WP9: YOZMA AND OTHER VENTURE CAPITAL FUNDS ANALYSIS

OUTLINE OF RESEARCH

The Jerusalem Institute For Israel Studies 

1. OBJECTIVES

Conduct a Dynamic Analysis of selected themes in the Emergence, Evolution and Operation of the Venture Capital Industry in Israel. More specifically this will include:

•	Description of the operation of 'Yozma Funds" (at least 4 out of the 30 Funds; and at least  1 Inbal Fund)
•	Understanding of the 'dynamic' effect of Yozma funds on the subsequent growth of Israel's VC industry. This will include learning effects; reputation effects; links and networks; and income cycle impacts (e.g. reinvestment of profits, etc)
•	The quantitative importance ("impact') of Yozma Funds
•	Understanding of the Evolution of the VC industry as a whole since 1991. A distinction between three distinct phases will be made; and indication of some of the links between the various phases.
•	A typology of Venture Capital companies and a definition of 'Venture Capital'
•	An analysis of Strategies and of Behaviour of Venture Capital companies. This will include:
•	An indication of VC companies built strengths through time; and on the activities (screening, selecting, monitoring, board, managing, linking and opening doors, head hunting, etc) undertaken
•	Branch Specialization: most of the focus in Israel is on IT particularly Software and Communications Equipment/ Software. There seems to be some specialization going on, due to factors such as learning and economies of scale. Some companies invest in Medical Instruments and Health care; a much smaller group invests (or invested) in Biotechnology
•	Management Approach:  Issues of Syndication/Co-financing: distribution of risks; company life cycle phase; partnering with Strategic Partner; links with US Venture Capital;
•	Divesting/exiting strategies: the relative importance of Mergers&Acquisitions (M&A) i.e. sales of portfolio companies to foreign companies-- versus IPOs; and how this changed through time within the overall VC industry
•	Fund Raising Strategies: the importance of private and corporate investors; of Strategic Partners ; of US and other foreign VC companies; of Foreign and local Investment and other banks; and of Pension Funds
•	Advertising among Potential Entrepreneurs: From the pilot interviews it appears that no advertising was necessary in Phase 1 of the industry (1991-96); and in Phase 3, the reputation of VC companies, the  links with Start Up entrepreneurs and managers from previous investments;  and some pro-active activities such as search and investment in Incubators--all of these give VCs access to potential portfolio companies  
•	Proposal Validation Techniques: During the pilot interviews some VC funds’ managers appeared reluctant to give details on their techniques for proposals validation.
•	When Yozma and Inbal Funds’ managers will be interviewed a set of questions will relate to their evaluation of incentives that were given them by the state.

2. METHODOLOGY 
The only way to understand how the VC operates today is first to understand how it evolved throughout the various phases. This in turn requires intensive interviewing and case studies; and Conceptual / Appreciative Theory will follow in order to pull the various cases together into a coherent whole. 

The phases of execution are the following:
1.	Identification of the VC Management Companies to be interviewed and the 30 funds associated with these (this work has been carried out in the second half of October)
2.	Preparation of Background Material for each one of these companies, in order to be able to devote the interviews to substantial issues rather than to  'learning the facts' (this work has been carried out in the second half of October)
3.	Interviews A pilot of four interviews has been carried out in early November. These included: Yozma III – Tel-Aviv ; Gemini – Tel-Aviv ; Jerusalem Global – Jerusalem ; Polaris – Tel-Aviv.
4.	Rewrite of interviews and in some cases 'writing a full case study'
5.	Appreciative Theory I: 'collating' the interview re-writes; and identifying VC typology and 'profiles of VC companies'

Some work will also be done to describe the overall VC industry of Israel (using 5 above as one of the inputs, together with additional material). And some work will be done later on formulating policy conclusions.

3. THE QUESTIONNAIRE
The questionnaire is divided into five sections that address the development phases of the VC company. The questions in each section address the issues relevant specifically to that development stage, and allow for a deeper understanding from an evolutionary perspective. 

The sections are:
•	The founding stage of the VC company,
•	The beginning of activity of the VC fund,
•	Stages in the development of the company,
•	Competition in the industry and coping strategies, and
•	The future of the industry

4. VC COMPANIES IN THE SAMPLE
The VC companies selected for the pilot interviews are among the leading, large VC companies that hold several funds at different stages. The choice of companies is based on the IVC (Israel Venture Capital) database. This choice will allow for an analysis of the development of the VC industry in Israel from an evolutionary perspective.

The VC funds will be selected out of the following list:

1.	Yozma Venture Capital  – Tel-Aviv (“Yozma” fund)
2.	YVC II – Tel-Aviv
3.	Jerusalem Global Venture Capital – Jerusalem (“Yozma” fund)
4.	Yazam incubator - Jerusalem
5.	Giza Venture Capital I – Tel-Aviv (“Yozma” fund)
6.	Zinook Incubator – Tel-Aviv
7.	Jerusalem Venture Partners – Jerusalem (“Yozma” fund)
8.	JVP II – Jerusalem
9.	JVP III - Jerusalem
10.	Polaris venture Capital – Tel-Aviv (“Yozma” fund)
11.	Gemini Venture Capital – Tel-Aviv (“Yozma” fund)
12.	Star Israel Venture Capital – Herzlyiia (“Yozma” fund)
13.	Star II – Tel-Aviv
14.	Star III- Tel-Aviv
15.	Apex Israel Venture Capital – Tel-Aviv
16.	Kardan (Nitzanim) Venture Capital - Herzlyia
17.	Israel Seed Partners - Jerusalem
18.	Tamir Fishman Venture Capital – Tel-Aviv 
19.	Vertex Venture Capital – Tel-Aviv
20.	PCM Venture Capital – Tel-Aviv
21.	Formula Ventures  - Herzlyia
22.	BRM – Tel -Aviv
23.	Invantech Venture Capital – Tel-Aviv (“Inbal Fund”)
24.	Mofet Venture Capital – Tel-Aviv (“Inbal Fund”)
25.	Evergreen Venture Capital – Tel-Aviv
26.	EVC II – Tel-Aviv
27.	Green VC – Tel-Aviv
28.	Klal Venture Capital – Tel-Aviv
29.	Klal Biotechnology Fund. – Tel-Aviv
30.	Medical Biotechnology Fund – Tel-Aviv (“Yozma” Fund)
31.	MBF II – Tel-Aviv
32.	Dudi Gilo Ventures – Tel-Aviv and California
33.	Comsor Venture Capital – Tel-Aviv
34.	Waldan - Herzliya
35.	Eurofund – Tel-Aviv (“Yozma” fund)
36.	FIMI – First Israel Mezzanine Investor – Tel-Aviv
37.	ECI VC – Tel-Aviv
38.	Orion – Tel-aviv
39.	Infinity- Tel-Aviv
40.	Infinity II – Tel-Aviv
41.	Medmax – Herzliya
42.	Sairem Funding Kelner – Tel-Aviv