The Israel Innovation Authority certainly faces a daunting task: to safeguard Israel’s long-term economic position in the world by setting the country’s innovation policy and strengthening the infrastructure to support its knowledge ecosystem. Founded in 2016 as an independent, statutory public agency, the Innovation Authority is based on 40 years' experience as the Office of the Chief Scientist in the Ministry of Economy and Industry. Its funding comes from Israel’s national budget and it is managed by a Board of Directors that consists of representatives from both government and the private sector. The Authority’s work is premised on the belief that economic robustness prevents national vulnerability.
“Israel must lead strategically, like a raft in the middle of the ocean. To stay on the raft, we require economic strength, and we must gain this economic strength from technological superiority and from a strong ecosystem,” explains Dr. Ami Appelbaum, Chief Scientist of Israel’s Ministry of Economy and Industry and Chairman of the Israel Innovation Authority.
Dr. Appelbaum believes that one of Israel’s strongest assets is its wealth of multidisciplinary talent in scientific, technical and industrial fields. The country’s small size is an advantage in his view, because everybody knows each other, and Israelis know how to ‘think outside the box’ and operate with a sense of urgency and speed.
The Innovation Authority keeps the metaphoric raft from tipping over by balancing the public and private sectors. “We can only stay afloat and compete on the global market if we have a complete ecosystem. If you only have innovation but not the ability to bring it to the market, then you don’t have an ecosystem and cannot compete globally. And if you can take it to the market, but you don’t have enough skilled people, infrastructure, regulation and a friendly environment for doing business, you also have a problem. This requires a fine balance between a free market and a market that is supported by the government,” notes Dr. Appelbaum.
Since disruptive, tech-driven businesses inevitably face a high level of risk, private investment in cutting-edge R&D in certain fields is often lower than optimal. The Innovation Authority seeks to overcome these “market failures” by reducing the level of risk for these companies. “As a government entity, we protect the free market where there is a market failure, for example by stepping in to support a small entrepreneur for whom it is still premature to raise capital from private investors,” Dr. Appelbaum clarifies.
Over 4,000 requests per year
In 2020, a year marked with the Covid-19 global pandemic and a financial hiatus in all global markets, the Israel Innovation Authority invested approximately $700 million of public funds in promoting Israeli innovation. The recipients of these investments range from early-stage entrepreneurs who developed cutting-edge technologies to global corporations interested in collaborating with Israeli technology. The approach is bottom-up: the investees are the ones who initiate the process by applying for financial support. If approved, the Authority provides up to 50% of the desired budget; for the remaining sum, the individual or company must commit to obtaining matching funds from other sources.
Last year, the Innovation Authority received over 4,000 requests for financial assistance, of which 1,800 were approved. The amount invested in each entity varied greatly – from around $50,000 to individual entrepreneurs up to as much as $15 million to multinationals such as Medtronic or General Electric. The funds are conditional loans which are waived in the event that the initiative fails. If the project is a success, the company pays the Authority 3-5% of its annual sales revenues until the principal has been fully repaid. Moreover, the Innovation Authority does not take any equity or interest in the company or project it funds.
“If we don’t get our money back, that’s unfortunate, but okay. We’re not looking to make money for the Government of Israel,” Dr. Appelbaum insists. “Our goal is to enable Israeli entrepreneurs, start-ups and large companies to develop differentiated technologies, knowledge and intellectual property despite the high risk associated with such ventures. We want Israeli companies to advance from development to production and for the production to take place in Israel and go global. We would like to create high-value, high-salary jobs. Our approach is completely different from that of a VC or capital fund, which wants to profit. We want the Israeli economy to profit.”
A sovereign committee of experts decides who receives funding, based on evaluations by subject matter experts. The committee never meets directly with the applicants, in order to ensure an unbiased and equitable process based on equal opportunity. Each applicant is assigned a subject matter expert who performs due diligence, analyzes the requests according to set criteria and reports their findings to the decision-making committee. The Authority employs 180 subject matter experts, each of whom specializes in a specific field such as semiconductors, cyber, energy, agritech, etc.
In order to qualify for funding, applicants must offer a breakthrough technology that has the potential for making a global impact, and they must have a strong team with marketing ability. However, traditional industries are not neglected by the Innovation Authority. Rather, the Authority invests directly in low-tech companies as well, in order to help them increase productivity through digitization and R&D, so that they can successfully compete on the global market.
“We care about the entire ecosystem. We support technology transfer from academia to industry, as well as start-ups and individual entrepreneurs. These can include people who have a dream that could change the world. In such cases, we send our experts to investigate and, if the dream sounds reasonable, we will provide funding,” Dr. Appelbaum elaborates. “We also support start-up incubators and SMEs [small and medium enterprises] as long as they demonstrate breakthrough technologies and products that can truly change the market, as well as large companies that are game changers with disruptive technologies. The private sector would most likely not fund them because of the high risk involved, but we will – precisely for that reason.”
Investing in the entire ecosystem
Since the Innovation Authority’s mission is to support the entire knowledge-based ecosystem in Israel, one of its priorities is to overcome the infrastructure gap that threatens the country’s economic growth. Specifically, although Israel boasts highly skilled human capital with an exceptional entrepreneurial spirit, the future of Israeli innovation is vulnerable because of a severe lack of engineers. Dr. Appelbaum points out that prior to the Covid-19 economic crisis there were some 19,000 open positions for computer engineers in Israel, including hundreds of Artificial Intelligence engineers. Post Covid-19, this number is expected to increase even more.
The Authority is actively involved in efforts to close this gap by promoting initiatives to increase the number of students in high-tech fields, particularly among underrepresented populations. To this end, it is funding programs that integrate members of minority groups such as Arabs, ultra-Orthodox Jews and even women, in these crucial academic fields. Special emphasis is also placed on Israel’s peripheral regions.
Another way in which the Innovation Authority is involved in the overall ecosystem is by setting policy and regulations. “We work with the private sector and Government Ministries to address ethical and regulatory issues proactively, to lay down the legislative groundwork that will allow future technologies to be implemented,” Dr. Appelbaum notes, adding that the Authority is intent on “finding a balance between the value and the potential harm of new technologies,” ensuring safe and successful implementation into our everyday lives.
Looking toward the future
One of the ways the Israel Innovation Authority differs from similar entities in other countries is that it does not limit itself to supporting today’s entrepreneurs and tech companies; it also invests in the technologies of the future. “We ask ourselves: what will lead global technology and the global economy ten and even 20 years from now? We are investing in these technologies today in order to strengthen Israel in the future,” says Dr. Appelbaum.
The Authority has identified three main fields that are poised to change humanity and where Israelis are spearheading cutting-edge research:
Quantum technology – The world is now experiencing the first stages of the quantum revolution, whose impact will likely be enormous in the not-so-distant future. The field of quantum introduces a new paradigm for information processing, and it is disrupting the way we compute, communicate and measure. “Today we are investing in quantum technologies – which includes quantum materials, quantum sensing, quantum communication and quantum computing – on a national level and in collaboration with other countries,” Dr. Appelbaum discloses, adding that, “This effort brings together academia, the private sector, the public sector and the defense establishment. These are long-term investments.” A national project is already up and running with a budget of NIS 1.25 billion ($375 million) over a five-year period.
Artificial Intelligence (AI) – Artificial intelligence refers to machines that mimic human cognition, including learning and problem solving. Advances in computing power and data collecting, digitization and processing are enabling increasingly sophisticated applications of AI technology in virtually all aspects of life, and undoubtedly AI will become even more pervasive and significant in the future.
Here too, the Innovation Authority has launched a national initiative which encompasses universities, industry, the public sector and the private sector. The focus of this initiative is to solve three Israeli market failures: data storage and computing facilities are based on foreign infrastructure and therefore a local facility is needed; existing NLP tools do not support Hebrew and Arabic at the level required to retrieve innovative insights from data in those languages; and there is an increasing shortage of students with AI training.
Bio-convergence – Bio-convergence represents the next technological wave of the 21st century that will revolutionize the healthtech industry, as well as many other industries and fields. Enabled by advances in fields such as genomics, gene therapy, DNA sequencing, AI, big data and nanotechnology, bio-convergence is paving a holistic path to remarkable innovations in treatment and diagnostics. This tremendous potential for improving healthcare across the board has inspired the Innovation Authority to lead efforts to turn Israel into a hub of bio-convergence research. Our vision is to create a new industry segment with half a dozen new unicorns and tens of small and medium size companies expected in the next decade.
The Innovation Authority leads these large-scale national projects under the aegis of TELEM – the National Infrastructure Forum for Research and Development.
Maintaining Israel's leadership
Just like the many entrepreneurs and start-ups that are able to pursue their visions thanks to the support they receive from the Israel Innovation Authority, the Authority itself is a modern-day incarnation of Israel’s fabled pioneering spirit – energetic, enterprising and determined to succeed. With a mission statement of investing in innovation to promote sustainable and inclusive growth, the Innovation Authority operates on two levels simultaneously to enable the continued leadership of the local innovation ecosystem. In the short term, the Authority operates as an enabler, providing support in the form of conditional grants to entrepreneurs and innovative technological projects. In the long run, it identifies future technologies that have the potential of becoming the next growth engines for the economy and helps develop the infrastructure to prepare for their future implementation. “Countries that will embrace the fast changing technologies and adopt them will prevail. We are charged with the task of ensuring that Israel maintains its leadership position as a global innovation hub,” concludes Dr. Appelbaum.
Investing in bio-convergence
BiomX is part of an expanding ecosystem of Israeli companies in the field of bio-convergence – an emerging field that fuses life sciences with different disciplines to create a sum set that is far greater than all of its parts. One of many young Israeli start-ups in this nascent field, BiomX combines synthetic biology with advanced AI platforms to discover and develop innovative microbiome-based therapeutics to prevent and treat cancer and skin disorders. MeMed, another bio-convergence start-up, harnesses AI, systems engineering and molecular biology for a diagnostic platform that delivers precise distinctions between bacterial and viral infections. Such companies are continuing a longstanding Israeli tradition of biotechnological innovation.
At the core of Israel’s early success in bio-convergence is its world-renowned human capital. Unleashing its full potential requires smart investments to support and accelerate promising technologies and cutting-edge solutions – which is why, over the past decade, the Israel Innovation Authority has invested more than $100 million annually in the life sciences sector across a number of different programs. Through international cooperation agreements, R&D incentive programs targeting multinational corporations, and early-stage incubator programs, the Innovation Authority is propelling bio-convergence forward for the benefit of humankind.
Reaching international markets
Since the domestic market is very small, the Israel Innovation Authority established an International Collaboration Division whose task is to help Israeli companies penetrate international markets through a range of initiatives and programs, as well as attract global companies to invest in Israel in order to expand their R&D, engineering and marketing activities and, if appropriate, engage in high-value manufacturing in Israel. These programs include:
- Bilateral agreements and R&D funds with other countries and with specific districts and cities around the world. These agreements enable the Innovation Authority to help identify partners abroad and to support Israeli companies.
- Horizon 2020/Horizon Europe Framework Programs – Israel is an associate state in the European Horizon program, which promotes R&D and innovation. Israeli companies, entrepreneurs, universities and even NGOs can take part in various consortiums and receive funding, as well as form contacts with international companies and institutions, thereby facilitating exchange of knowhow, experience and their entry into the European market.
For more information about the Israel Innovation Authority, click here
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