Working with the IIA.

Israel’s Innovation Authority (IIA) is designed to encourage and support the early stage development of the technological innovation ecosystem in Israel. As such it offers many different programs to support startups from pre-seed stage onwards. Incubit operates within the framework of the IIA’s Incubator Incentive program.

As part of the program. the IIA asks for 20-50% equity in the incubated companies held by the Incubator operator, in return for a complementary investment of 15% of the R&D costs. The other 85% of R&D costs are funded for no equity.

The incubator is obligated to provide incubated companies with comprehensive assistance including physical office space, business guidance, access to partners, exposure to potential investors and customers, legal advice and administrative support.

As this is a state-sponsored program it is also regulated in a few areas. Here is a high level overview of the regulations associated with IIA funding programs::

1. Royalties – The incubated startup must repay the grants received, through royalty payments from revenues generated by the sale of the product or service that were developed while in the program. Royalties are payable until 100% of the amount of the grant is repaid
2. Licensing and transfer of manufacturing rights – Any transfer of know-how or manufacturing rights outside of Israel requires the pre-approval of an IIA designated committee.
3. Licensing and transfer of know-how – All know-how (e.g., the technology) derived from the research and development performed under the IIA program and all the derived rights (e.g., intellectual property rights) must stay in possession of the funded startup. A designated IIA committee may approve the transfer of know-how between Israeli entities, and in special cases permitted by Israeli law, can also approve such transfer to non-Israeli entities. The IIA committee also must pre-approve licensing of know-how, provided that  the license does not totally expropriate the ownership of the know-how by the funded startup.

You can read more about the IIA’s Incubator Incentive Program here.