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indicates that the investment activities of Israeli VC funds is still limited to early-
stage investments, with over 80% of their investments being made in early-stage
companies. This is in contrast to the investment activities of foreign VC funds which
are more evenly balanced between the various growth stages. With tail wind in the
form of investments from Israeli institutional investors and a slew of investments from
Asian countries headed by China, we expect that Israeli VC funds will assert an even
stronger presence in the market while continuing to support early-stage start-ups
and solidifying the market for later stage investments by foreign VC funds.
Recent Trends in Strategic Investments
Aside from Israel’s appeal to financial investors, Israel continues to be a major hub
for large multinational corporations (“MNCs”) looking to tap Israeli innovation. While
strategic investments of MNCs (either directly, or by way of their corporate ventures
arm) are not a new phenomenon in Israel, we continue to see a rising number of MNCs
involved in both M&A and investment transactions in Israel. A prime example for such
strategic participation in the M&A and investment field can be found in The Nielsen
Company, a global market leader inmeasuring consumer behavior.During 2015 Nielsen
acquired eXelate - a company with a major R&D center in Israel. This was in addition
to Nielsen’s ongoing early-stage investments through Nielsen Innovative, its early-
stage incubator, which operates under the Technological Incubator Program of the
Israeli National Authority of Technological Innovation (formerly, the Office of the Chief
Scientist in the Ministry of Economy) (“OCS”). We believe that this model used by
MNCs, which combines both strategic investments and M&A transactions, will remain
strong in the near future - especially with growing interest in Israeli technology from
Chinese MNCs.
The Role of the Israeli National Authority of Technological Innovation
(OCS)
While, at times, it has remained generally unknown to foreign investors - one of the
key catalysts to the Israeli high-tech success story is the Israeli government itself,
through the work of the OCS. The OCS, established in the early 1980s, is responsible
for executing government policy for support of industrial R&D - with the goal of
assisting in the development of technology in Israel as a means of fostering economic
growth. The OCS has been a catalyst in the development of R&D in Israel through the
programs that is administers, some of which are intended to provide direct financing
to start-up companies (e.g., Tnufa), while others aim to attract private capital by
providing supplemental funding (e.g., Young Companies Track). Below are two of the
programs which the OCS features, which we find particularly appealing to foreign
investors in Israel.
Global Enterprise Collaboration Program
The program is designed to encourage collaboration between Israeli start-ups and
MNCs, combining the highly creative and efficient R&D capabilities of the Israeli start-
ups with the strong commercialization, manufacturing and marketing capabilities of
the MNCs. As part of the program, the Israeli start-ups and MNCs collaborate on a
With tail wind in the form of investments from Israeli institutional investors
and a slew of investments from Asian countries headed by China, we expect
that Israeli VC funds will assert an even stronger presence in the market while
continuing to support early-stage start-ups and solidifying the market for later
stage investments by foreign VC funds.