"After the privatization of technology incubators was halted during 2004, it's possible that projects in the incubators already privatized will not receive budgets in 2005, despite the government's commitments to the entrepreneurs who entered into partnerships with it. The reason is the sharp cut in the R&D budget in the budget proposal, even if this results in lawsuits for breach of contract against the stage by entrepreneurs," Chief Scientist Dr. Eli Opper told "Globes" today.
Opper said the deep cut in the R&D budget from NIS 1.8 billion two to three years ago to NIS 1.4 billion in 2004 and NIS 900 million in the 2005 budget proposal, "will reduce Israel's R&D inventory to a level that jeopardizes growth. It will also cause the incubators program severe problems."
Opper added that as a result, "We will close incubators and we won't be able to budget projects in existing incubators." Israel currently has 23 technology incubators, of which 12 were privatized over the last two years. The state promised entrepreneurs to finance at least five projects a year at each incubator. According to Opper's figures, each incubator needs ten projects a year to be economically viable.
Regarding the state's not meeting its commitments, Opper told "Globes", "Privatization means bringing in private venture capital investors as partners in the incubators. This is a positive development, because people in the business came in as investors. These were people with a track record in high-tech and early-stage projects. None of them were just financial investors." He added, "We'll seek any means to finance the incubator projects as promised, but if there's no money, we won't finance them and they will sue the state."
Opper said at least an additional NIS 150-170 million was needed for the continued operation of the existing incubators plus the two biotechnology incubators, due to be set up when the tender process is completed in a few months.
Opper went on to say that many incubator companies have no chance of obtaining support from the Office of the Chief Scientist's R&D budget, and that many venture capital funds would not invest in start-ups without matching investments from the Chief Scientist. He said, "Raising capital for the technology incubators is not like finding donors for the school lunch program."
Published by Globes [online] - www.globes.co.il - on August 24, 2004