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joint venture (“JV”) of common interest. The OCS provides financing to the JV equal
to 20%-50% of the R&D budget approved by it. In addition, the MNC provides in-kind
resources and support to the Israeli company in the form of consultation and services.
As part of the JV, the companies enter into an agreement regarding the ownership and
licensing of intellectual property developed during the JV. Such intellectual property
may be solely owned by the Israeli company or jointly owned by the Israeli company
and the MNC. The Israeli company may also provide the MNC with a non-exclusive
license to the intellectual property. The program features many leading MNCs - such
as Infosys, DuPont, Microsoft, P&G, Cisco, General Electric, IBM and Intel.
Technological Incubator Program
The purpose of the incubator program is to promote innovative, early-stage start-ups.
The OCS, by way of the incubators, provides significant amounts of governmental
financing for Israeli start-ups in dire need of funding. As part of the program,
Israeli companies enter an incubator for a period which typically lasts between 18
and 24 months, during which they receive funding ranging approximately between
US$520,000 and US$770,000. As part of the program, the OCS provides funding for
85% of the R&D budget approved by it. The incubator itself must invest the balance
of such R&D budget and must also provide each project with business development
and marketing services, office space and infrastructure and various other support
services. In exchange for its investment and support, the programmandates that each
incubator receive between 20%-50% of the equity of each incubator company.
In order to ensure that the local economy benefits from any success OCS-backed
companies achieve, the State of Israel has attached several “strings” to its funding.
Firstly, each project is obligated to repay the government-provided funds back to the
State of Israel in the form of royalties from income. Additionally, there are limitations
on the transfer outside of Israel of knowhow resulting from the R&D conducted
by the OCS-funded projects and any products resulting from such must generally
be manufactured inside Israel. However, recognizing the importance of foreign
investments and the challenges of globalization, these restrictions are typically lifted
in exchange for increased repayments to the OCS.
The recent trends in the Israeli high-tech sector strengthen its growth prospects and
we believe that the combination of experienced entrepreneurs, increased late-stage
funding and a bigger influx of foreign investors will serve as a significant catalyst in the
near future and contribute to sustained long-term growth in the Israeli market.
While, at times, it has remained generally unknown to foreign investors - one of
the key catalysts to the Israeli high-tech success story is the Israeli government
itself, through the work of the OCS.