2. THE NATIONAL POLICY FOR ENCOURAGING ISRAELI HIGH-TECH Yair Amitay Managing Director

3. Jaffa Oranges vs. Software (1992-2001) 0 500 1000 1500 2000 2500 3000 3500 1992199319941995199619971998199920002001 exports ($millions) Citrus Software

4. 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 200220012000199919981997199619951994199319921991199019891988 Industrial Export by technological intensity (In million $) Low-tech Med-tech High-tech

5. Why Israeli High-tech? High-Tech is over 50% of industrial production. Over 50% of industrial export are High-Tech. World highest per-capita science graduates and scientific workforce: 140 per 10,000 R&D spending 4.5% of GNP - among the world’s highest. Civilian spin-offs of defense technologies. Global JV’s takeovers and international alliances.

6. Expenditure on Civilian R&D as a percent of the GDP in Israel and in OECD Countries (2001)

7. OCS Industrial R&D Programs Generic R&D Magnet Magneton ISERD (Eu FP6) National International Pre-Seed Technological Incubators Nofar Tnufa Eureka Bi-national Funds Bi-national Agreements Seed Fund Industrial R&D Fund Competitive R&D MATIMOP

8. OCS Support Programs Along the Innovation Process Internationa l programs INCUBATOR S Nofar EU FP6 Applied academic research MARKET PROXIMITY RISK MAGNET Competitive R&D Seed Fund Tnufa

9. 14 Technological Incubators 23 Incubators Grants are 85% of the approved expenses, up to 350,000$. Duration: up to 3 years.

10. MAGNET - Generic R&D and Technology Transfer Support Collaborative pre competitive generic technologies. Grants: 66% of approved budget. Over 5 participants per project (Industry & Academia) 16

11. INTERNATIONAL TECHNOLOGICAL CO-OPERATION Why? How?

12. International Technological Cooperation - Why Sharing the risk of R&D. Strategic partnerships for mutual benefit. Access to new technologies.

13. International Cooperation in R&D KORIL - with KOREACIIRD - with Canada SIIRD - with Singapore Bi-national Funds: BRITECH - with the UK BIRD - with the U.S.A

14. International Cooperation in R&D BI-national R&D Support Agreements: The Netherlands Spain Belgium France Portugal I taly Ireland Sweden Finland Germany China India

15. International Cooperation in R&D European Commission Sixth Framework RTD Program EUREKA Multinational Agreements: Multinational Agreements:

16. Bi-National and Multi-National Industrial R&D Projects Total 65 Total 102 Total 152 No. projects Eureka Bi-nat’- Europe Bi-nat’ Funds Asia Bi-nat’ Asia New Ongoing 20022003 2004 Plan

17. National and International programmes Yearly Funds Available Industrial R&D Projects $300M Magnet$40M Technology Incubators$30M Tnufa$ 3M EUREKA$16M Israel – Sweden (SIBED)$1.5M Israel-Italy$1.5M

18. National and International programmes (cont.) Yearly Funds Available BIRD-USA-Israel Bi-National R&D Foundation 14 $M CIIRDF-Canada- Israel Industrial R&D Fund 1 $M Britech-United Kingdom- Israel Industrial R&D Fund 2 $M SIIRD-Singapore -Israel Industrial R&D Fund 2 $M KORIL – Korea-Israel Industrial R&D Fund 2 $M European 6th Framework programme $4000M

19. OCS Grants by Technological Sectors Other: 4% Communications: 36.5% Software: 17.3% Chemicals: 2.6% Electro-Optics: 8.1% Electronics: 9.1% Life Sciences: 22% 2003 0320

20. VC INDUSTRY in ISRAEL Highest VC investments as share of GNP:1.3% during 1998-2000 (5.4 $B) High Share invested in early stage firms (over 0.6% against 0.1% in most OECD countries). Large Pool of SU; highest number of IPOs in Nasdaq after the US & Canada Strong participation of foreign (limited) partners A distinctive targeted VC industry policy was adopted (Yozma Program, 1993-8)

21. YOZMA: Objectives and Targets Objective: Creation of a VC ‘Industry’ rather than stimulating a pool of VC. Specific Design targets 1. Attracting high quality foreign & domestic agents; 2. Strengthen collective learning mechanisms; 3. Triggering evolutionary selection processes (strategies, organization; etc)

22. YOZMA: Objectives and Targets (cont). 4.Lead Coordination among agents; 5.Send a strong coherent signal about the potential of the cluster and of the commitment of the Israeli Government; 6.Achieving critical mass of capital and capabilities; 1.Achieving critical mass of capital and capabilities;

23. THE YOZMA PROGRAM Specific Design Features-1 A Government Venture Investment Component-100M$ 80% Fund of Funds investment: 10 private/hybrid daughter “Yozma Funds” typically with a 40% Government Share in each fund (8M$) 20% direct investments in SU Limited Partnership form of VC organization ; Incentives to the Upside (call option on Govern. Shares)

24. THE YOZMA PROGRAM Specific Design Features-2 Selection of management teams Collective Learning : reputable foreign limited partners; links among Yozma Funds, Interactive processes, etc.; Notes on Government Venture Contribution Scope leading to Critical Mass: triggered a self- sustaining cumulative process engulfing the entire cluster; Catalytic Program: limited period of incentives; privatized in 98;

25. Thank You for Your Attention