Lessons From The 2000 Bubble 12/08

What happened in ?

Downturn was not invented in 2008 GDP change has tended to be coincident indicator of US technology capital spending

VC activity never stopped

Exits are fewer and takes more time Venture capital market is effected by exits pace – IPO melted sharply while M&A have not stopped following 2001 Time to exit has increased following the last crisis Very little liquidity in 2008 – Q3 ended with 66 deals of M&A and one IPO

Lessons learned Innovation spending suffers– budgets are focused on maintenance. Startups usually innovate and suffers the most It takes at least 2 years for spending to recover – survival is #1 priority It’s almost impossible to raise from new investors Cash is more important than market share Fast reaction by managements is crucial

Lessons learned

VC’s job: Make sure management understands the environment Triage quickly - support companies that have value in current time Find M&A solutions for the weaker companies sooner than later

…and the opportunity Companies with must have products Clear ROI Technology proven companies Small project – not a major decision for the customer Modest financial needs Emerging markets

The opportunity – cont’ Emerging market expenditure is likely to decelerate, but still well outpace that of G7 economics Israel is positioned well to capitalize on emerging economies growth In absolute numbers the NA and Europe have bigger portion in technology spending