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IDF soldiers working with computer technology. Photo: IDF Spokesperson’s Office.
CTech – Israel’s Ministry of Finance, the Israel Innovation Authority (IIA), and the Israel Securities Authorities have formed a plan to encourage institutional investments in early stage startups.
According to the plan’s draft, which was sent to institutional bodies on Thursday and reviewed by Calcalist, Israel will provide a budget of up to NIS 2 billion (approximately $565 million), with each institutional investor eligible for protection on investments amounting to a minimum of NIS 150 million and a maximum of NIS 300 million (approximately $42.4 million-$85 million)
The draft was sent to some 20 institutional bodies for comment ahead of its planned approval by the end of May. The six to 12 bodies that will be eligible for protection will be selected in a tender in June and can start investing under the program’s protection in July.
According to the draft, the plan has two main objectives: to assist startup companies that are struggling financially by encouraging investments from institutional bodies and to support institutional bodies establishing a tech investment portfolio.
An institutional body chosen for the program will receive protection on the value of its investment in one of two ways: 50% put option protection of the total nominal investment in Israeli tech companies using customer funds and 30% put option protection for investments using non-customer funds.
The protection will be offered for investments made over an 18-month period following an institutional body’s acceptance for the program. The protected investments will be managed by the institutional body for a period of eight and a half years: 18 months of investment and an additional seven-year holding period.
Should the investment appreciate in value by the end of the program, the institutional body will be required to repay IIA, the government’s tech investment arm, 20% of the difference between the investment yield and the government bond’s yield for investments using customer funds and 10% for investments using non-customer funds.