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

Oded Hermoni @odedhermoni
The Chase After the
Israeli Unicorn
Oded Hermoni
Rhodium 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)
odedh2005@gmail.com

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 innovation
Israel 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
Innovation
Category 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 eco-
system 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

290of the world’s largest
companies have
chosen Israel for
R&D

Investment Landscape

29.7
6.1
2.1
6.3
AUD27.3
AUD4.7
AUD1.9
AUD4.1
AUD29.4
AUD3.1
AUD2.3 AUD1.8
$0
$8
$15
$23
$30
$38
US Europe & UK Israel China
$B
Annual VC Investment by Geography ($B)
2011 2012 2013
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)

268
343
604
677
378 367
418
578 579 585
695
596
648 617
714
920
1,000
1,050
0
275
550
825
1,100
1,375
1997 1999 2001 2003 2005 2007 2009 2011 2013*
#ofCompanies
New Tech Companies Formed in Israel
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 companies
2,882 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 &
Incubators
Up 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 cycles
95% comes from non-Israeli LP’s

Performance

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

Unicorns – Are not that rare in Tel Aviv
2013/2014 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

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 to
Rakutan 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 you
Oded Hermoni
Email: odedh2005@gmail.com
Website: www.rhodium.co.il
Twitter: @odedhermoni

Breakdown of investments per stage -
smaller rounds than SV

M&A of VC-Backed Companies -
Dramatic Increase in # and Size
1075
650
475
466
435
434
391
370
360
360
335
321
300
295
268
266
240
237
230
200
200
$0 $300 $600 $900 $1,200
Waze
Trusteer
Intucell
Adap.tv
XtremIO
Cyoptics
Anobit
PrimeSense
Wilocity
Check
Provigent
Amobee
SuperDimension
Dotomi
Cotendo
dbMotion
Wintegra
Aeroscout
Attenti (Dmatek)
ScaleIO
Cyvera
•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&A
deals

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

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

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