Israel Innovation Authority: New Startup Fund “Boost for High-Tech”
The Israel Innovation Authority (IIA) is launching new startup funds as part of a stimulus package for the Israeli high-tech industry. Alongside investors from the private market, the IIA’s “Boost for High-Tech” funds will invest about NIS 500 million annually in pre-seed, seed, and round A stages.
The IIA is granting the funds as part of its benefit track 7. The goal is to stimulate the growth of Israeli R&D startups at a high level of risk and in early stages of activities.
The funds hope to boost the growth of startup companies with innovative technologies and to encourage private investors to invest in Israeli startups engaging in fields with relatively few investors and not much private capital available to invest.
The IIA’s new funds will help Israeli startups finance several needs:
- Completing the development of an innovative technological product (including conducting experiments in trial-run facilities).
- Promoting the product in target markets.
- Building capabilities and internal infrastructures for the company’s growth and establishment.
The Funds’ Main Advantages – Multi-Year Certainty and Non-Dilutive Financing
One of the advantages of the IIA’s new fund is that it pre-approves a multi-year grant at a fixed rate until the company reaches the next funding milestone, without having to apply annually.
As usual, the IIA’s funding does not dilute shareholders. In other words, in consideration of the IIA’s invested funding, the IIA will receive royalties from the company’s sales (and not shares in the company) only if the venture succeeds in reaching the sales stage.
The funds consist of three main investment tracks – Pre-Seed, Seed and Round A. A company may submit an application for support through one of the three tracks only once.
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Pre-seed stage
The IIA will participate in the pre-seed investment stage, offering a grant rate of 60% of the total investment round. The maximum grant provided will be ILS 1.5 million. Eligible companies must have raised no more than ILS 1.5 million since their incorporation, submitted their application within three months, and their total income in the previous calendar year must not exceed ILS 300 thousand. In addition, companies fulfilling the criteria to be classified as a “preferred enterprise” (one of the entrepreneurs holding at least 33%
comes from a population that is under-represented in the high-tech sector or the enterprise is located in Development Area A) will receive an additional 10% on the grant.
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Seed stage
The IIA will participate in an investment round at the seed stage at a grant rate of 50% of the total investment round up to a maximum grant of ILS 5 million in companies that raised no more than ILS 7.5 million since their incorporation and until three months before they submitted their application, and whose total income did not exceed ILS 3 million in the last calendar year before they submitted their application. Companies fulfilling the criteria to be classified as a “preferred enterprise” will receive an additional 10% on the grant.
- Round A stage
The IIA will participate in the round A investment stage, offering a grant rate of 30% of the total investment round. The maximum grant provided will be ILS 15 million. Eligible companies must have raised no more than ILS 50 million since their incorporation, submitted their application within three months, and their total income in the previous calendar year must not exceed ILS 30 million. Here, too, the benefit for companies operating in Development Area A will apply.
The tracks are open for online submissions in the personal zone of the Israel Innovation Authority’s website.
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Adv. Ken Shaked is a partner in Barnea Jaffa Lande’s High-Tech Department and is at the service of entrepreneurs for any matter pertaining to interactions with the Israel Innovation Authority.