A delegation of senior officials from the Ministry of Finance and the Israel Innovation Authority will fly to the US this week to examine possibilities for encouraging overseas funds to invest in Israeli companies in healthcare and climate technologies. In Israel, there is a lack of investors and of a supporting eco-system in these fields, which means that many Israeli entrepreneurs found their companies abroad, a trend that dates from a long time before the effect of the government’s judicial overhaul legislation. The program is in the initial stages of being formulated, but when it gets underway there could be investment from the state budget in the region of NIS 100-200 million.
The team, led by Israel Innovation Authority CEO Dror Bin and head of the Ministry of Finance Budgets Division Yogev Gardos, is going to Boston, a health-tech and biotech center, where funds specializing in these and tangential fields operate. The local eco-system arose out of a US government investment program, which the Israeli delegation seeks to study and to consider replicating in Israel, at least in part. The team will meet the US government officials responsible for the program, companies in the relevant fields, and representatives from Harvard University and MIT.
One way of encouraging US funds to invest in Israel is to provide investment protection from the Israeli government. The fiscal consequences of such a plan are mainly the long-term risks. If, for example, after a decade, an investment in an Israeli health-tech company turns out to be loss-making, the government will have to cover some of the loss.
Another possible measure is incentives for investors in the form of taxation or other benefits. That will have a more immediate effect on the budget, but the amounts will be lower than in the case of providing investors with a safety net.
If the conclusion from the visit to the US is that the government should invest in bringing in the funds, the program will take about a year to put together. At best, the effect of the program will be felt in the medium to long term, as the Boston model is replicated at the Weizmann Institute of Science in Rehovot, the Technion-Israel Institute of Technology in Haifa, and other academic institutions. The Ministry of Finance’s aspiration is not to budget the incentives permanently, but to set the market on its feet and then to withdraw from involvement in it.
At least some of the ideas can be incorporated in the 2023-2024 state budget. In the budget of the Israel Innovation Authority, which amounts to about NIS 1.5 billion annually, there is money that can be put to use rapidly.
The program is not directly connected to the crisis in which the technology industry finds itself in Israel and globally, but it is hard to ignore the timing. Israeli technology companies raised 65% less capital in the second quarter of 2023 than in the corresponding quarter of 2022, according to figures from LeumiTech and IVC.
Published by Globes, Israel business news - en.globes.co.il - on September 4, 2023.
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