Ministry of Industry, Trade and Labor
Office of the Chief
Scientist
THE TECHNOLOGICAL
INCUBATORS PROGRAM
ESTABLISHING START-UP
COMPANIES FROM INNOVATIVE IDEAS
BACKGROUND
Technological incubators are support
organizations that give fledgling entrepreneurs an opportunity to develop their
innovative technological ideas and set up new businesses in order to
commercialize them. The program is
underway since 1991 and is administrated by the office of the chief scientist
of the Ministry of Industry, Trade and Labor (OCS).
GOALS
The program nurtures novice entrepreneurs at
the earliest stage of technological innovation, helps them implement their ideas
by turning them into exportable commercial products and form productive
business ventures in
By absorbing a large portion of the risk in
this early stage, where commercial money plays a minor role, the technological
incubators provide entrepreneurs with physical premises, financial resources,
tools, professional guidance and administrative assistance - so that, during
their stay in the incubator, they may turn their abstract ideas into products
of proven feasibility, novelty and advantages sought in the international
marketplace.
The entrepreneurs term of activity in the technological incubator considerably
enhances their prospects of raising the financial investment they need, finding
strategic partners and emerging from the incubator with businesses that can
stand on their own two feet.
ACCEPTANCE CRITERIA
R&D project based on an innovative
technological idea of an individual (not an existing company )
that aims to develop a product with significant export marketing potential.
FIELDS OF ACTIVITY
Generally speaking, activity takes place in
all fields of R&D.
There are no predetermined fields of
specialization at the incubators, unless decided by the incubator, to
specialize in a certain field. Thus
there are specialized or partially specialized incubators in software, life
sciences, medical devices, environment, water, IT and communication.
PROJECT ACTIVITY FIELDS (Incubated Projects as of 1.1.2007):
PROJECT ADMITTANCE
The entrepreneur must file an application to the incubator within which
he wishes to operate the project.
The project will then be examined by the incubator and if found suitable
the incubator will submit an application to the Incubators Program Management
in the OCS.
The project will then be examined by the Incubators office and will be
brought before the Incubators Committee headed by the Chief Scientist.
If approved, the project may operate in the applicant incubator.
KNOWHOW AND MANUFACURING RIGHTS
The project is committed to abide by the Israeli R&D law in regard
of all manufacturing and know-how rights.
In any event of transferring know-how and manufacturing rights abroad,
it is deemed necessary to receive special approval from the Chief Scientist.
PROJECTS TERM IN INCUBATOR:
Approximately two years.
Biotech Projects may receive an additional third year in the incubator.
BUDGET:
The total budget for the two year term ranges between US $350,000 to US
$600,000. Budget for Biotech incubators
(under directive 8.4) may be up to $1,800,000 for three years.
GOVERNMENT SUPPORT:
85% of the approved budget provided as a grant or a soft loan.
For Biotech incubators: 80% of approved budget provided as a soft loan.
OWNERSHIP DISTRIBUTION IN THE PROJECT
Incubators operating under directive 8.2 (non-profit organizations):
·
At least 50% by the entrepreneur
·
Up to 20% by the provider of supplementary financing (i.e., additional
to the state grant) for project implementation
·
Up to 20% by the incubator
·
At least 10% by key staff members other than entrepreneurs
According to negotiations by both parties
Incubators operating under directive 8.3 (privatized incubators):
·
30% - 70% by the incubator (including the provider of supplementary
financing)
·
70% - 30% by the entrepreneur
According to negotiations by both parties
Any further investments deemed necessary in the future will be open to
free business negotiations.
GOVERNMENT PAYBACK
Payback is required in case of success only.
Incubators operating under directive 8.2 (non-profit incubators):
3% - 3.5% Royalties from product sales and up to total amount granted by
the government.
Incubators operating under directive 8.3 (Privatized incubators) or
under directive 8.4 (Biotech Incubators):
Will be under the incubators owner's
responsibility.
CURRENT STATUS
There are 24 technological
incubators in Israel today, in the following locations: Jerusalem, Tel Aviv,
Haifa, Beer Sheva, Dimona, Sde Boker, Ofakim, Ashkelon, Kiryat Gat, Kiryat
Arba, Netanya, Hadera, Ariel, Jezreel Valley (Migdal Ha'Emek), Jordan Valley
(Tzemah), Nazareth, Segev Bloc (Misgav), Yoqne'am, Golan Heights (Katzrin), and
Upper Galilee (Kiryat Shmona).
Out of 24 incubators, 15 are
located in peripheral areas.
There is one incubator that
was established as a Biotech incubator.
Approximately 200 projects in various stages
of R&D are being carried out in the Technological Incubators at any given
time.
By the end of 2006,
over 1000 projects had matured and left the incubators. Of these graduates, 57%
have successfully attracted private investments.
41% of the incubators graduates (Since the beginning of the program) are still up
and running.
By the end of 2006, the total cumulative private investment in graduate
incubator companies surpassed 1.5 Billion Dollars as the bottom graph shows:
In recent years, incubator projects have successfully
been able to raise from, private investors, more than
twice the initial investment made by the government, within two-years of their
admittance into the incubators (Round A Funds) as shown by the graph below:
It must be said, that without the government
making the initial investments in these projects, the projects would not have
been ignited and the private investments that they have successfully attracted
would have been directed elsewhere if at all.
The technological incubators have become
massive repositories of potential ideas for new high-tech venture companies in
the future. It is well known that the
incubator program is the NO. 1 manufacturer of startups in
The program has positioned itself as an
important source of deal-flow for the venture capital industry that is
searching constantly for new technologies in which to invest in.
TECHNOLOGICAL INCUBATOR
PROGRAM OFFICE
Office of the Chief
Scientist, Ministry of Industry, trade and labor
P.O. BOX 50031, 61500 TEL AVIV, ISRAEL
Tel: 972-3-5118127
Fax: 972-3-5173734
E-mail: hamamot@ocs.moital.gov.il
Web site: http://incubators.org.il
Program Director: Rina Pridor