The Israel Ministry of Finance and the the ministry of Industry, Trade and Labor have launched a new incentive program to attract institutional investment to funds who focus on Israel’s knowledge-intensive industries. The program aims to alleviate the need for liquidity as Israeli VCs struggle to raise follow on funds and is expected to to increase the volume of investments in venture capital funds by by NIS 800 million in 2011-2012 (around $200 million).
According to the program, the state will participate in the risks associated with the institutional investment. An International institution that commits to invest in Israeli VCs, will get matching of up to 25% of their investment by the state of Israel. The total amount allocated to the program by the government is NIS 200 million ($50 million).
This is a good effort on part of the government, and many in the Israeli venture capital industry in Israel would agree that the government needed to step up. But is it ‘too little too late’?
The quote from Dr. Eli Opper, the outgoing Chief Scientist of the Ministry of Industry, Trade, and Labor, says a lot:
“The background for the program is the global financing crisis and the difficulties encountered by companies in raising investments to fund research and development. Its success will contribute greatly to maintaining Israel’s relative advantage and strengthening its positioning as a global leader in technological innovation.”
Israeli companies are struggling and the industry as a whole is having a hard time maintaining a relative advantage. Telecom was the growth driver for Israel in the 90’s but what is our next horizon?
Ministry of Finance Director General Mr. Haim Shani commented:
“The high-techindustries are an essential strategic asset and a source of pride for the Israeli economy. An important part of the program is being launched today, aimed at increasing Israeli institutional entities’ involvement in investments in the Israeli venture-capital industry.”
If high-tech is such a tremendous source of pride (and it is), the government needs to do more to ensure that it remains that way. Michael Eisenberg has a few ideas in his Hummus Manifesto.