BACKGROUND & GOALS
The Technological Incubators Program was established in 1991 and is administrated by the Office of the Chief Scientist, Ministry of Economy. The primary goal of the program is to transform innovative technological ideas, that are too risky for private investments, into viable startup companies that after the incubator term should be able to raise money from the private sector and operate on their own. Secondary goals of the program are as follows: 1. Promote R&D activity in peripheral and minority areas. 2. Create investment opportunities to the private sector, including venture capitalists. 3. Transfer technologies from research institutes to the industry. 4. Create an entrepreneurship culture in Israel.
There are 20 incubators in Israel to date, out of which 18 are technological incubators, 1 is a technology based industrial incubator and 1 is a designated biotech incubator. The incubators are spread all across Israel including 8 that are located in peripheral areas. There are approximately 160 companies in various stages of R&D that operate in the incubators at any given time.
THE INCUBATOR LICENSEE
An incubator is a private legal entity, for profit, that supplies its portfolio companies with the following: 1. Work environment. 2. Administrative services. 3. Technological & Business guidance. 4. Legal & Regulatory assistance.
Selection of an incubator licensee is done through a competitive process in which the winner receives a license of 8 years to establish an incubator in Israel and to submit grant applications for innovative projects, in order to establish new startup companies.
The competitive process is open for everyone, local and foreign entities as one.
Amongst shareholders of current incubator licensees there are Venture Capitalists, Private equity groups, Super Angels, local and Multi-National Corporations.
The incubation term of a project in a technological incubator is approximately 2 years and the total budget for the two years term ranges between $ US 500,000 to $ US 800,000, depending on the field of activity of the project (in addition, projects in peripheral incubators are entitled for an extra budget of $ US 125,000). 15% of the total budget is financed by the incubator and 85% of the total budget is financed by the government as a grant, that will be paid back only upon success. The company will pay the government 3%-5% royalties from revenue generated, until the full amount of grant (plus interest) is paid back.
An incubator licensee can invest only 15% of the approved budget of a new project and receive up to 50% of the shares.
In the first two years, most of the risk is taken by the government.
Graduated companies with high success rate.
High international reputation.
FIELDS OF ACTIVITY
The incubators operate in all fields of R&D, especially in Life science (including medical devices), Cleantech and ICT. Out of ~160 incubated companies, ~40% are medical device companies, ~8% are Biotechnology & Pharma, ~15% are Cleantech, ~35% are ICT and ~3% are in other areas such as machinery and materials.
Since 1991 and to the end of 2013, the government initiated over 1,900 companies with a total cumulative government investment of over 730 Million Dollars.
Over 1,600 companies had matured and left the incubators. Of these graduates, 60% have successfully raised private investments. By the end of 2013, ~35% of the incubators graduates are still up and running. The total cumulative private investment in graduated incubator companies surpassed 4 Billion Dollars.
This means that on every Dollar the government invested in an incubator company, the company raised an additional 5 – 6 Dollars from the private sector.
Without the government taking the risk and making the initial investments in these initiatives, the companies would not have been established and the private investments that they have successfully raised would not materialize.
The incubators program positioned itself as the primary manufacturer of startups in Israel today, establishing 70- 80 new startups every year.
TECHNOLOGICAL INCUBATORS PROGRAM OFFICE
Office of the Chief Scientist, Ministry of Economy
Program Director: Anya Eldan, email: Anya.Eldan@ocs.economy.gov.il
Address: P.O. BOX 50031, 61500 Tel Aviv, Israel Tel: 972-3-5118127 Fax: 972-3-5173734
E-mail: email@example.com Web site: http://incubators.org.il