The Government Seed Fund

1
The Government Seed Fund

• January 2006

2
Background

• The Burst of the high-tech Bubble Security
  Situation Fewer Investments Particularly in
  Start-Ups
• The Need Sharing Investor Risk to Encourage
  Investments and Increase the Number of Start-Up
  Companies

3
The seed program

• An additional and separate vehicle to support new
  start-up companies.
• The Governments matching investment shares the
  risk with the investor.
• The investor also enjoys the equivalent of a
  stock option at the opening price

4
Seed Program (cont.)

• Funding Source
• VC Fund or Corporation Active in VC or Tech
  Company Investing in Like Industries
• Has the ability and manpower to guide the
  management of the new company
• Has sufficient available funds

5
Seed Program(cont.)

• Start-Up Company
• RD Company in Existence for not more than 6
  Months OR Whose Total Expenditures have not
  Exceeded 1 million NIS (companies in
  Bio-technology till the pre-clinical stage)
• First Round excluding financing for feasibility
  study.

6
Investment Model

• Essentially Like VC Investment in the Private
  Sector.
• Ensure that Government and Investor Interests
  Overlap.
• Determine a System that will Yield a Return to
  the Government for a Successful Investment.
• Ensure that the Government will be able to Sell
  its Holdings to a Third Party.

7
The Governments Investment

• Up to 5 Million NIS per Company per 2 Year Period
  that will Finance up to 50 of the Approved Work
  Program.
• The Expenditures Supported will be Those Related
  to RD.

8
The Governments Investment

• The seed fund and the investor will put up
  matching funds.
• Preferred shares will be issued as follows
• Preferred shares A Investor
• Preferred shares A1 Seed Fund (nonvoting no
  right to appoint directors)
• Ordinary shares Entrepreneurs and workers

9
The Governments Investment(cont.)

• Preferred Shares A1
• Liquidation Preference (incl. Merger, Purchase of
  Shares and Properties).
• Dividend Preference
• Rights of Conversion to Preferred Shares A or
  ordinary shares.
• Full Ratchet Protection Against Dilution of
  Shares.

10
The Investors Option

• The Investor will be given an Option to Purchase
  the Government Shares Anytime Within the First 7
  Years.
• Within the first 3 Years the purchase is at cost
  plus regular interest.
• For Years 4 till 7 at cost plus higher
  interest.

11
Privatization

• The Sale of the Governments Holdings in the
  Start-Up Companies does not Entitle any of the
  investors the right of first refusal if a 60 days
  notice of sale was given and the investors did
  not express interest in purchasing the seed fund
  shares

12
RD Law

• With reference to transfer of know-how and
  manufacturing rights, the company will be bound,
  as are all those enjoying government support by
  RD LAW

13
The approval procedure

• The Investor can apply to be approved even
  without a specific company he wants to invest in.
• The Company - cant get approval without an
  approved investor investing in it.

14
Board Members

• Mr. Eli Opper Chief Scientist, Moital
• Mr. Chemi Peres- Managing Director, Pitango
• Mr. Shlomo Shalev- Senior VP Investments, Ampal
• Mr. Rafi Nevo CEO, Treatec
• Ms. Chana Gad General Accountant, Moital
• Mr. Avi Feldman Vice Legal Advisor, Moital
• Mr. Ran Kiviti Manager Tmura Fund, Moital

15
FOR FURTHER INFORMATION

• Please contact
• Mr. Itamar Dar
• Seed Fund manager
• Email itamar_at_ocs.moital.gov.il
• Tel [phone]
• Web www.moital.gov.il/madan