TECHNOLOGICAL INCUBATORS PROGRAM

By: Yossi Smoler Program Director Yossi.Smoler@ocs.moital.gov.il

Ministry of Industry, Trade & Labor

Office of The Chief Scientist

Government Involvement

• Market Failure: • Early stage, high risk, innovative technological

enterprises, can not raise money from the private sector.

• Government response: • Technological Incubators Program

What is a Technological Incubator?

Organization that support early-stage, highly-innovative projects, that are too risky for the private sector investments

Incubator’s Goal

Developing innovative technological ideas into start-ups and leading them towards first round investment.

What does an Incubator offer to entrepreneurs?

• Appropriate facilities and infra-structure for R&D.

• Financing.

• Central administrative services (secretarial, accounting, legal, commercialization).

• Management & Technical assistance.

• Professional & Business guidance.

• Connectivity to potential customers, partners and investors

• Inter-tenant synergism.

Government Support

• Average budget of project: $500K • Government grant: 85% of budget

• Incubator’s investment: 15% of budget

• Payback: 3% royalties from revenue

• Support duration: 2 years

• Extended support to Biotech/Pharma & Clean-Tech projects

• Annual Government Budget to the Program: ~$50M

The Incubators Franchise Model

• Franchise Term: 8 years with performance based milestones

• Tender: 1 year before Franchise end date

Technological Incubators Program

Main objective

• Creating new start-up companies that would not start otherwise

Secondary objectives

• Technological transfer from research institutes to the industry

• Creating technological entrepreneurial culture

Technological Incubators Program (Cont.)

Secondary Objectives (cont.)

• Providing Deal-Flow for the Venture Capital industry

• Creating industrial R&D activity in the peripheral regions

Program Milestones

• 1991: Establishment of program

• 2002: Initiating the Privatization Process

• 2005: Establishing a designated biotech incubator in Jerusalem

• 2008: Establishing 2 technology based industrial incubators in Haifa and Arad

• 2010: End of Privatization Process

• 2011: Reforms in the basic models of the Incubators Program

• 2012: Implementation of the tendering process for selecting new licensees.

Project Criteria

• Innovation and uniqueness.

• Early stage, high risk.

• Market potential.

• IP protection

• Management team

• Feasible with available resources.

• Individual initiative.

Projects Acceptance Process

1.Approaching an incubator.

2.Incubator’s assessment.

3.Approaching the Technological Incubators Program.

4.Program’s evaluation.

5.Decision of the Incubators Committee.

6.Initiating the project.

Volume of operation

• 24 incubators distributed across Israel: • 22 technological incubators

• 1 technology based industrial incubators

• 1 biotech designated incubator

• Approximately 8 projects per incubator

• Every year 70 – 80 new start-up companies are established in the incubators, ~90% of them complete the incubator term

Upper Galilee: Meytav (Tel-Chai)

Arad: Meizam Arad

Kiryat Arba: Mofet B’Yehuda

Ariel: Incentive

Nazareth: NGT

Hadera: Yozmot

Migdal Ha’Emek: Ofek

Golan Heights: Meytag (Katzrin)

Jerusalem: JVP, Van-Leer & Bioline

Gush Segev: Misgav

Haifa: Technion, LN & HiCenter

Kinneret: Kinrot (Tsemach)

Yoq’neam: Naiot

Netanya: Targetech

Tel Aviv: Lab-One & Rad-biomed

Ashqelon: ATI

Kiryat Gat: Xenia

Ofakim: OHV

Beersheba: Ma’ayan Ventures (Omer Park)

Dimona: Rotem Ventures

Sde Boker: Iris Ventures

Sde Boker

Beersheba

Ofakim

Ashqelon

Dimona

Arad

Kiryat Gat

Tel Aviv

Netanya

Hadera

Haifa

Ariel

Jerusalem

Kiryat Arba

Yoq’neam

Tel-Chai

Katzrin

Tsemach

Tsemach Gush Segev

Nazareth Migdal Ha’emek

Incubators Location

Incubated Companies - Fields of Activity

December 2011

Cleantech

14%

Electronics

4%

ICT

31%Biotech & Pharma

12%

Medical Devices

39%

Government Investments VS. Private Funds

Invested in Incubator Companies (Aggregate)

1991 - 2011

0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000

3,000,000

3,250,000

3,500,000

3,750,000

Thousand Dollars

Cumulative Government Invesments 5,100 21,600 44,980 68,560 99,560 130,660 162,160 192,760 222,591 254,158 286,308 313,440 339,460 364,673 396,126 428,915 461,760 509,389 556,419 600,803 643,980

Cumulative Private Funds 0 100 7,950 19,045 52,026 90,580 152,652 248,729 342,260 645,705 762,910 847,140 932,903 1,127,845 1,303,012 1,741,701 2,174,548 2,546,047 2,868,841 3,155,837 3,445,773

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Highlights

• The incubators program is the primary “Manufacturer” of start-ups in Israel

• The incubators program is the only opportunity for early-stage, high-risk innovative projects that are not yet able to raise money from the private sector

• The incubators program is an important source of deal-flow for the venture capital industry

Highlights (Cont.)

• The incubators program is especially important in times of economic crisis

• The incubators program has a significant impact on the life-science industry in Israel

• The incubators program has a crucial role in developing an entrepreneurship culture in Israel