Record year for private investment in incubators

February 22, 2006 07:25

The incubator program assists entrepreneurs in developing their technology ideas and making the transition to start-up companies.

2 minute read.

pie chart 88 298

pie chart 88 298. (photo credit: Ministry of Industry, Trade and Labor)

Graduate companies from the government's incubator program raised $175 million from the private sector in 2005, marking the program's most successful year to date, the Ministry of Industry, Trade and Labor said Tuesday. Of the 112 companies that raised the money, 54 received their first investments in 2005. "We are now seeing the fruits of the investments we made during the hi-tech crisis years," Rina Pridor, founder and manager of the program said. "At a time when private investors froze their funding of seed stage projects, we continued and even increased our activities, which enabled us to now present a very impressive portfolio of companies." The incubator program assists entrepreneurs in developing their technology ideas and making the transition to start-up companies. Chief Scientist Eli Ofir said the success in 2005 shows that the incubator system has become the number one producer of start-up companies in Israel. Indeed, the Israeli model has been lauded as one of the most successful in the world. "Israel has a unique framework with tremendous potential," said Steve Rhodes, general manager of the Misgav Technology Center, an incubator that hosts nine projects and has four pending approval from the Chief Scientist. "It does not guarantee success however, and very much depends on how the management uses the system." Rhodes added that the last two years have seen better quality ideas entering the system and more motivated management working towards the success of their programs. The government invested $30m. in the incubator program last year through the budget of the Chief Scientist's office and Pridor expects the program to receive roughly the same budget this year. Entrepreneurs wishing to join the program first apply to the desired incubator for approval, and subsequently are forwarded to the Office of the Chief Scientist to meet its requirements. On approval, the project receives funding from the incubator and the government, is given premises, assistance in setting up its R&D activity, and professional and administrative services for a two-year period (three for life science projects). After the two or three years, the project needs to show a level of financial independence by gaining funds from outside sources such as venture capital firms and corporate investors. Unsuccessful companies leave the program with no payback commitment to the government. Pridor said over 60% of companies that completed their two-years in 2005, successfully graduated from the program. There are currently 24 incubators in Israel and 62 new projects entered the system in 2005. Of the total projects in the system in 2005, 37% were in the medical device sector; 23% in biotechnology; 14% in programming; 10% in communications; and 8% in electronics.

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