Research and development (R&D) grants have contributed to Israeli hi-tech success over the years. Clever geeks leave the IDF with bright ideas. Venture-capital (VC) funds then provide capital, education, and financial discipline. The Israel Innovation Authority (IIA) provides R&D grants.

Here is a brief overview. Note that programs and government R&D budgets are evolving.

The IIA aims to de-risk private-sector investment through government-backed non-dilutive grants. The grants are repayable by royalties of 3%-5% of revenues, if any, until the full amount plus interest is repaid.

Funded R&D should be done in Israel. If funded know-how is sold or transferred outside Israel, usually after an M&A deal, repayment is required according to a formula, capped at six times the grant plus interest.

• Aimed at: Companies developing new products or upgrading an existing technology.

• Potential benefit: Financial support of 20%-50% of approved R&D expenditure. Additional 10% in development areas. Up to 75% in the first year and 70% in the second year for a start-up company owned by a minority population and/or haredim (ultra-Orthodox) and/or women.

• Main terms: Repayable by royalty payments only if the company successfully reaches commercialization.

• Aimed at: Developing production processes.

• Potential benefits: 40% of approved budget up to NIS 3 million grant over 12 months or NIS 6m. grant over 24 months. Additional 10% in development areas A & B.

• Potential benefits: Pre-seed 60% of investment round up to NIS 1.5m. grant. Seed 50% of investment round up to NIS 5m. grant and Round A stage companies 30% of investment round up to NIS 15m. grant. Additional 10% if supports under-represented populations, such as Arabs, haredim, women, periphery region. Repeatable up to limits.

Technological incubators program for entrepreneurs

•Aimed at: Private entrepreneurs, entities interested in establishing technological incubators in accordance with a relevant call for proposals.

• Potential benefit: Up to 85% of the approved budget up to a maximum budget of NIS 3.5m. for a period up to two years. Further grant possible in year three, according to the program’s regulations.

Also, a grant of up to 15% of the approved budget from the incubator, making up to 100% funding possible for an entrepreneur. Space and administrative services are provided by the incubator, and access to potential partners, customers, and additional potential investors.

• Aimed at: VC firms, multinational companies, experienced investors.

• Potential benefit: Up to NIS 40m. in grants over five years, regarding management fees, capital expenditure, and central lab equipment, as follows: 70% of approved expenses for two years, plus 60% for the next two years, plus 50% in year five.

• Main terms: Financial resources at least NIS 120m. plus full-time professional team – CEO, CTO, chief business officer. Nonprofit entities maximum 20%. Need a business plan.

• Aimed at: Connecting academia, industry leaders, and investors to extend entrepreneurship and hi-tech activity to the entire population and regions. Operated by licensees chosen through a competitive process.

• Potential benefit: Support from IIA includes “significant” grants, professional guidance, and creating collaborations. Private investors and multinational companies can invest directly in start-ups, collaborations, or the establishment of R&D centers.

• Aimed at: Advancing programs for recruitment, sorting, training, internship, and placement of hi-tech employees.

• Potential benefits: Initial establishment stage: 50%-70% of approved budget of up to NIS 1m.; growth/scale-up stage: 30%-70% of approved budget of up to NIS 15m.

• Aimed at: Israeli companies collaborating with foreign companies. There are currently five binational funds:

I4F: Israel-India (50% up to $2.5m. per project, half from IIA, half from:

BIRD: Israel-USA (50% up to $1.5m per project);

SIIRD: Israel-Singapore (50% up to $1.5m. on R&D track, 66%, or $3m. on strategic track, other smaller tracks exist);

KORIL Israel-Korea (up to 50% of direct R&D);

Japan Israel: (up to 50%of R&D expenses).

• Main terms: Different programs for each fund.

• Potential benefit: Up to 50% of recognized expenditures.

Support for participation of Israeli companies in the European Frameworks Program – Horizon

• Potential benefit: Up to 85% of approved expenditures up to NIS 70,000 of travel and conference expenses to locate partners, and authorized consultation to write the request.

• Aimed at: MNCs with annual revenues over $1.5 billion and unrelated Israeli companies with R&D focus.

• Potential benefit: one-stop shop support, access to Israeli innovation.

As always, consult experienced professional advisers in each country concerned at an early stage in specific cases.

leon@hcat.co

The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.