Start-ups worry about funding cuts

Finance Ministry announces 15% cut in funds which go to research and development grants and to the Technological Incubator Program.

start up 88 (photo credit: Azri Samin)
start up 88
(photo credit: Azri Samin)
Cuts announced this week at the Office of the Chief Scientist have some in the start-up community worried that projects already underway in the country's Technological Incubator Program, may be harmed. "There are a lot of projects in process and a budget cut could negatively impact them," said Doron Sherf, new projects director of the Mofet B'Yehuda Innovation Accelerator. The Ministry of Finance announced Monday a 15 percent decrease in funds for the Chief Scientist, which goes to research and development grants and to the Technological Incubator Program. The incubator program has been reduced from NIS 147 million in 2006 to NIS 135m. this year, according to Rina Pridor, director of the Technological Incubator Program. "Everything is going to a bit a more stringent," said Brenda Zeitlin, business development manager of Targetech Innovation Center, a private incubator that operates partly through loans from the government. There likely will be a stricter screening process, Zeitlin said, but companies won't be deterred because "when they need the funding, they'll look everywhere." Mofet B'Yehuda in Kiryat Arba and Targetech in Netanya are two of 24 government-sanctioned technological incubators, which were set up in the 1990s as a way to help Russian immigrants with engineering and hi-tech backgrounds bring their ideas to fruition. The centers assist entrepreneurs, researchers and scientists develop and bring new products to market by providing legal and financial consultation, as well as providing lab space and manpower. Sherf and other start-up veterans spoke to a group of more than 40 new immigrants at the beginning of the week about how to develop a start-up in Israel. Co-hosted by Nefesh B'Nefesh, the first-ever seminar advised around 40 English-speakers on legal considerations, government funding, research and development tips and bringing a product to the global market. The first step is to follow market trends and become an expert in the industry, advised Mofet B'Yehuda Business Development Director Hillel Lerman, and be willing to react accordingly. "A successful company can change course during development according to market trends," Lerman said. "You need to prove the technological and commercial concepts," said Jeremy Kagan, CEO of eBIZ.mobility, "and take money from where you can." Kagan took his idea to bat at the Office of the Chief Scientist to secure pre-seed funding and was rejected at first, but after reworking the business plan to address potential weaknesses, he appealed the decision and received funding for research and development. After several years in the Mofet incubator, his company developed software that allows on-line purchases with different mobile devices, which differed from the original concept. "You learn and take feedback from the industry," Kagan said. Meanwhile, hi-tech lawyer Michael Teplow outlined some of the legal aspects of starting a business in Israel, advising that first a business structure such as creating a limited liability company be chosen; to never mix personal and company actions and to check the legal ramifications for every action taken. "You don't have to mortgage the whole farm for the company," Teplow said, suggesting that the best way was to find investors instead of using personal funds. The Office of the Chief Scientist initially provides nearly $50,000 for initial research, and also has funds for life sciences companies, as well as collaborations between organizations such as universities and research centers, Sherf noted. Companies that use the technology incubators can receive investments ranging from $350,000 to $600,000. There are also bi-national funds and bilateral programs for startups to take advantage of. Several participants came to the seminar prepared to take their ideas to bat, such as David Chernoguz, a biologist who made aliya in 2004. Chernoguz said he already has a partner for his feed-forward performance management software product, SD-Sensor, and is now looking to develop it further. "It's really hard to break into this tough world, no matter how brilliant you are," Chernoguz said.