From Oranges to High Tech Exits The Story

From Oranges to High Tech Exits: The Story of Israeli Innovation TECHFEST VIETNAM 2017 Hà Nội November 14 th, 2017

The Knowledge Effect Adapted from the “Brief History of Humankind” exhibit at the Israel Museum, Jerusalem Ideality. Roads Proprietary Information 2

One Big Step! Don’t be afraid to take a big step if one is needed. You can’t cross a chasm in two small jumps. ~ David Lloyd George Ideality. Roads Proprietary Information 3

Israel’s Story The High-Tech Ecosystem History: Israel’s Rise as a Tech Powerhouse Case Study: Technology Incubators Ideality. Roads Proprietary Information 4

Israel – Then Haifa Jerusalem Tel Aviv Be’er Sheva 450% Inflation Rate (1984) Ideality. Roads Proprietary Information 5

Israel – Now Northern Israel Haifa Jerusalem Tel Aviv Be’er Sheva Ideality. Roads Proprietary Information 6

Israel ID Israel Population: 8. 6 Million GDP: $327. 6 Billion Unemployment: 5. 2% GDP Per Capita: $37, 778 Area: 21, 600 square kilometers HDI: 0. 894 (18 th highest in the world) Ideality. Roads Proprietary Information 7

The Strategy of… Going Global from Day One! Intellectual Property Regulation Strategic Partners and… Ideality. Roads Proprietary Information 8

Israel Creates Big Companies “Start-up Nation” No. 3 on NASDAQ listed companies (Behind only USA, China) Global leader in Venture Capital investment per capita R&D center of many global companies Huge success stories Ideality. Roads Proprietary Information 9

Sample Israeli Tech Exits, 2015 -2017 $60 M $150 M Facebook acquires Pebbles Interfaces 7/2015 $200 M $350 M Microsoft acquires Secure Islands 11/2015 $20 -30 M $20 M Amazon acquires Annapurna Labs 1/2015 $320 M Apple acquires Linx Imaging 4/2015 $42 M Facebook acquires N-trig e. Bay acquires Sales. Predict Microsoft acquires Adallom Huawei acquires Hexatier 5/2015 7/2016 7/2015 12/2016 $380 M $145 M Cisco acquires Leaba 3/2016 $430 M Solar. Edge IPO 3/2016 $212 M Intel acquires Ravello Systems 2/2016 Ideality. Roads Proprietary Information Sony acquires Altair 1/2016 10

Prominent Israeli Tech Exits, 2012 -2017: $15. 3 B $1. 25 B $1. 19 B Mobileye Acquired by Intel 2012 $5 B $4. 4 B 2017 NDS Acquired by Cisco 2016 Playtika Acquired by Giant 2015 FUNDtech Acquired by D+H 2011 Waze Acquired by Google Ideality. Roads Proprietary Information 11

Venture Capital Investment Per Capita (2015) 450 400 350 US Dollars 300 250 200 150 100 50 0 Source: Geektime Annual Report 2015 Ideality. Roads Proprietary Information 12

Total 2016 Exits $10. 02 B Ideality. Roads Proprietary Information 13

Total Income from Academic Commercialization (2014) $650 M Ideality. Roads Proprietary Information 14

Israeli High-Tech Exits by Sector (%) Ideality. Roads Proprietary Information 15

The Israeli High-Tech Ecosystem Lack of Natural Resources The Capital Market Culture CRITICAL MASS Industry Venture Capital Education Universities Government Ideality. Roads Proprietary Information 16

Foreign R&D Centers in Israel by Country of Origin Over 300 [PERCENTAGE] [PERCENTAGE] US - 66% Canada - 3% Switzerland - 4% UK - 6% 16 other countries - 13% France - 3% Germany - 5% Ideality. Roads Proprietary Information 17

Foreign R&D Centers in Israel until 1990’s 1974 1964 1949 Ideality. Roads Proprietary Information 18

New Foreign R&D Centers in Israel 1989 -2012 1989 1991 1993 1997 1998 1999 2000 2004 2005 2006 2008 2010 2012 Ideality. Roads Proprietary Information 19

The Innovation Cycle Exit Taxes Royalties Foreign investment Government R&D support programs Ecosystem Experienced entrepreneurs R&D infrastructures Ideality. Roads Proprietary Information 20

Government – Support Programs Generic R&D Middle Stage International National Seed Competitive R&D Cooperative R&D Early Stage Late Stage and Solid Corporation Applied Academic Research Basic R&D Reaching Global Markets Ideality. Roads Proprietary Information 21

Investments and Reimbursements Total R&D Budget and Royalties 50% 600. 00 [VALUE] 45% Millions of dollars 500. 00 40% 400. 00 35% 33% 36% 30% 27% 300. 00 35% 23% 200. 00 15% 10% 100. 00 5% 2006 2007 Total R&D Budget 2008 Royalties 2009 2010 2011 2012 0% Royalties % out of R&D Budget Ideality. Roads Proprietary Information 22

re Is a ra Ja el p Fi an nl Sw and ed Au en D str Sw enm ia itz ar e k G rlan er d m an y U S Be A lg Sl ium ov e Fr nia a Au nc e N C et stra ze he li ch rla a R nd ep s ub Ic lic el a N nd or w ay C UK an a Ire da la Es nd t H oni un a ga ry I t Lu Por aly xe tug m a bo l u N ew S rg p Z ai ea n la Tu nd Sl rk ov ak Po ey R lan ep d u G blic re e M ce ex ic o C hi le 0 Ko Expenditure on Civilian R&D as a % of GDP in OECD Countries 5 4. 3 4 3 2 1 4. 1% = $13, 700, 000 3. 6 3. 2 3. 1 3. 0 2. 9 2. 7 2. 5 2. 4 2. 3 2. 1 2. 0 1. 9 1. 8 1. 7 1. 6 1. 5 1. 4 1. 3 1. 2 1. 0 0. 9 0. 8 0. 5 Ideality. Roads Proprietary Information 0. 4 23

Expenditure on Civilian R&D, % of GDP (Cont. ) Index Growth: 2013 1. 9% 2014 6. 1% 2015 4. 8% Business Sector in 2015: 86% of national R&D expenditure. R&D Financing in 2015: 49% from Foreign Funds. Ideality. Roads Proprietary Information 24

Government – Support Programs 100% 80% Government Budget 60% 40% 20% 0% Early Stage Middle Stage Late Stage Solid Corporation VS 1600 1400 1200 1000 800 600 400 200 0 Early Stage Middle Stage Late Stage Solid Corporation Private Funding Ideality. Roads Proprietary Information 25

Culture Numerous international conferences Academic courses in entrepreneurship Special high school programs (“Young Entrepreneur”) Entrepreneur a respected status in Israel “Failure” considered to be an asset Ideality. Roads Proprietary Information 26

Case Study: Israel’s Technology Incubators

Government Involvement Definition of the “Market Failure” Early stage, high risk, innovative technological enterprises cannot raise money from the private sector Average budget of project: $600 K Government grant: 85% of budget Incubator’s investment: 15% of budget Payback: 3% royalties from revenue Support duration: 2 years Extended support to Biotech/Pharma & Clean-Tech projects Annual Government Budget for the Program: ~$50 M Ideality. Roads Proprietary Information 28

Incubator – the Israeli Model Invested Capital: New Venture Entrepreneurs Founders 50%-70% State of Israel 15% ~$90, 000 Incubator Owners 85% Investors 50%-30% ~$510, 000 The venture returns the grant from royalties, success-based only. Ideality. Roads Proprietary Information 29

The Impact of the Incubator Program Government Investments VS. Private Funds Invested in Incubator Companies (Aggregate) 1991 - 2013 Thousand Dollars 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 $4, 500, 000 $4, 250, 000 $4, 000 $3, 750, 000 $3, 500, 000 $3, 250, 000 $3, 000 $2, 750, 000 $2, 500, 000 $2, 250, 000 $2, 000 $1, 750, 000 $1, 500, 000 $1, 250, 000 $1, 000 $750, 000 $500, 000 $250, 000 $0 Ideality. Roads Proprietary Information 30

Results: Israeli Technology Incubators Companies Launched • 1, 932 Companies Created • (1991 -2015) Private Capital Raised Return on Public Investment • Over US$5 Billion Raised by Incubator Graduates • 5 -6 x Return on Public Sector Investment • (1991 -2012) • (1991 -2015) Follow-on Investment • 60% of Incubator Graduates Raised Private Sector Investment • (1991 -2012) Long Term Success • 40% of Incubator Graduates Still Active Companies • (1991 -2012) Ideality. Roads Proprietary Information 31

Can the Israeli Story be Duplicated? Ideality. Roads Proprietary Information 32

Example #1: New Zealand Ideality. Roads Proprietary Information 33

Example #2: Argentina Ideality. Roads Proprietary Information 34

The Creation & Continuity of the Ecosystem The creation of the ecosystem is not a spontaneous process but a government responsibility! The continuity of the ecosystem is not an automatic process but a government responsibility! Ideality. Roads Proprietary Information 35

Cảm ơn bạn! Meir Dardashti @Ideality. Roads +972. 58. 4708388 +1. 267. 3889747 meir@idealityroads. com www. idealityroads. com/