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STARTUP/SEED STAGE INVESTMENT BY VENTURE CAPITAL
FUNDS (IN ISRAEL): ENTREPRENEURS IN RESIDENCY AND
EXECUTIVE IN RESIDENCY PROGRAMS
STARTUP/SEED STAGE INVESTMENT BY VENTURE CAPITAL
FUNDS (IN ISRAEL): ENTREPRENEURS IN RESIDENCY AND
EXECUTIVE IN RESIDENCY PROGRAMS

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Categories:Types, School Work
Published by: Dr. Jimmy Schwarzkopf on Jun 09, 2008
Copyright:Attribution Non-commercial

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STARTUP/SEED STAGE INVESTMENT BY VENTURE CAPITALFUNDS (IN ISRAEL): ENTREPRENEURS IN RESIDENCY ANDEXECUTIVE IN RESIDENCY PROGRAMS
By
Dr. Jimmy Schwarzkopf  Research Fellow & Partner
STKI
 jimmy@stki.info
 Dr. Schwarzkopf has worked during the last 30 years in all areas of Computer Information Services. IT Analyst asMETA Group Israeli Research Manager and was named a META Group Research Fellow. As an academic researcher inEntrepreneurship Sciences has published and presented in the Academy of Management and Babson Conferences. Asa consultant in Arthur Andersen Consulting (USA), Booz Allen (USA) and Kesselman & Kesselman. As a systemsprofessional in SCS Computers and the R&D Unit of the Israel Defense Forces. As a sales and marketing professionalin Digital Equipment Corporation. Teaching in the MIS department at Ben Gurion University and the Computer Schoolof the IDF. Entrepreneur founding two companies in the IT arena: store and forward mail and office informationsystems.Dr. Schwarzkopf received BSE and MSE degrees (Systems Engineering) from the University of Central Florida. Got hisMSIA (Management Information Systems) and ABD (PhD Program) in Systems Science (received (twice) the WilliamLarimer Mellon Scholarship/Award) from Carnegie Mellon University. His doctorate (Management/ Entrepreneurship)he got from Case Western Reserve University.
 
Paper: STKI 132November 2005
 
 2
STARTUP/SEED STAGE INVESTMENT BY VENTURE CAPITALFUNDS (IN ISRAEL): ENTREPRENEURS IN RESIDENCY ANDEXECUTIVE IN RESIDENCY PROGRAMSABSTRACT
What constitutes venture capital and what constitutes angel financing is a naturalquestion
.
In the time period after the bubble burst in 2000 it became easy to differentiate:1.
 
 Angel investors
: usually “high status” individuals, former successfultechnology entrepreneurs who use their financial wealth, which
 financed birthand initial growth
of ventures.2.
 
Venture capital (VC)
: independently managed, dedicated pools of capital thatfocus on equity-linked investments in privately held, high growth companiesneeding
mid stage financing
. Startup/seed financing were usually notacceptable VC funding phases, because of the greater risks involved.The growth in “Startup/Seed Financing” by VCs (almost 100% in Israel duringFY 2004 alone), shows that Israeli VCs contrary to their Silicon Valley counterparts areinterested in participating earlier in the venture’s life.In the post Google IPO era, since 2004, Israeli VC partnerships are eagerlypursuing “good” startup/seed ventures, by using a combination of new programs like the
“Entrepreneur/Executive in Residency (EIR)”
programs among others. No academicpapers that analyze these phenomena or even describe it have been found. On the otherhand, newspapers and VC magazines have mentioned and described the work of EIRs inthe VC industry in Israel.The purpose of this paper is to conceptualize the characteristics of andrelationships between:
 
“VC partners”
and the “
Entrepreneurs”
who receivedfinancing in the
startup/seed phase
 s
.
 
This will allow comparison between many types of VC-Entrepreneur relationships in
 
startup/seed stage ventures
and shed light on thenascent entrepreneurs and the EIR programs in particular. We believe that knowledgeconcerning this type of program will help VCs in other countries by either encouragingthem to adopt this practice or to abandon it.
 
The question of how VC equity financing willevolve over the next decade and how it will work with startup/seed ventures is a particularly critical one
.
 
 3
TABLE OF CONTENTS
Abstract ..................................................................................................................................... 2Introduction ............................................................................................................................... 4Discovery, Innovation and Entrepreneurship ......................................................................... 13The Conceptual Model ............................................................................................................ 18Variables ................................................................................................................................. 19Research Questions ................................................................................................................. 34References ............................................................................................................................... 37 List of FiguresFigure 1: Amount Raised by Israeli High Tech Companies ($M) ............................... 7Figure 2: Capital Raised by Israeli Seed Companies ($M) .......................................... 8Figure 3: Number of Israeli High-Tech Companies by Sector and Stage (2/05) ......... 9Figure 4: The Conceptual Model ............................................................................... 19

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