Outline

1. Israel as a Role Model for Global InnovationProf. Dr. Liora KatzensteinFounder and PresidentISEMI College for Entrepreneurship Education Sofia, 30 October 2014

2. Outline • Financing Innovation Policy • The Instruments • Some Results • Israel & Bulgaria Compared • Conclusions for Bulgaria

3. Innovation Support Institutions1. Office of the Chief Scientist • Office of the Chief Scientist (OCS) at the Ministry of Industry and Trade - Created in early 1970s to encourage R&D based export-oriented industries - If R&D project results in a commercially successful product  sales royalty is payable until 100%-150% of the US-dollar value of the R&D grant has been repaid

4. Innovation Support Institutions 2. Israeli Export Institute • Works with approximately 1,000 high tech start-ups per year • Offers information on every relevant topic • special focus on marketing and management • Initiates contacts with foreign investors and potential joint venture partners • Rents space in worldwide exhibitions, encouraging & assisting start-ups to participate

5. Innovation Support Institutions 3. BIRD Foundation • Industrial cooperation between Israeli & US companies, est. 1997 • Most active of various international arrangements to finance joint R&D • Works closely with Chief Scientist, to evaluate tech merits of each project • Contributes, over 2-3 years, up to 50% of the approved cost of R&D • Should a project fail for any valid reason  no return of BIRD grant is due • Should commercial revenues result  BIRD receives a max 150% • Typical scenario for BIRD - Joint venture involving: • Israeli company with innovative technological abilities • American company which develops, manufactures, installs, and supports • Has an ongoing demand for new products for an established customer base in the U.S.

6. Innovation Support Institutions 4. The Technological Incubators • Purpose & Operations • An answer to the influx of technologically trained former Russian immigrants • Under the aegis of the Chief Scientist • Infrastructure supported 100% by Government (US K300) • Structure dedicated to seed investments • A separate company, in which the investor is a partner for each project • Entrepreneurs expected to complete development & financing in 2 yearsObligation to return loans based on future success • Provides the following services • Assistance in determining the tech and market feasibility • Assistance in obtaining the financial resources needed • Assistance in forming and organizing an R&D team • Professional and administrative guidance & supervision • General and Administrative services http://www.incubators.org.il/

7. Innovation Support Institutions 5. Yozma – Governmental VC fund • $100M allocated in 1991 by the Government to Yozma a fund of funds • Co-invested $US 8M in VC funds along with $US 12M brought by private investors • Private investors have the right to buy the government out after 6 years for nominal investment • 10 Yozma funds created • Privatized in 1998 • Catalyst for establishment of Israeli VC industry

8. Investment in Innovation – TrendsFrom VC to Private Equity • Between 1990 – 2009, mostly Venture Capital funds (VC) • Over the years, VC funds were getting larger, until 2008 • Ability to invest in companies requiring significant input of funds • Better able to lead such investments • Prefer larger deals and more mature companies  affect those needing seed or start-up financing • Take positions on Boards of the companies in which they invest • Increased association with US investment banks • Access to considerable research resources • opportunity to springboard their start-ups into world markets

9. Total Capital Raised By Israeli High-Tech Companies

10. Total Capital Raised by Israeli VC Funds by Vintage Year ($b) 2003-2013 €

12. Private Equity Deals by Quarter ($m)

13. M&As and IPOs of Israeli High-Tech Companies, $b (2002-11)

14. Entrepreneurship in IsraelSupporting Factors • The Specific Israeli/Jewish Background • The Israeli improvisation • East- European immigration • Individualistic character • Abundant venture capital • Generous government support schemes

15. Entrepreneurship in IsraelLimiting Factors • Cost of capital, especially seed capital • Banks do not understand entrepreneurship • Problems with “Intrapreneurship” • Lack of team work ability (Despite army experience) • Treating competition with contempt • Product, not service, focus • Lack of punctuality, exactness & discipline • Lack of strategic focus

16. Israel and Bulgaria ComparedSimilarities • Recently established democratic and free market nations (1990’s). • Share aspiration for technological leadership • Aspire for Global Presence

17. Israel and Bulgaria ComparedDifferences (A) • Availability of local markets • Available for Bulgaria in East Europe • Not available in Israel • Exit Orientation • Israelis  IPO-oriented • Bulgaria  not IPO-oriented • Availability of capital • Israel  made available over the last 2 decades • Bulgaria  not available over many years

18. Israel and Bulgaria ComparedDifferences (B) • Risk Aversion • Israelis are by nature not risk averse • Bulgarians are more risk averse • Government Orientation • Israeli government encourages and supports risk taking in a multitude of ways. • Bulgariangovernment is making efforts to adopt innovation policies.

19. Elements for competitiveness for both nations • “The Global Individual with Local Roots” • Professional • Ethical • Visible • Cross-Cultural

20. Conclusions for Bulgaria • Given the inherent limitations and facts provided… • Training & Education, mostly risk taking • Move from basic industry and services to sophisticated products • Cross-cultural Communication

21. Thank you for listening! lkatzenstein@gmail.com Please ask any question you like!