Israel Innovation Authority launches new fund to establish three deep tech incubators

The Israel Innovation Authority today unveiled a new Deep Tech “Incubator Fund” as part its “Boost for the Israeli High-Tech” initiative, with an emphasis on nurturing new startups while diversifying the tech landscape and strengthening Israel’s innovation competitiveness against global innovation hubs,. The new fund invites both Israeli and international corporations, along with venture capital funds, to submit proposals to secure grants of up to 40 million NIS for the operation of three new technological incubators.

The selected incubators will concentrate on investing in Deep Tech companies operating in sectors such as health, bio-convergence, food-tech, agri-tech, climate-tech, and other areas marked by high technological complexity and innovation, intricate regulation, lengthy market penetration processes, and tangible product offerings.

The incubators set up by the new fund will serve as innovative investment entities, integrating both local and international investors to offer financial backing and a supportive framework for nurturing startups in various Deep Tech sectors. Entities selected through the tender process will receive grants of up to 40 million NIS (approximately $10 million) over a 5-year period. This funding will cover the incubator’s operational expenses and facilitate the establishment of a central laboratory for the benefit of the participating companies. The incubators will support companies all the way from ideation to their initial significant funding stage (Round A).

Additionally, companies participating in the incubator can receive tens of millions of shekels in non-dilutive investments from the Israel Innovation Authority through various programs, particularly through the new Startup Fund of the Israel Innovation Authority, which allocates over 500 million NIS annually and includes participation in the investment rounds of incubated companies at a grant rate of 60% in pre-seed stage companies, up to a grant of 1.5 million NIS; a grant rate of 50% in seed stage companies, up to a grant of 5 million NIS; and 30% in Round A stage companies, up to a grant ceiling of 15 million NIS.

In addition to supporting the operation of the technological incubator itself, any incubated company can compete for the Incubator Fund and potentially receive grants of over 21 million NIS – approximately 6 million dollars per company, to grow, with significant state participation in risk, from the idea or knowledge commercialization stage to early growth stages, with the support and guidance of the incubator and its shareholders.

The tender process will be open for six months. Applicants are required to demonstrate the availability of funding sources totaling at least 120 million NIS, which will be allocated and invested in the incubator and incubated companies during the grant period. 

Dror Bin, CEO of the Israel Innovation Authority said:The new technological incubator program we’re launching today is part of a series of recent initiatives aimed at propelling Israel’s innovation ecosystem forward. Specifically, it complements the efforts of the Start-up Fund and the newly established Innovation Fund. Over the years, technological incubators have demonstrated a key strength: their ability to nurture deeply innovative companies (deep-tech) in Israel, often starting from the conceptual or academic research stage, with the country’s participation bearing financial risk. Moving forward, we’re looking for additional value from the newly selected incubators through a competitive process. This includes their capacity to attract robust Israeli and international equity holders and financial partners, ensuring sustained support for companies over the long term. This, in turn, will facilitate the influx of private capital necessary for their growth and expansion into global markets, thereby fostering the emergence of large, sustainable enterprises within Israel. Through these efforts, we believe the incubators will significantly enhance Israel’s competitive edge vis-à-vis global innovation hubs.

Hanan Brand, Vice President of the Israel Innovation Authority and Head of the Startup Division said: The technological incubator plan recently marked thirty years since its establishment, and has been one of the central cornerstones, along with the Venture Fund, of the Israeli innovation ecosystem that has made Israel what it is today – a startup nation. The program has created over 2500 innovative technology startups to date, accumulated hundreds of exits that have brought multinational companies to Israel, providing thousands of jobs across the country, and to this day has been one of the major providers for the establishment of deep-tech companies in Israel, with the state taking significant risk in these early stages. We are proud to launch a competitive process that we believe will lead to the establishment of a new generation of technological incubators, supported by strong financial and strategic investors – some of whom may not have previously operated in Israel, led by a leading technological management team. They will all come together with the Israel Innovation Authority’s assistance to build new groundbreaking companies that will have the potential to be a huge part of the future of Israeli high-tech.

This article was first published on 8 April by ISERD.