[premoney 2014] rhodium >> oded hermoni, "the global vc: israel"
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"The Global VC: Israel"TRANSCRIPT
Oded Hermoni @odedhermoni
The Chase After the Israeli Unicorn
Oded HermoniRhodium Ventures
Oded Hermoni @odedhermoni
Oded Hermoni• Active Venture Partner @Rhodium • Screening committee-TIE Angels, board
member, advisor, angel investor in several start ups and advisor to US VCs on Israeli investments
• Co-Chair IEFF (Israeli Executives & founders in Silicon Valley)- 800 members
• Past: Headed the Israeli VC Association (IVA), Israel High Tech Industry (IATI), VP Investments and BD Capital point group, Maytag High tech ventures
• Founder of TopIdea (Acquired by Zap Group, 2006)
• Tech Editor and Journalist (TheMarker, Haaretz, RedHerring)
Oded Hermoni @odedhermoni
About Rhodium• Investment arm of the Recanati family • Recanti - Legacy of 78 years of investments in the
Israeli industry (IDB, Clal, Elron, Iscar, Given Imaging, Quigo, Objet/Stratasys, Mobile Eye)
• Rhodium - Founded by Daniel Recanati, invests in early stage start ups in Israel, NYC, SV and focused on B2C and B2B2C.
• Management – Daniel Recanati, Yaron Kniajer and Oded Hermoni
• Investments includes Outbrain, Face.com(FB), HopStop (Apple), Yotpo, Zooz, Yildmo, Chosen, GreenSQL, among others
• Screen 1600 deals a year (over 1000 in Israel)
Oded Hermoni @odedhermoni
A tiny country…with lots of innovationIsrael is the 100th smallest country / Population of 8M, 10.2% of workforce in High Tech and the highest density of start ups in the world
Oded Hermoni @odedhermoni
Oded Hermoni @odedhermoni
When you think about Israel, you might think about this…
Oded Hermoni @odedhermoni
While, when I think about Israel, I think about something else…
Oded Hermoni @odedhermoni
Some cool facts you might not know about Israel…
Oded Hermoni @odedhermoni
• Milk-Israeli cows produce more milk per cow than almost any country in the world
• Trees- Israel is one of only two countries that began the 21st Century with a net gain in the number of trees
• Museums- Israel has the highest number of museums per head in the world
• Solar-More than nine out of 10 Israeli homes use solar power to heat water
• Sushi-Tel Aviv has the largest no. of Sushi restaurants per capita
• Academics- Israeli academics produce more scientific papers per capita than anywhere else in the world
Oded Hermoni @odedhermoni
And others which affect your daily life• Communication: first cellular phone - Motorolla,
Text Message - comverse , Instant message - ICQ, Viber, Tango
• Hardware: Kinect- Primesemse, DiskOnKey, Intel’s Centrino
• Security: First PC Anti Virus (and PC Virus), Firewall -Checkpoint
• Search: Google’s automatic search completion• Medical :“ReWalk”- walk again device, Given Imaging swallowable imaging capsules• Navigation :Waze• Content discovery – Outbrain
Oded Hermoni @odedhermoni
Startup Nation with World-Class InnovationCategory Ranking
R&D Spending #1
Scientific Research #1
Public Spending on Education #1
Business Innovation #1
Cyber-security #1
Entrepreneurship #2
Economic Resilience During Crises
#4
“The country’s main strengths remain its world-class capacity for innovation...which rests on highly innovative businesses that benefit from the presence of the world’s best research institutions geared toward the needs of the business sector.
Israel’s excellent innovation capacity, which is supported by the government’s public procurement policies, is reflected in the country’s high number of patents….
Its favorable financial environment, particularly evident in the ease of access to venture capital…has contributed to making Israel an innovation powerhouse.“(World Economic Forum 2012-2013)
Source: IMD World Competitiveness Ranking 2013
Oded Hermoni @odedhermoni
The Israeli High Tech Eco-System
Oded Hermoni @odedhermoni
ACADEMIC INSTITUTIONS
ISRAELI MILITARY
EXPERIENCED ENTREPRENEURS
SEASONED ANGEL INVESTORS
SUPPORTIVE GOVERNMENT
ESTABLISHED MULTINATIONALS
RESEARCH INSTITUTIONS/INCUBATORS
VIBRANT LOCAL AND INTERNATIONAL
VC INDUSTRY
The Silicon Wadi has a similar eco- system to Silicon Valley
Oded Hermoni @odedhermoni
Leading Academy
Israel has five major universities- 3 ranked on the top 100 global academic list 2013• Israel ranked 3rd for its scientific infrastructure, and
4th for its technological infrastructure (IMD 2013).• Complimented by an unusually high availability of
scientists and engineers (ranked 8th in the 2013-2014 WEF Global Competitiveness Yearbook)
• Ranked 5th in the world for patent filings per capita (2013-2014 WEF Global Competitiveness Yearbook)
• Over the past decade, Israel, with a population of just 7.9 million, has produced eight Nobel laureates
Oded Hermoni @odedhermoni
• Elite Technical units are a key (and cost effective) training ground
• The Army promotes stating one’s mind, questioning authority- limited “hierarchy”
• Technology/intelligence units have the latest tech and “toys”
• Best and brightest work as teams, take risks, and lead
• Israeli “Chutzpah” + constant external threats lead to
agile development and product building
• Bond with friends and partners for life
The Military secret sauce
Oded Hermoni @odedhermoni
290
of the world’s largest
companies have chosen Israel for
R&D
Oded Hermoni @odedhermoni
Investment Landscape
Oded Hermoni @odedhermoni
US Europe & UK Israel China$0
$8
$15
$23
$30
$38
29.7
6.1
2.1
6.3
AUD27.3
AUD4.7AUD1.9
AUD4.1
AUD29.4
AUD3.1 AUD2.3 AUD1.8
Annual VC Investment by Geography ($B)
2011 2012 2013
$B
Source: Giza Venture Capital
The Israeli VC Environment more venture capital per capita than any country — 2.5 times the U.S., 30 times Europe, 80 times India, and 300 times China
Oded Hermoni @odedhermoni
US comparison- Israel Ranked 4th
ANNUAL VC INVESTMENT BY STATE ($B)
Oded Hermoni @odedhermoni
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
2014*
0
275
550
825
1,100
1,375
268343
604677
378 367418
578 579 585
695596
648 617714
9201,000
1,050
New Tech Companies Formed in Israel
# of
Com
pani
es
Source: IVC and Vintage Investment Partners*Vintage projection. 2013 figure is projected given lag in reporting
Record Company Formation – 2 per day
Oded Hermoni @odedhermoni
10 Year glance: 7,027 companies2,882 closed /4,145 net
Oded Hermoni @odedhermoni
8 million people and 7,000 start ups…
• 2nd only to SV in no. of Start ups per SQF
• More than 7,000 Start Ups
• $14.4B raised by Israel VC’s
• $26B invested 1997-2013
• M&A $73B, IPO $7B• NASDAQ – 70
companies
Source: IVC Research center
Oded Hermoni @odedhermoni
Trends• Foreign investors dominate the investment
scene – 82% of the investments (compared to 50% in 2005)
• Early stage investments increasing- 47% 80% upround from Seed
• A crunch expected (reduced capital available by Israeli funds)
• IPO’s and M&A’s – dramatic increase• Serial entrepreneurs are looking to build big
companies• Internet investment increase• Increase in multi national R&D Centers
Oded Hermoni @odedhermoni
The Israeli VC Environment Funding Ecosystem
Angels & IncubatorsUp to $20M
Micro-VC Funds$20-50M
‘Big’ Local Funds>$100M
Mega-VC Funds>$300M
No Israeli Funds
Source: Giza Venture Capital and Vintage Investment Partners
Incubation
Seed
Series C+
Series A
Series B
Accel, Battery, Bessemer, Canaan, Index, Lightspeed, Norwest, USVP, Venrock, Corporate VCs
Aleph, Carmel, Cedar, Gemini, Genesis, Giza, Greylock, JVP, Magma, Marker, OrbiMed, Pitango, Sequoia
Glilot, Inimiti, lool Ventures, TriVentures, YL Ventures
24
Angels, Elevator, Office of the Chief Scientist, OurCrowd, UpWest Labs
Oded Hermoni @odedhermoni
VC investments by sectors
Source: IVC Research center
Oded Hermoni @odedhermoni
Established Local and international VC community
INTERNATIONAL LOCAL
Oded Hermoni @odedhermoni
Capital raised by Israeli VCs-6 cycles95% comes from non-Israeli LP’s
Oded Hermoni @odedhermoni
Performance
Oded Hermoni @odedhermoni
The Israeli VC Environment M&A of VC-Backed Companies - Dramatic Increase in # and Size
Source: IVC Research center
Oded Hermoni @odedhermoni
Unicorns – Are not that rare in Tel Aviv2013/2014 IPO’S AND EXITS over $500M:• Imperva $1.23B• Viber $900M• Wix $778M• Varonis $635M• Waze $1.15B• Objet (merged with Stratasys) $5B• Kite Pharma $1.14B
Expected IPO’s (Based on the press*) • MobileEye $2.5-3B• OutBrain $1B• Next up: 164 companies with over $25M rev
Oded Hermoni @odedhermoni
A history of proven global exits…
$1 billion
$80 million
$345 million
$120 million
$630 million
$340 million
$900 million
$268 million
$679 million
$517 million
$340 million
$313 million
MERGER
$650 million
Oded Hermoni @odedhermoni
Most active acquirers
Oded Hermoni @odedhermoni
IPOs Returning – Recent Israeli VC- Backed NASDAQ IPOs
• Israel has 70 companies listed on NASDAQ- more than all Europe combined
• 50% of the Israeli companies listed on the AMEX, NASDAQ and NYSE stock exchanges closed out 2013 with gains of 30% or higher. The value 9 companies more than doubled and 3 tripled
Oded Hermoni @odedhermoni
The Israeli VC Environment Top VC-Backed Exits By Sector
Consumer Web / Mobile Apps
Enterprise Software Comms. Software Semis Adtech
$1,085M
$475M
$1,554M
$466M
$1,435M
Source: IVC Research center
Oded Hermoni @odedhermoni
Notable exits and potentially next unicorns…
•Source: IVC Research Center
Source: IVC RESEARCH CENTER, Vintage and Oded Hermoni
Oded Hermoni @odedhermoni
Israeli VC M&A Performance comparing to US
Oded Hermoni @odedhermoni
Dramatic improvement in exit/investment ratio Capital efficiency is the name of the game…
Trusteer raised $10m – sold for $650M/IBM (2013)Waze raised $67m- Sold to Google for $1B (2013)XtremIO raised $25M- sold for $430M to EMC (2012)
Viber raised $30M – sold toRakutan for $900M (2014)Intucell raised $6.5M – Sold to Cisco for $475M (2013)
Source: IVC Research center
Oded Hermoni @odedhermoni
Why Israel and Why now?
Oded Hermoni @odedhermoni
• HIGHER CHANCE OF SUCCESS: Many of Israel’s entrepreneurs are second-timers who have already built successful companies and learned from failures
• ECOSYSTEM HAS MATURED: a developed network of seasoned entrepreneurs, investors, institutions and local and global VC firms looking for big exits
• PRO INVESTORS TERMS:Israeli A round = SV Seed (valuation and size)
• Available Talents: Cost-30% less than in the Valley
• GLOBAL FROM DAY ONE: A small domestic market means that Israeli start-ups are focused on global growth from the beginning
Oded Hermoni @odedhermoni
Oded Hermoni @odedhermoni
Best practices-working with Israelis
• Polyphonic culture (relationship-oriented) and task oriented CONTRAST to Monochromic (rule-oriented)
• No bullshit, no politics, just clearly set out goals and get them done
• Good with Improvising/thinking out side the box – Famous for “Chutzpa”
• every Israeli has a very strong opinion on EVERYTHING.
• Help each other out• Prefer to cut corners• Direct - Say exactly what they think• LOVE to argue. Hate Hierarchy • Love challenges and dislike wasted talent
Oded Hermoni @odedhermoni
Understanding Israelis An Israeli employee has an American boss. The boss is furious at something the Israeli did, so he calls him and says with a stern voice: "I think we may have a slight problem here”.Here's how the Israeli interprets it:• "I think" = The boss is not sure there's a problem. He
only thinks there's a problem.• "We" = It's not my problem. It's our problem. So it's not my
fault.• "May" = We may have a problem, meaning it's not certain
there is a problem.• "A slight problem" = A minor thing, not a big problem.
Oded Hermoni @odedhermoni
Thank youOded Hermoni Email: [email protected] Website: www.rhodium.co.ilTwitter: @odedhermoni
Oded Hermoni @odedhermoni
Breakdown of investments per stage - smaller rounds than SV
Oded Hermoni @odedhermoni
The Israeli VC Environment M&A of VC-Backed Companies - Dramatic Increase in # and Size
WazeTrusteer
IntucellAdap.tv
XtremIOCyoptics
AnobitPrimeSense
WilocityCheck
ProvigentAmobee
SuperDimensionDotomi
CotendodbMotionWintegra
AeroscoutAttenti (Dmatek)
ScaleIOCyvera
$0 $300 $600 $900 $1,200
1075650
475466
435434
391370
360360
335321
300295
268266
240237
230200200
•Apple (2013)
EMC (2012)
Apple (2011)
Broadcom (2011)Singapore Telecom (2012)
Covidien (2012)ValueClick (2011)
Akamai (2011)
PMC (2010)Stanley Black & Decker (2012)
3M (2010)
Avago (2013)
Allscripts (2012)
Exit Value $M
Cisco (2013)
Google (2013)
AOL (2013)
EMC (2013)
IBM (2013)
Palo Alto Networks (2014)
45
Qualcomm (2014)Intuit (2014)
Most of the large size M&A – I the past 3 years
2013- $4.6B VC backed M&Adeals