Israel’s Yozma an example for CanadaAug. 19, 2012
In 1991, Israel had almost nothing in the way of venture capital. Today, it has a host of local VC funds that together invest nearly twice as much per capita as those in the United States.
That blooming of investment in the desert has undoubtedly benefited the Israeli people. In recently published research comparing regions across the United States, Sampsa Samila and I have estimated that, on average, each company funded by venture capital led to the creation of an additional two to six startups and more than 300 local jobs — good jobs at that, with nearly six-figure salaries.
The recently proposed $400-million federal initiative to reinvigorate venture capital in Canada therefore has much to recommend it. It also seems sensible that the Canadian Advanced Technology Alliance’s Venture Capital Blueprint would draw inspiration from a program widely credited with creating the Israeli VC community, Yozma. Yozma is one of the few cases — many would claim the only case — of successful government intervention in venture capital.
But what would a Yozma program mean for Canada? What did it do right? In 1992, Yozma set aside $100-million to attract experienced international venture capitalists to Israel. To qualify for the program, they had to raise roughly $12-million in private capital and had to team up with a local Israeli who would become a partner in the VC fund. Yozma would then provide $8-million in matching investments to those who qualified (with a capped upside to attract venture capitalists and private investors).
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