Israel’s R&D

Landscape

Yoram Yaacovi

General Manager

Microsoft Israel R&D Center (ILDC)

World’s Most Innovative Countries

World Economic Forum 2016-2017 Global Competitiveness Report

1. Switzerland

2. Israel

3. Finland

4. United States

5. Germany

6. Sweden

7. Netherlands

8. Japan

9. Singapore

10. Denmark

Source: World Economic Forum Global Competitiveness Report

2016 Q1-Q3: Most Prolific in History for Israeli Hi-Tech Capital Raising

Gro

wth

Total capital raised reached

$4B in 510 deals

+27% YoY in capital raised

+22% YoY in average deal size

57% of H1 deals included at

least one foreign VC investor

Source: IVC-Exits Report , October 2016

2.161.93

2.4

3.43

4.44

5.3

544577

666 681 693

510

0

100

200

300

400

500

600

700

800

0

1

2

3

4

5

6

2011 2012 2013 2014 2015 2016Q1-Q3

Capital Raised in $B and Number of Deals

4

Over the past 4 years alone, Chinese investors have invested over $15B in

Israeli companies

Total

Investment

High-tech investments with Chinese participation grow by ~50% annually

and are expected to reach over $500M this year, up from $118M in 2012.

Tech

Investments

Chinese giants such as Alibaba Group and Huawei have set up R&D centers

in Israel as well as invested in local tech companiesR&D

Source: Catalyst Fund Research, 2016

A growing trend of Chinese companies and investors looking to tap into the local technology

market and acquiring Israeli technologies

Chinese Investors are Tapping into the

Israeli Tech Market

$

Key Sectorial Trends in the Israeli Ecosystem

Israel Leading in Cyber Security

$300M

Source: IVC Research, 2016

In 2016, over 430 local

companies alongside 20R&D centers developed

security solutions

20% of global

investments in the Security sector are in Israel

2 universities ranked

top 20 globally in

computer science; heavily

invested in cyber security

Nearly $300M raised

by cybersecurity

companies in 2015 (+50%

YoY)

Israel’s expertise in the Security, Communication, ML and IoT is being deployed in automotive

technologiess, leading to unparalleled dominance in the field

Leading global automotive companies invest in local R&D

Home to some of the

leading automobile

technology companies

Global automobile

vendors are

establishing relations

with local companies

Israel’s Automobile Startup ecosystem is rapidly growing

150 startups and research groups, +100% from 2013

As Vehicles go High-tech, Israel’s in the Driver’s seat

Source: Vertex Venture, June 2016

The Marker, October 2016

Source: Vertex Venture, June 2016

The Marker, October 2016

Israel Becoming a Global Leader in IoT

There are approx. 330 IoT startups, ~5% of the Israeli startup ecosystem

The IoT ecosystem leverages Israel’s strengths in sectors like Big Data & BI, Life Science, and Security

There is much more IoT growth to come: most companies are in early R&D or initial revenue stages

Source: Bank Leumi research, 2016

Globes, September 2016

Fintech is Flourishing

Israel is a main source for Fintecdevelopment. There are over 200 Fintec startups, most launched in the last two years

Local companies and startups focus their developments around investments (37%) payments (21%) and loans (13%)

Global and local banks and credit card companies are opening local innovation centers, hubs and accelerators

Israel continues to attract global companies’ R&D Centers

Some however are choosing to close their local operation

Hi-Tech Workforce Trends

Changes in demand and pay YoY (2015/2016) Changes in number of hi-tech employees

Shortage in Relevant Graduates

2,346 2,476 2,635 2,649

2,806 2,984 2,917 3,020

5% 5% 5% 4% 4% 5% 4% 4%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2008 2009 2010 2011 2012 2013 2014 2015

Computer Science, Math & Statistics Graduates

Number of Graduates % of all-up graduates number

Source: Israel Bureau of Statistics, 2016

Classified as Microsoft General

Shortage in skilled

professionals is

worsening, short and

long term solutions

must be put in place

Israel continues to

lead in global

innovation and as a

result attracts interest

and investments from

foreign investors

Local expertise creates

leadership in key

technological domains:

Security, Fintec, IoT

and Automotive

Key Takeaways

Israel’s Cyber Startup Domain Map

Source: BVP Israel Cyberscape

Israel Startups - Automotive 2.0

*Startups that raised >$100K

Source: Vertex Ventures, June 2016

Startups that raised >$100K

Source: TLV Partners, December 2015

Israel’s IoT Startups Map