The Israeli government, by way of the Israeli National Authority for Technological Innovation (commonly known as the Israeli Innovation Authority, the “IIA”), has recently published an updated and new Israeli technology incubator program (the “New Program”) (dubbed by the IIA as the “New – Incubators 4.0 Program”). The goal of the New Program is to support innovative, high-risk, early-stage technology entrepreneurships experiencing difficulties securing private financing, to promote commercialization of groundbreaking technological know-how originating in academia, to encourage seed investments through a technological innovation environment and to support startups in complex and unique high-tech fields (e.g., bio-convergence, clean-tech, agro and food-tech, life sciences, artificial intelligence (AI) and industry 4.0).

The IIA has issued (under previous incubator programs) several tenders during the course of the past few years (the “Tenders”) to operate technology incubators (each an “Incubator”). The Tenders are competitive processes designed for choosing concessionaires to operate an Incubator. 

The IIA has published a tender for the establishment and operation of up to 3 new Incubators. Under the New Program, each Incubator shall be afforded a concession period of 5 years (the “Concession Period”), with an option for a 3-year extension.


The deadline for the submission of the Tender applications is September 30th, 2021.


Government Funding.
Under the New Program, the Israeli Government will assist the Incubator’s portfolio companies (the “Incubator Companies”) by offering grants for funding R&D and commercialization activities (the “Government Participation”). When approving an Incubator Company, the IIA also approves a budget for such project (the “Approved Budget”) - which consists of the Government Participation and the amounts to be provided by the Incubator and third parties.

Each Incubator Company shall be entitled to receive an aggregate Approved Budget of up to NIS 6.5 million (~US$2 million), as follows: 


Proof of Feasibility Funding. This is relevant solely for projects which originate from academic research institutes. The IIA will participate in the funding of the proof of feasibility/concept, technological validation and/or the transfer of knowhow from a research institution. The Approved Budget for this period will typically be NIS 1,500,000 (with 85% Government Participation and the remaining 15% to be provided by the Incubator), and will be paid to each Incubator Company over the course of its proof of feasibility period - which is typically 12 months.

Initial Incubation Period Funding. The IIA will participate in the funding of the initial incubation period. The Approved Budget for this period will typically be NIS 2,500,000 (with 85% Government Participation and the remaining 15% to be provided by the Incubator), and will be paid to each Incubator Company over the course of its initial incubation period - which is typically 12 months.

Second Incubation Period Funding. The IIA will participate in the funding of the second incubation period. The Approved Budget for this period will typically be NIS 2,500,000 (with 60% to 75% Government Participation – depending on the field in which the Incubator Company operates, an additional 15% to 40% to be provided by the Incubator and the remaining portion may come from third party investors), and will be paid to each Incubator Company over the course of its initial incubation period - which is typically 12 months.

Capex Funding. The IIA shall provide each Incubator with a grant for the capex involved in establishing a central laboratory in its premises for the use of the Incubator Companies with an Approved Budget of up to NIS 4,000,000 (with 50% Government Participation and the remaining 50% to be provided by the Incubator).


IIA Restrictions on the Incubator Companies. Incubator Companies are subject to the Israeli Law for the Encouragement of Research, Development and Technological Innovation in Industry, 1984 (the “Law”), and the regulations promulgated thereunder, as well as the IIA’s self-instituted rules which also apply to Incubator Companies. As part of the regulatory scheme obligating the Incubator Companies, each Incubator Company is obligated to repay the Government Participation to the IIA by way of royalties calculated out of income generated and there are restrictions on the transfer of knowhow (and all rights relating to such) and manufacturing outside of Israel. Details on this, as well as the numerous exceptions and related payment schemes, are outside the scope of this update.
 
We have over two decades of experience representing IIA Incubators and Innovation Labs – including in tender processes - as well as providing strategic consulting to consortiums vying for such tenders. We represent almost half of the Incubators and Innovation Labs currently operating under the auspices of the IIA.
 
Please do not hesitate to contact us with any questions or for further information – we would be happy to discuss.