Cases and Policies
Handbooks of Research on Clusters series
Edited by Charlie Karlsson
Chapter 7: Venture Capital Emergence and Startup-Intensive High-Tech Cluster Development: Evidence from Israel
Gil Avnimelech, Dafna Schwartz and Morris Teubal 1 Introduction and objectives This chapter deals with the evolution of the Israeli startup-intensive high-tech cluster of the 1990s and its relationship with the Venture Capital (VC) industry. Startup-intensive high-tech clusters are high-tech clusters with a signiﬁcant startup segment such as the clusters in Silicon Valley, Cambridge and Israel. The link with VC industry results from the fact that they have been an important motivator for the successful emergence and development of such clusters, certainly in Israel (Avnimelech and Teubal, 2004a, 2006a) and possibly in the Silicon Valley case (Florida and Kenney, 1988). The chapter will present a life-cycle perspective of the evolution of the VC industry and high-tech cluster in Israel. We suggest that this case, despite its unique characteristics, has signiﬁcant policy implications for other regions. In this chapter we consider VC as an industry, which evolves over time while coevolving with the high-tech cluster. The VC industry includes formal and non-formal VC agents such as VC funds, investment companies, incubators and business angels. VC agents consist of ‘independently managed dedicated pools of capital that focus on equity investments in privately held, high growth companies’ (Gompers and Lerner, 1999, p. 349). This deﬁnition allows for two variants, a narrow and a broad one. The narrow deﬁnition of VC companies includes those organizations with a ‘dominant’ orientation to the early stage ﬁnancing of high-tech startups. This is the dominant category when characterizing Israel’s VC industry (Avnimelech and Teubal,...
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