Analysis of how Israel created a technology ecosystem that is only second to Silicon Valley

1. Lecture Centre for Jewish Life
«Investing in Israeli High-Tech»
by Edouard Cukierman
July 9th 2012
Main Office - 3 Daniel Frish St. Tel Aviv 64731, Israel
Tel: +972-3 695-0666 Fax: +972-3 695-0222

2. Israel Cluster’s Ingredients
Catalyst Presentation
7. Transparency of governance 1. Education and universities
2. Government support
6. Entrepreneurial spirit
Israel
Cluster 3. Technology sector
expanding internationally
5. VC and access to global
financial markets
4. Defense industry
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3. 1. Education and Universities
1. 1 Israel – Brainpower that can be leveraged
Catalyst Presentation
Number of Engineers Per 10,000 Employees
140
85
65
53
38 35 35 34 28 25 22 19
Source: Technion Israel Institute of Technology 2010 / SolveITLabs. Analysis, April 2010
Investment in Education % GDP
9.2%
7.0%
6.4% 6.4% 6.2% 5.9% 5.7% 5.5% 5.3% 5.0% 4.7%
4.0%
Source: Ministry of Finance 2010 / Worldbank 2010
draft. confidential 3

4. 1.2 Israeli Innovation Model: “The Tech Transfer”
from University to Industry
Catalyst Presentation
Creation of institutionalized basis for
scientific research
Technology transfer: the secret engine
Dr. Albert Einstein, on his visit to the Technion, 1923
• World pioneer in tech transfer since 1959
• 2 of the world’s top 15 tech transfer
companies (Yeda, Weizmann Institute of
Science (1959) and Yissum, Hebrew
University of Jerusalem (1964))
• > $8 billion in licensed product sales
• $ hundreds of millions in tech transfer
revenues
• Dozens of spinoffs
Source: ITTN
draft. confidential 4

5. 2. Government Support In Israel
Catalyst Presentation
Technology
Education
 Constantly rising government
spending on hi-tech education
Co-investment Military Budget
with VC industry
 Talent Incubator
 Yozma VC Fund and
Health Fund
Immigration
Chief Scientist Support
 Jewish Agency
 Government R&D grants since 1970’s  Gvahim
and still growing  MASA
 Incubator Program for start-ups  Nefesh B’Nefesh
draft. confidential 5

6. 3. Technology sector expanding internationally
3.1 Israel Economic Status 2005-11
Catalyst Presentation
 Israel’s economy keeps growing and continues to be a “safe haven” among the OECD
markets. => 45% of Israel’s growth comes from the high tech Industry
GDP growth – Israel vs. Developed Markets, 2005-11
5.7%
6.0% 5.4%
4.9%
4.7% 4.7%
5.0%
4.0%
4.0% 3.2%
3.0% 2.9%
2.7% 2.7%
3.0% 2.3%
2.0%
0.8%
1.0%
0.0%
2005 2006 2007 2008 2009 2010 2011
-1.0%
-2.0%
-3.0% Israel OECD
-4.0% -3.5%
Source : OECD
draft. confidential 6

7. 3.2 The High-Tech Sector Is The Growth Engine
Of The Israeli Economy
Catalyst Presentation
Industrial Export by Technology Intensity (1990 vs. 2011)
1990 Industrial exports 2011 Industrial exports
$7.7B $40.7B
1990 2011
Source : The Central Bureau of Statistics,
Israel 2011
draft. confidential 7

8. 4. Israel Defense Industry
Catalyst Presentation
“Many Israeli start-ups should pay royalties
to the army. The military service deserves
some of the credit. Israel's army does not just
train soldiers, it nurtures entrepreneurs”*.
* Quote of Edouard Cukierman in the interview to the “Economist”.
draft. confidential 8

9. 5. VC And Access To Global Financial Markets
5.1 VC Investments
Catalyst Presentation
VC Investments per Capita in 2011, US $
180 164
160
140
120
92
100
80
55
60
40
18
20 4.5 7 8
0
China Europe India Russia Brazil USA Israel
Sources: IVC Research Center, IVC 2012 Year book ;
Pwc, MoneyTree Report 2012; RVCA Yearbook 2012;
INSEAD PE Report 2012
draft. confidential 9

10. 5.2 A decade of Israeli European / US Public Offerings
Catalyst Presentation
 Portfolio companies of Catalyst, which went public on
Israeli IPO’s NASDAQ: PowerDsine (PDSN), Scopus (SCOP), Omrix (OMRI),
Europe USA
In: Commtouch (CTCH), BOS (BOSC), Cyalume (CYLU), Dot Hill
Number of Capital Raised Number of Capital
(Hill), Orckit (ORCT). Some portfolio companies like MTI went
Year public on AIM.
Offerings ($M) Offerings Raised ($M)
 Cukierman & Co. (CIH) is the leading Investment House for
Up to1998 14 200 74 3,269 IPOs of Israeli firms in Europe. Transactions of CIH include:
Summit, Visonic and Metaltech in London, Astra and VCON in
1999 12 446 20 3,375 Paris, Wizcom, OTI and Electronics Line in Germany.
2000 7 353 33 4,649  As of today, Israeli companies raised over $27B through foreign
public equity offerings, in addition to over $46B in secondary sale
2001-2003 1 118 12 2,806
on the market by shareholders.
2004 5 150 12 1,117  With 176 companies going public on American Stock Exchanges,
Israel was ranked #3, after China and Canada, in terms of number
2005 20 1,106 4 355
of foreign companies (excl. North American companies) listed on
2006 16 2,078 8 3,460 NASDAQ.
 With 84 Israeli companies going public on European Stock
2007 6 2,117 11 1,210
Exchanges, Israel was ranked #2 in terms of number of foreign
2008 2 222 _ _ companies traded on European Exchanges.
 CIH is the sole NYSE Euronext’s Israeli listing sponsor.
2009-2011 1 3 4 192
Total 84 6,793 178 20,433 Source : Israel VC Indicator Survey: 2008, 2009 & 2011; NASDAQ, NYSE, EURONEXT (2011)
draft. confidential 10

11. 5.3 Israel Hotbed for Multinational Enterprises
Catalyst Presentation
500
4,000
10000
1,500
1,000
400
1000
450
1,000
1,500
200
1,500
3,000
Estimated Number of employees in Israel
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12. 5.4 Israel M&A Selected Transactions & Our
Direct Involvement
Catalyst Presentation
Israeli Companies acquired by International Players International Players acquired by Israeli Companies
Seller Buyer $ Millions Year Seller Buyer $ Millions Year
Mirabilis AOL 425 1999 European Mineral
DSPC Intel 1,600 1999 Eden Springs 110 2002
Water Cox
Galileo Marvell 2,700 2000
Brandt Elco Holdings 225 2002
Chromatics Networks Lucent Tech. 4,500 2000
Top Tier Software SAP 400 2001 Zone Labs Checkpoint 205 2003
Indigo Hewlett Packard 880 2001 Allibert Keter 20 2003
Precise Software Veritas Software 537 2003 Ofer Brothers Orco Group 100 2005
Eden Springs Danone 699 2003 Ivax Teva 7,400 2005
Orex Kodak 63 2004 Rosebud &CIH Hardstone 173 2006
P-Cube Cisco Systems 200 2004 XenSource Citrix 500 2007
Europe Israel (Zisser) Segece Klepierre (BNP) 925 2004/5 Actimize Ltd. Nice Systems 280 2007
Elco Brandt Fagor 200 2005 Bentley Teva 360 2008
Scitex Vision Ltd HP 230 2005 Ratiopharm Teva 5,000 2010
Shopping.com eBay 650 2005
Theramex Teva 372 2010
M Systems SanDisk 1,550 2006
Microtune Zoran 166 2010
Iscar Ltd. Berkshire Hathaway 4,000 2006
Mercury Corporate HP 4,500 2006 European Israeli Transactions
Taro Pharmaceuticals Sun Pharmaceuticals 454 2007
Omrix Johnson&Johnson 438 2008 Transactions Involving Fund Principals
Fraudscience PayPal Inc. 169 2008
Solel Solar System Siemens 418 2009 From 1999 to 2012, over 684 Israeli companies
Merial Sanofi-Aventis 4,000 2009 were involved in M&A transactions with foreign
Shamir Optical (50%) Essilor 130 2010 enterprises for a total worth of more than $46b.
Provigent Broadcom 350 2011
Oridion Systems Covidien 346 2012
Objet Stratasys Inc. 634 2012 Source: IVC Research Center, IVC 2012Year book
Clal Industries Access Industries 350 2012 12
draft. confidential

13. 6. Entrepreneurial Spirit
Catalyst Presentation
• Jewish Education Studies: Questioning and Challenging
• ”The Israeli Chutzpah”: The absence of hierarchical barriers promotes
innovation at all levels of a firm
• Reaction to isolation and lack of resources
• Democracy - culture of transparency
• Melting Pot: Israeli immigrants are coming from more than 90 countries
• Problem-solving approach
• ”A network of startups in a Start-Up Nation”: Israel has the highest amount of
Start -up per capita in the world
• R&D centers with world-wide recognition
• Israel is blessed with an exceptional entrepreneurial workforce, ranked 3rd in
the world (IMD index). According to WEF Global Competitiveness Report
2008-2009, Israel ranked 3rd for Registered Patents Per Capita
draft. confidential 13

14. Cukierman & Co. Range of Activities
Catalyst Presentation
Corporate Finance Private Equity Funds Family Office
• Private Placement • Venture Capital
• Initial Public Offerings • Private Equity
• Mergers & Acquisitions • Secondary Advisory
• Strategic & Financial Consulting
draft. confidential 14

15. Track Record
Transactions Advised by Cukierman Investment House
Catalyst Presentation
Since its establishment in 1993, Cukierman & Co. Investment House Ltd. has been engaged
in transactions valued over €3b through Private Placement, IPO and M&A.
draft. confidential 15

16. The Opportunity To Invest In Israeli Companies Traded In Europe
Catalyst Presentation
205
112
* Cukierman 15 Index is an average of the 15 largest Israeli companies traded in Europe.
This index, published initially by Globes, reflects the performance of the major Israeli
companies in Europe.
Published by:
From 2002 to 2005, Israeli companies were underperforming due mainly to risk perception
of the Israeli Market. Since the third quarter of 2005, Israeli companies have been
outperforming the index of European companies traded in the same European Exchanges.
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17. Catalyst Partners Experience and Track record
Catalyst Presentation
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18. Where European and Israeli Business meet!
10th Edition: October 29th , 2012
Catalyst Presentation
Organized by Catalyst Fund and Cukierman Investment House Ltd., Go4Europe is
one of the most prestigious conferences in Israel. Go4Europe addresses the current
issues of raising funds and establishing strategic alliances across borders.
In the previous years, our conference has welcomed several Heads of State, including
Mr. Ariel Sharon, Mr. Benjamin Netanyahu, Mr. Ehud Olmert and President Nicolas
Sarkozy.
Go4Europe’s 9th Edition was held on October 31st 2011 and hosted 1,288 participants.
Among them 400 came especially from Europe, including key European
Parliamentarians and investors from European institutions and Family offices.
Among the participating companies and sponsors:
RUSNANO, EBRD, RVC, DLA PIPER, APM, NYSE EURONEXT, VEOLIA, TEVA, M&A
EUROPE,BANKHAPOALIM,ASSYA,OTTO,LCF,ROTHSCHILD,FRANCETELECOM,PHILIPS,EV
OLVA,NOVARTIS,SANOFIAVENTIS,ALCATEL,NOKIA,PHILIPS,DEUTSCHTELECOM,
VINCI,….
To register or view the
agenda: www.go4eu.com
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19. С уважением,
Екатерина
Thank you!
Contact: edouardc@catalyst-fund.com
Tel: +972 3 6950 666