What is the role of Israeli State in start-up financing process’?
Israel is the 2nd reference in the world regarding innovation just behind the Silicon Valley. The country is dedicated to innovation and detains several very famous and successful references that we all well-know: Waze, Chromatis or NDS. There is already around one start-up for 1214 inhabitants. In 1947, when David Ben Gurion stated the creation of the State of Israel, he knew that the one way to face the troubles with its neighbors would be innovation, technology, creation and taking risks. Nowadays, Israel is the Start-up Nation.
What is the role of Israeli State in start-up financing process’?
In 1993, Israel developed which is called YOZMA (Incentive). The former government wanted to attract funds from international venture capital but the lone financial market was not efficient enough. In fact, the State wanted to transform its inventions into innovations so it adopted incentives like advantageous taxes. The government decided to double any investments in the country through government founds. The number of investment surged from $ 58 million in 1993 to $ 3.1 billion in 2000, and the number of companies grow up also from 100 to 800. This incentive had been a real success. The YOZMA program enabled the creation of a M&A Market, attracted scientists and entrepreneurs from all over the world (mainly USSR) and had been at the origin of the birth of Israeli “Unicorn” companies.
Moreover, the government has undertaken a leading competitive Research & Development policy. There are 84 incubators in Israel (8.5 million inhabitants) against 80 incubators for France (66 million inhabitants) in 2016. These figures demonstrate how it is important for the politics to attract foreign direct investments, make them finance the Israeli start-up and value Israeli creative ideas. Once again, this is a successful R&D financing policy. In 2016, the country is ranked 2nd in the world for Research & Development (4.1 of its GNP according to UNESCO) just behind South Korea. Besides, according to IVC-KPMG, Israel levered $ 4.6 billiards for its start-up and all the international companies have settled their offices in Israel like Microsoft, Intel, Dell.
Furthermore, Israel indirectly finances its start-up environment’s through grants and development of sovereign fields like education, infrastructure and international partnership. First, Israel ranked 2nd after Canada in OECD countries for the 25-64 years that achieved a high degree diploma in 2013. The country also usually invests 7.4% of its GDP in its educational institution. As student of the Global Young Leader Program, I experimented the dedication of the state to link education and professional market during my seminar in the city of Beer Sheva. The Ben Gurion University built a bridge to join the new non-profit research center called CDI (Center for Digital Innovation). It is a very encouraging symbol for entrepreneurs and students.
The government is mainly dedicated to build roads, echo parks, ports or technology hubs. For instance, the state spent $100 million to develop irrigation, mall and houses for the new military technology hub created in the city of Beer Sheva and the state spent $100 million to develop irrigation, mall and houses. On the other hand, the state created the Office of the Chief Scientist (OCS) to collaborate with the SCRA (South Carolina Research Authority) created in 1983. The state of South Carolina and Israel decided in 2013 to mutualize the R&D and to give grants for some innovative development projects which may present a cost up to $200000.
To conclude, the state has a pro-active policy of incitement for local and international investments. Data show that the role of the government is very important for Israel innovative environment. From my personal point of view through the Global Young Leader Program led by Skema Business School in 2017, the necessity of implication of the state in the innovative fabric is essential and welcomed.
Still, as Avi Hasson the Director of Innovation in Economic Israeli Ministry diagnosis, the country faces a new challenge:
Which leverages Israel may activate to stop its start-up called Unicorn (valued more than $1 billion) like “Outbrain” not choosing the earning-way of Exit?
Simon ILLOUZ