Israel Innovation Authority extends $25 million lifeline to startups amid war

Grants will be for 100 startups experiencing cash flow difficulties, delays and cancellations with potential investors, and of significant projects due to the war with the Hamas

Sharon Wrobel is a tech reporter for The Times of Israel.

View of Kiryat Atidim, the tech business park of Tel Aviv. (Yossi Zamir/Flash90)
View of Kiryat Atidim, the tech business park of Tel Aviv. (Yossi Zamir/Flash90)

The Israel Innovation Authority, in charge of directing the nation’s tech policies, will allocate NIS 100 million ($25 million) in assistance grants to provide about 100 cash-strapped startups with a lifeline to cope with the challenges posed by the war situation.

As part of the authority’s R&D fund program, a fast-track channel of grants will be made available to Israeli startups who are struggling to raise capital from their existing investors during the war period. Application for the program will open in November, the authority said.

“The high-tech sector, which has faced declining investment volumes over the past 18 months, is also impacted by the current crisis,” said Israel Innovation Authority CEO Dror Bin. “This impact is more pronounced in startup companies that urgently need funding, especially during a challenging period when it is difficult to conduct new financing rounds.”

“This step is designed to be a force multiplier for the welcome initiatives put in place by both local and international investors, designed to support the excellent companies that are facing temporary challenges due to the collective war efforts,” Bin remarked.

Israel has already called up more than 300,000 reservists, many of whom are working in local tech firms and companies, as Israel declared war on Hamas after more than 1,500 terrorists broke through the fortified Gaza border on October 7 and murdered some 1,300 people, most of them civilians, including babies, children and the elderly. Many were murdered in their homes and some 260 were massacred at an outdoor music festival.

Already before the outbreak of the war, Israeli tech companies suffered from a severe plunge in investments of as much as 70 percent, which was exacerbated by a global economic slowdown and the contentious judicial overhaul advanced by the Israeli government earlier this year.

A building in Tel Aviv damaged by rocket fire from the Gaza Strip on October 7, 2023. (Jack Guez/AFP)

That’s as about 80% of venture capital investments in local high-tech startups were generated from foreign funds in the years 2021 and 2022.

The Israeli economy’s dependence on the high-tech sector has significantly grown in the past decade. The Israeli high-tech industry is contributing 18% to local GDP, versus less than 10% in the US, and about 6% in the EU. About 14% of all employees work in the high-tech sector and in tech jobs in other sectors. The Israeli economy relies on high-tech products and exports, which make up about 50% of total exports, as well as high-tech taxes.

The Israel Innovation Authority said that the fast-track grant channel is for tech companies that are at the product development or initial sales stage, including startups in the active fundraising phase. Applications will be evaluated according to a startup’s technological assets, financial runway, its investors’ available funding, and the impact on employees and infrastructure.

“From mapping the needs of startup companies in Israel, we understand that most of them are experiencing cash flow difficulties, delays and cancellations with potential investors, and the delay of significant projects and technological developments,” Bin said. “The channel is designed to provide certainty and cash flow that will help companies overcome the crisis and be an economic growth engine upon exiting it.”

Bin added the authority will continue to provide startups with a sufficient security net to help the Israeli high-tech sector thrive in the post-crisis era.

“Much like the entire Israeli economy, our high-tech sector was significantly harmed by the crisis,” echoed Innovation, Science and Technology Minister Ofir Akunis. “Our policy of providing rapid support, in collaboration with the Ministry of Finance, will prevent critical damage to the high-tech industry.”

“This policy will be the central tier in the ability of the Israeli economy and its growth engine to quickly return to a path of growth at the end of the war,” Akunis added.

Most Popular
read more: