $7.7 billion $45.8 billion • Israel’s High-Tech exports totaled US$ 21.5 billion in 2013, which is 47% of the total manufacturing exports and represent a significant increase compared to 1990 when the High- Low Tech amounted to US$ 2.31 billion Tech, Low Tech, 5% 19% • Israel’s economy keeps growing and High Tech, continues to be a “safe haven” among 30% the OECD markets Medium Low Medium High Tech, Tech, 31% Low Tech, → 45% of Israel’s growth comes from the 47% 19% high tech Industry Medium High Tech, 32% Medium High Tech, 17% Source : The Central Bureau of Statistics, Israel

4 - Defense Industry  Israel 2014 military budget is 56.9 bn NIS (≈ US$ 13.5 bn), approximately 5.2% of the GDP and 13.0% of the total budget  Israel is the 4th largest military equipment exporter after USA, Russia and Germany  Israel Aerospace Industry’s (IAI) 2014 sales grew by 5% and reached US$ 3.83bn Military expenditure as percentage of GDP, 2014 (%) 5.2 4.5 3.5 2.6 2.2 2.06 1.4 1.2 “Many Israeli start-ups should pay royalties to the army. The military service Israel Russia US S.Korea UK China Brazil Germany deserves some of the credit. Israel's Source: SIPRI (sipri.org); 2014 army does not just train soldiers, it nurtures entrepreneurs ”* . – Edouard Cukierman , interview with “The Economist” .

5 - VC and Access to Global Financial Markets  Early stage investment by VC in Israel equals 50% of early stage investments for all of Europe  Israel has a prospering start-up & VC industry, 2nd largest in the world  Over the last decade, c. US$ 18 billion were raised by Israeli High-Tech companies, at the VC level VC Investments per Capita in 2014, US $ 1600 Foreign Direct Investment Per Capita by Nation 1400 (2014 in US$) 1200 1000 800 600 400 200 0

5-1 Israel’s IPOs in Europe & US Israeli Equity Europe USA Offerings  Portfolio companies of Catalyst, which went public on Number Capital Number of Capital NASDAQ: PowerDsine (PDSN), Scopus (SCOP), Omrix Year of Equity Raised Equity Raised ($M) (OMRI), Commtouch (CTCH), BOS (BOSC), Cyalume (CYLU), Offerings ($M) Offerings Dot Hill (Hill), Orckit (ORCT). Some portfolio companies like MTI went public on AIM. Up to 1997 9 78 60 2,398  Cukierman & Co. (CIH) is the leading Investment House for 1998 5 122 14 871 IPOs of Israeli firms in Europe. Transactions of CIH include: Summit, Visonic and Metaltech in London, Astra and VCON 1999 12 446 20 3,375 in Paris, Wizcom, OTI and Electronics Line in Germany.  As of today, Israeli companies raised over $37B through 2000 7 353 33 2,806 foreign public equity offerings, in addition to over $46B in secondary sale on the market by shareholders. 2001-2003 1 118 12 2,806  With over 200 companies going public on American Stock Exchanges, Israel was ranked #3, after China and Canada, 2004 5 150 12 1,117 in terms of number of foreign companies (excl. North American companies) listed on NASDAQ. 2005 20 1,106 4 355  With over 90 Israeli companies going public on European 2006 16 2,078 8 3,460 Stock Exchanges, Israel was ranked #2 in terms of number of foreign companies traded on European Exchanges. 2007-2009 8 2,339 19 1,628  CIH is the sole NYSE Euronext’s Israeli listing sponsor. 2010-2013 6 1,084 36 4,010 2014 8 2,100 29 3,900 Source: Capital IQ, Dec. 2014 Total 97 9,974 247 26,726