The Technological Incubators Program is a successful collaboration between the government and the private sector, and is considered a major generator of start-up companies in Israel. It features a unique model that has generated worldwide interest.
(Communicated by the Ministry of Economy)
The Technological Incubators Program of the Office of the Chief Scientist at the Ministry of Economy is currently embarking on three competitive processes to choose four license holders who will establish and manage technological incubators for a period of eight years. During this time, the licensees will be able to submit requests for government support to innovative technological initiatives which have passed the state’s examination and deemed worthy. The incubators will be established in the Tel Aviv and Jerusalem areas.
This is the final stage in the reform of the Technological Incubators Program that began in 2011. Over a period of three years 11 incubator operators were selected. Their shareholders include major companies such as Philips, Teva, and Strauss, who won recent bids.
Since its establishment in 1991, the Incubators Program has generated nearly 1,600 companies, dozens of which went on to IPO and over half raising additional investments. Prominent companies founded in recent years as a result of the incubator program achieving outstanding results include: Neuroderm, graduate of the Ofakim incubator, issued late last year at a value of $164 million (raising $45 million in the IPO); Steadymed, graduate of the Rad BioMed incubator, listed this year on NASDAQ at a value of $100 million (raising $40 million in the IPO); and CyActive, graduate of the JVP Cyber incubator, acquired this year by PayPal for $60-80 million (becoming PayPal’s development center in Israel).
The technological incubators program supports innovative early stage technology initiatives and those which carry high risk. An initiative accepted by the incubator becomes a company and enters the incubator for a period of two years with NIS 2 million in funding, 85% of it in government money. Companies accepted to incubators located in the periphery receive NIS 2.5 million. The remaining 15% is invested by the incubator. Government funding is returned to the state only if a company succeeds, through royalties generated by sales from products developed. Initiatives in cyber, cleantech and medical technology receive a higher amount of government funding.
The program is a successful collaboration between the government and the private sector, and is considered a major generator of start-up companies in Israel. It features a unique model that has generated worldwide interest.
As a result of recently updated Director-General’s instructions, several changes were made. Most significantly, preference is given to groups with more than one shareholder in order to ensure wide-ranging support for companies. Raising the minimal commitment to NIS 50 million can also help prove the capability to support incubated companies further down the line.
Minister of Economy Aryeh Deri: “Israel is a global hub of innovation, largely thanks to the Technological Incubators Program. The program is a magnet for leading investors from around the world and major corporations competing over the licenses, generating highly innovative companies. It also allows corporations to invest in Israel at relatively low risk and introduces them to the Israeli economy.”
Chief Scientist at the Ministry of Economy, Avi Hasson: “The Technological Incubators Program is one of the flagship programs of the Office of the Chief Scientist, and the recent competitive processes attest to the program’s appeal, with powerful groups and organizations in the financial and business areas competing over the right to establish a technological incubator.”
General Manager of Early stage and Incubators Program at the Office of the Chief Scientist, Anya Eldan, said: “Start-up companies have trouble raising capital in the private market in the early stages of the product life-cycle, due to the high risk entailed in the product’s implementation and penetration into the market. The comprehensive support provided by the incubator helps entrepreneurs find potential customers and investors, and perhaps receive assistance in the first pilot project. This competitive processes will enable the entry of new operators, offering companies significant value. After their term under the incubator’s tutelage, start-up companies can boost their chances of raising financial investments, finding strategic partners, and leaving the incubator as an independent business.”
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