[PREMONEY 2014] Rhodium >> Oded Hermoni, "The Global VC: Israel"

Oded Hermoni @odedhermoni

The Chase After the Israeli Unicorn

Oded HermoniRhodium Ventures


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)

[email protected]

mailto:[email protected]



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)


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


When you think about Israel, you might think about this…


While, when I think about Israel, I think about something else…


Some cool facts you might not know about Israel…


• 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


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


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


The Israeli High Tech Eco-System


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 ecosystem to Silicon Valley


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


• 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


290

of the world’s largest

companies have chosen Israel for

R&D


Investment Landscape


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


US comparison- Israel Ranked 4th

ANNUAL VC INVESTMENT BY STATE ($B)


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


10 Year glance: 7,027 companies2,882 closed /4,145 net


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


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


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


VC investments by sectors



Established Local and international VC community

INTERNATIONAL LOCAL


Capital raised by Israeli VCs-6 cycles95% comes from non-Israeli LP’s


Performance


The Israeli VC Environment M&A of VC-Backed Companies - Dramatic Increase in # and Size



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


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


Most active acquirers


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


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



Notable exits and potentially next unicorns…

•Source: IVC Research Center

Source: IVC RESEARCH CENTER, Vintage and Oded Hermoni


Israeli VC M&A Performance comparing to US


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)



Why Israel and Why now?


• 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


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


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.


Thank youOded Hermoni Email: [email protected] Website: www.rhodium.co.ilTwitter: @odedhermoni


http://www.rhodium.co.il/


Breakdown of investments per stage - smaller rounds than SV


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

[PREMONEY 2014] Rhodium >> Oded Hermoni, "The Global VC: Israel"

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