Chief Scientist to Step Up Aid to Seed-stage Firms

The Office of the Chief Scientist in the Industry, Trade and Labor Ministry plans to launch a program within several months to provide financing to early-stage technology and other small companies trolling for private-sector capital.

The OCS already devotes a large part of its budget to supporting seed ventures, but the sector has had an unusually hard time raising funds because of the global economic environment, Chief Scientist Avi Hasson said. The new program will be designed to leverage private capital invested in seed companies. The ministry's chief scientist's office has a budget of NIS 1.33 billion for 2012 and is expecting to get a NIS 300 million supplement. As things stand now, its grants budget is likely to be depleted by the middle of the year.

Over the years the office has pared back its support of big technology companies, which today receive less than 20% of total grants, compared to more than 50% in the 1990s, Hasson said. Companies with sales of less than $1 million get just over half the OCS aid. The amounts given to bigger companies have dropped by half since 2000. Most of the shift cane in the first half of the decade, under Hasson's predecessor, Carmel Vernia.

In spite of this, there has been some debate about whether assistance should be cut even further, given the trouble start-ups are having raising private sector capital. Big companies, as well as companies outside the high-tech sector, have been getting increasing amounts of R&D aid, as part of a program to boost employment in industry in Israel's periphery.

OCS assistance for companies outside the center of the country amounted to NIS 325 million last year, more than five times the amount they got in 2000. The extra funds are part of a program launched in 2005 aimed at enabling non-tech companies to adopt new technologies for manufacturing or for the development new products that will give them a competitive advantage.

Some 340 companies have participated in the program, receiving NIS 572 million in the form of grants, leveraging total investment of NIS 1 billion. The OCS plans to make changes in the program over the next several months, including the creation of a dedicated post for supervising it.