The Israeli Innovation Landscape and the role of the OCSth Ran Arad, EEN Spain Annual Conference, June 26, 2015 1
Israel some facts and figures 2
Quality of Scientific Research Israel is a Global Leader in Research and Innovation Level of Innovation Source: World Economic Forum, 2012 3
The hi-tech sector contributes significantly to Israel s Industrial Export Hi-Tech Export Contribution to the Total Industrial Export $M 4
We re doing well on the Patent front Number of patents per R&D employee Triadic patent families* Biotech sector Israel Japan Germany U.K. France Denmark Italy Canada U.S. China Russia * Patents filed simultaneously in Europe, Japan, and the U.S SOURCE: OECD Main Science and Technology Indicators, 2007 and 2010 5
Spend on civilian R&D is quite high Spend on civilian R&D as a percentage of the GDP Italy United Kingdom Ireland Netherlands France OECD Australia USA Germany Switzerland Denmark Sweden Japan Korea Finland 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Israel 6
Israelis are relatively well-educated The proportion of university graduates in the 35-44 age group Austria Germany OECD France Spain Denmark Sweden Switzerland Belgium Australia United Kingdom Ireland USA Finland Korea Israel 0 10 20 30 40 50 60 Japan Canada 7
Some call us the startup nation Global startup Ecosystem ranking (2012) Source: The Startup Genome index includes: Startup Output Funding Company Performance Talent Support Infrastructure Entrepreneurial Mindset Trendsetting Tendencies Ecosystem Differentiation Ecosystem Silicon Valley Tel Aviv Los Angeles Seattle New York City Boston London Toronto Vancouver Chicago Paris Sydney Sao Paulo Moscow Berlin Waterloo Singapore Melbourne Bangalore Santiago Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 8
A few startup-related figures 10 Year Total New: 7,027, Closed: 2,882, Net: 4,145, 2013 41% of founded startups are in the internet sector IVC Research Center, 2014 9
A spot on M&A activity 2011-2013 Total annual M&As by sector (in USD millions) PWC, 2013 10
and 2005-2013 Total annual M&As 2005-2013 (in UDS millions) 2005 2005 2006 2006 2007 2007 2008 2008 Total amount 2009 2009 2010 2011 2012 2013 2010 2011 2012 2013 Number of transactions Average deal size PWC, 2013 11
Largest M&A deals in Israel 2004-2013 IVC Research Center, 2014 12
R&D Centers In Israel Northern Region Haifa Region Tel Aviv Region Jerusalem Region Southern Region Over 250 foreign companies have established R&D canters in Israel Over 50,000 people are employed in these R&D centres in Israel 13
Massive presence of foreign MNCs Source: OECD 14
Why? The Key Ingredients Which Have Let to Success Culture Human resources You get to be a commander at a young age Government Support Immigration from the former Soviet Union in the 90s Army training, development and experience Risk seeking, not looking for job security No fear of failure Pushy: Balagan, Hutzpah ; The Jewish Mother :-) The OCS Yozma starting the VC industry Required resources available: academia, brain power, funding An ecosystem has been created Not all is Rosy (the three conflicts) 15
The OCS and its role in the Ecosystem 16
The Private Sector and the Public Sector Indeed, we have a relatively high spend on civilian R&D as a percentage of our GDP Israel: 4.2% However, this is divided ~80/20 between the private sector and the public sector VCs Business angels Multinationals Mainly the OCS this will be our focus from now onwards 17
Introducing the Office of the Chief Scientist (OCS) of the Ministry of Economy Execution of government policy for support of industrial R&D Goal is not to make money but strengthen the industry Enable but don t lead the market do no harm 37 different programs to promote innovative R&D 18
The Evaluation Process Ministry of industry Deputy Chief Scientist 1. Submission by Applicants to the OCS Through an online system 2. Evaluation process Nominating an evaluator On-site evaluation Final report 3. Decision made by the Research Committee: Approval/disapproval, budget and % support 4. Chief Scientist Legal Representative Ministry of Finance Public Representative Payment: Company gets immediately partial advance money. EoQ: writes final technical and financial report to receive next installment. 19
Evaluation Criteria 1. The technology aspect (innovation, originality, risk, technological assets, IP) 2. The commercial aspect (potential, markets, marketing, customers, sales, margins, manufacturing, economic benefits) 3. The capabilities and competence of the company 4. In case of international cooperation: the synergy 20
Strings attached Funding (20%-50%) is matched with private money Financing is done through grants (no equity) but these become loans upon success IP has to stay in Israel 21
The OCS s Main Programs: MAGNET Magneton Kamin R&D Fund Nofar Technological Incubators Tnufa e Ap R ed i l p m e Pr o -C rch tiv ti pe tiv eti mp Co a se &D R e es R e rch a e Program for Multi National Corporations ((MNCs International Programs 22
Drilling down into the main OCS programs 23
Industry Academy Cooperation Nofar Kamin Companies importing academic Spin-off companies started in academic knowledge institutions OCS participation : 90%, industrial OCS participation: 85-90%, company: 10%, up to $125K for a rest by the academic institution, period of 15 months up to $800K for a period of 2 years Magent Magneton Consortium of several Israeli academy Promotes technology transfer from and industry members. academia to industry via a mutual OCS participation: 66% from cooperation between an individual industry expenses and 80% company and an academic from academy budget research group. (3-5 years, no payback) OCS participation: 66%, up to $760K 24
Pre Seed TNUFA program Bridging the gap between Israeli inventors and the business world. Individual inventors / startup companies at the pre-seed stage Pre-R&D goals Protection of intellectual property. Technological proof of concept. Market research and business planning. ~120 qualified projects every year. ~20% reach the next stage of financing. Grants of up to 85% of approved expenses up to $65,000 per project 25
Seed Incubation Incubator Program The Technological Incubators Program is a government response to a market lack. Market Failure Early stage, high risk, innovative technological companies, can not raise money from the private sector. Government Response Bridging the gap through the Technological Incubators Program 26
Seed Incubation Incubators Program Incubator Program 20 incubators across the country 7 peripheral (preferred conditions) 1 biotechnology (Rehovot) 1 industrial (Haifa) International Investors Haifa Caesarea Natanya International Collaborators Gush Segev Nazareth Yoq neam Tel Aviv Ariel Ashdod Ashkelon Jerusalem Gush Ezion Beer Sheba 27
Seed Incubation Incubator Program Transforms risky innovative technological ideas into viable startup companies Supports the formation of startup companies to lead them toward Round A investments. Since its inception in 1991 and until 2012, the incubator program created 1,450 companies Basic Conditions: 15% incubator: 85% OCS (no equity) $570-860K Payback: 3% from revenue Incubator Term: 2-3 years Extended support to: Biotech / Pharma & Clean-Tech projects (budget, optional 3rd year) Projects initiated in peripheral regions Biotechnology Incubator $2M, 85% OSC: 15% Incubator 28
Sectors of Incubated Companies, 2012 29
The Main Program of the OCS R&D Fund The R&D Fund is the main instrument operating under The R&D Law. Supports competitive R&D of companies (SMEs to big companies). Project criteria: development of a new product strategic innovation of an existing product lead to a new industrial process or to a strategic innovation of an existing industrial process support Beta Site test stage OCS participates in 20% - 50% of R&D expenses Royalty payments out of the total annual revenues: 3 % of revenues acquired during the first three years 3.5 % from the third year onward Total payments may not exceed the amount of the grant plus interest 30
The Main Program R&D Fund In cases involving the transfer of production rights abroad, different payment terms apply: transfer of ownership to a foreign entity with business activity remaining in Israel : up to 3 times the value of the original grant. In cases entailing transfer of IP resulting in substantial termination of local activities : up to 6 times the value of the original grant. 31
International Cooperation International Cooperation: the key to successful innovation Research and innovation today are global. For Israel this has always been a key success factor, since Israel has a small internal market is distant from the global markets is limited in resources Going global is critical for Israeli companies 32
Programs Targeted for International Cooperation Bi-National Funds In this framework, two countries contribute a predetermined amount to a binational foundation focused on supporting collaborative projects. BIRD US CIIRDF Canada KORIL RDF Korea SIIRD - Singapore!EUREKA EUREKA incorporates 40 national funding agencies from virtually all European countries and the European Union, including Israel. Bi-National Agreements There are currently more than 40 binational R&D cooperation agreements between Israel and other countries around the world. These agreements facilitate access to know-how and technologies, as well as open up new markets. Horizon 2020 Israel is the only non-european country that is has been admitted to the EU s Framework Program (FP). 33
MNC Program Main Principles: An OCS program to bridge between MNCs and small Israeli innovative companies The bridge: A joint R&D Project being financed by the Israeli company and the OCS; the MNC is contributing its assistance in kind Nature of projects: Pre-Competitive; Competitive and Long-Term R&D Win-Win partnership where both partners benefit from the cooperation ~100 Joint Projects since 2005 34
OCS programs stats and success stories 35
Industry Requests versus Approvals 2013 Numbers Amounts (NIS M) Success rate 36
The R&D fund uses most of the OCS budget Grants per OCS Program (NIS M) 37
OSC Grants by Technology Sectors 2013 38
Success Story - A small step for man Argo Medical invented the external wearable skeleton enabling the walking of paraplegic patients. TNUFA grantee Technological Incubator graduate BIRD joint project with Allied Orthotics & Prosthetics Six of the ten companies on Forbes Top 10 Health Tech Changing the World are Israeli. One of them is Rewalk of Argo. It s fair to say that Israel is not only the Startup Nation, but the Health Tech Nation as well. 39
Success Story - PROTALIX 2004 2004 Established in Meytav Incubator (Kiryat Shmona) Proof of Concept: examine potential plant cells application 2007 2007 Applied to the R&D Fund Developed a drug to cure Gaucher disease, an orphan disease: an inherited disorder related to a missing enzyme. 2012 2012 FDA approval 2014 2014 Traded (NYSE MKT:PLX) (TASE:PLX) Marketing agreement with Pfizer 8 drugs in the pipeline 250 employees Located in Carmiel 40
Success Story - InSightec 41
EEN in Israel 42
EEN in Israel One consortium OCS/MATIMOP/ISERD coordinator [Hi-Tech, Bio-Tech etc.] Manufacturers Association of Israel (MAI) [Traditional Industry] The Israeli Export and International Cooperation Institute (IEICI) [Trade: delegations and events] OCS/MATIMOP/ISERD Ran Arad (ICT SG, H2020 CoP), Sharyn Lieberman (BioTechChem SG) Main Focus: Partner Searches (database; b2b) In addition: KAM Share office with H2020 Delegates and NCPs -> close cooperation 43
A quick focus on Spain 44
ES-IL R&D cooperation Agreement with Catalonia Bi-National Agreement Agreement signed between OCS/ISERD and CDTI Agreement signed between OCS/ISERD and Accio Annual Call, opens in March and closes in June Annual Call, opens in May and closes in July Implemented through EUREKA (which in fact can also be used outside the Call period...) Implemented via EUREKA (not outside Call period) Single-phase (no preliminary evaluation) Single-phase (no preliminary evaluation) Accio contact: Ms. Mar Pérez Eurostars is always an option as well CDTI contact: Mr. Oscar Gonzalez Llamazares (FPs (FP7, Horizon 2020 Partnering Opportunities in Tel-Aviv NanoIsrael, January Cleantech, January Ilan Ramon (Space), January [IAC, Oct 2015] MEDinISRAEL (Medical Devices), March 2014: 72 winners with at least one IL and one ES entity For IL, ES is #3 (DE 102, UK 76, FR 69, IT 69) BrainTech, March Overall in FP7: 1343 (After DE, UK, FR and IT) Cybertech, March Agritech, April Envious of your SME Instrument success :-) Biomed, May Israel Mobile Summit, June DLD, September Watec, October 45
Examples of Approved Bilateral Projects Development of innovative InkJet inks for enhanced efficiency Silicio Ferrosolar; Fundacion CENER (ES) PV NanoCell (IL) GNSS antenna module Advanced Automotive Antennas (ES) OriginGPS (IL) New corrugated carton antimicrobial active packages for the conservation of foods S.A.E De Carton Ondulado (ES) BG Technologies (IL) 46
ES-IL cooperation in approved FP7 projects 47
Examples of Approved FP7 Projects Switchable shading appliances based on nanomaterials and hybrid electrochromic device configurations FUNDACION CIDETEC, MICROELETRONICA MASER SL (ES) HANITA COATINGS RCA LTD (IL) Early recognition, monitoring and integrated management of emerging, new technology related risks IBERDROLA SA, ATOS SPAIN SA, ENAGAS SA, FUNDACION TECNALIA RESEARCH & INNOVATION, INSTITUT QUIMIC DE SARRIA (ES) EKON MODELING SOFWARE SYSTEMS LTD (IL) A pilot line of antibacterial and antifungal medical textiles based on a sonochemical process UNIVERSITAT POLITECNICA DE CATALUNYA,TORRAS VALENTI S.A.,ASOCIACION DE INVESTIGACION DE LA INDUSTRIA TEXTIL AITEX (ES) BAR ILAN UNIVERSITY,OSM-DAN LTD.,AFCON HOLDINGS LTD (IL) Capture of evaporated water with novel membranes GAS NATURAL SDG SA(ES) THE ISRAEL ELECTRIC CORPORATION LIMITED,YODFAT ENGINEERS (1994) LTD (IL) 48
Thank You 49