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Outline
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Financing Innovation Policy
The Instruments
Some Results
Israel & Bulgaria Compared
Conclusions for Bulgaria
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Innovation Support Institutions
1. 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
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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
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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.
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Innovation Support Institutions
4. The Technological Incubators
• Purpose & Operations
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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 years
Obligation to return loans based on future success
• Provides the following services
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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/
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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 $US 12M
brought by private investors
• Private investors have the right to buy the government out
after 6 years for nominal investment
• 10 Yozma funds created
• Privatized in 1998
• Catalyst for establishment of Israeli VC industry
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Investment in Innovation – Trends
From VC to Private Equity
• Between 1990 – 2009, mostly Venture Capital funds (VC)
• Over the years, VC funds were getting larger, until 2008
– Ability to invest in companies requiring significant input of funds
– Better able to lead such investments
– Prefer larger deals and more mature companies  affect those
needing seed or start-up financing
• Take positions on Boards of the companies in which they invest
• Increased association with US investment banks
– Access to considerable research resources
– opportunity to springboard their start-ups into world markets
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Total Capital Raised By Israeli High-Tech
Companies
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Total Capital Raised by Israeli VC Funds by
Vintage Year ($b) 2003-2013 €
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Private Equity Deals by Quarter ($m)
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M&As and IPOs of Israeli High-Tech
Companies, $b (2002-11)
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Entrepreneurship in Israel
Supporting Factors
• The Specific Israeli/Jewish Background
• The Israeli improvisation
• East- European immigration
• Individualistic character
• Abundant venture capital
• Generous government support schemes
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Entrepreneurship in Israel
Limiting 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
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Israel and Bulgaria Compared
Similarities
• Recently established democratic and free
market nations (1990’s).
• Share aspiration for technological leadership
• Aspire for Global Presence
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Israel and Bulgaria Compared
Differences (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
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Israel and Bulgaria Compared
Differences (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.
– Bulgarian government is making efforts to adopt
innovation policies.
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Elements for competitiveness
for both nations
• “The Global Individual with Local Roots”
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Professional
Ethical
Visible
Cross-Cultural
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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
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Thank you for listening!
lkatzenstein@gmail.com
Please ask any question you like!