Israel Innovation Authority

The Israel Innovation Authority describes itself as an independent statutory authority whose purpose is to promote innovation as a lever for inclusive and sustainable economic growth.[2] Its stated mission encompasses preserving Israel's technological leadership and entrepreneurial culture, increasing the economic value they generate, contributing to output and exports, creating quality employment, and helping maintain Israel's position in global innovation.[2]

The Authority formulates innovation policy and implements it through support tracks and funding tools.[2] It advises the government and Knesset committees on innovation policy, monitors technological-innovation developments in Israel and abroad, and builds cooperation with counterpart authorities in other countries.[2] It is the leading government agency for innovation and technology support in Israel. Government agencies led by it fund incubators for early-stage technology startups and support new ideas and technologies, while Israel also develops traditional industries.[1]

The Authority's institutional roots include the Office of the Chief Scientist, established in 1965 to support government-led research and development. Its mandate expanded to industrial R&D in 1974, while a broader industrial policy developed during the 1970s around the view that Israeli firms could not bear the financial risks of advanced R&D alone.[5][6] The Office received powers and a budget to implement a coordinated national technology policy.[5]

The legal framework under which the Authority operates was set in place by the Law for the Encouragement of Industrial Research and Development, passed in 1984.[3] The Authority traces this law to national tasks of the era, including absorbing mass immigration and addressing an economic crisis.[2] Five policy responses were developed for knowledge-rich industry: support for competitive R&D, initiative funds to create a venture-capital market, incubators to generate innovative ventures, academia-industry collaboration through Magnet programs, and opening international markets to Israeli companies.[2]

A landmark of that earlier period was the $100 million Initiative Program, a government investment fund designed to encourage Israeli companies to operate in a high-risk technological environment.[3] It inspired private funds using a similar approach and helped forge the relationships among scientists, entrepreneurs, and foreign investors that proved important to advancing the Israeli economy.[3]

In 2014, the government announced a reform centered on creating a statutory National Authority for Technological Innovation under the Office of the Chief Scientist, with operations planned for 2016.[7] The proposal envisioned grants, equity investment, guarantees, and loans as support tools, and specified a board with government and industry representatives.[7] The Manufacturers Association's CEO warned at the time that the proposed approach could direct funds away from developing industry inside Israel.[7]

In early 2016, the Office of the Chief Scientist became an independent authority — the National Authority for Technological Innovation — under Amendment No. 7 to the Law on the Encouragement of Research, Development and Technological Innovation in Industry.[4] The establishing law had been authorized by the Knesset in August 2015, and the Authority commenced full operation at the beginning of 2017.[4] It replaced both the Office of the Chief Scientist in the Ministry of Economy and a government association known as the Israel Research and Development Center.[4] Aharon Aharon was appointed to lead it at its inception.[6]

Statutory independence placed approval of work-plan changes with an independent board rather than the government and the Ministry of Economy's director general, shortening procedures and helping the Authority update support programs for startups and entrepreneurs in both central Israel and the periphery.[8] Former chair Ami Appelbaum argued that this separation from political decision-making was important, while also criticizing political involvement in appointments and the Authority's transfer between ministries — assessments he offered as his own perspective.[8]

The 1984 law assigns the Authority responsibility for encouraging, advancing, supporting, and assisting technological innovation in industry and developing the infrastructure needed for it.[3] The assistance it may provide includes grants, loans, exemptions, discounts, tax breaks, guarantees, and other forms of support, but explicitly not the acquisition of company stock.[3]

The Authority must act in accordance with government decisions concerning it and, when no such decision applies, according to the policy of the Minister of Innovation, Science, and Technology.[3] Its benefit tracks are distinct from laws enacted by the Knesset: they are subject to government decisions, funded from the Authority's or ministries' budgets, and can be changed or cancelled.[3]

One objective of the 2015–2016 legal reform was to let the Authority's council set the terms of different benefit paths, allowing more flexibility in grant conditions.[2] Under the previous system, terms such as royalty obligations and limits on transferring knowledge abroad were set by law or regulation, requiring legislative amendments to change.[2] A 2005 amendment had already allowed knowledge to be taken abroad in exchange for replacement knowledge transferred to Israel, illustrating the evolving framework.[2]

The Authority provides research-and-development and startup investment subsidies by matching private investment in Israeli startups with preferential loans.[1] Companies repay those loans from eventual royalties on favorable terms, and repayment rates are more generous for firms that keep their intellectual property in Israel.[1] The Authority also frequently engages with multinational corporations through dedicated investment-promotion tracks.[1]

In its startup operations, the Authority supports incubator programs, international partnerships, and technology-implementation projects.[6] A 2018 foundation report described a workforce of approximately 120 employees and roughly 180 technological evaluators who assessed applications and advised research committees.[4] Four new support programs were authorized at that stage: Innovation Laboratories, a Biotechnology Incubator, Coding Bootcamps, and a program for multinational corporations' R&D centers.[4]

In 2019, the Start-Up Division supported 340 early-stage startup projects with NIS 430 million, an average grant of NIS 1.3 million per startup, while the Growth Division provided NIS 580 million that year — including NIS 355 million through the R&D Fund, NIS 100 million through the Pilots Program, and NIS 30 million for multinational companies' R&D centers.[9]

In 2021, the Authority invited corporations and capital funds to propose operating three technology incubators focused on high-risk fields including bio-convergence, foodtech, agtech, and climate tech.[10] Selected operators could run incubators for up to five years, with an option for three more; Authority grants could cover 85% of approved budgets, and operators could receive up to NIS 2 million for central-laboratory equipment.[10] The Authority's 2020 budget was approximately NIS 2.25 billion, and it distributed grants to 1,600 startups across technology sectors and product-development stages that year.[10]

A January 2024 planned reform envisioned shifting from the Authority's R&D Fund, then worth approximately NIS 600 million, toward a Startup Fund intended to invest alongside venture-capital funds from concept through Series A.[11] The new fund could provide up to 60% of a financing round, with a maximum of NIS 15 million per startup, and would receive royalty rights rather than shares.[11] NIS 160 million was to be added annually, with the fund expected to reach approximately NIS 500 million over coming years.[11]

With special government funding in 2024, the Authority launched the Fast Track emergency program involving more than NIS 400 million, a Startup Fund with investment volume of around NIS 500 million, and Yozma Fund 2.0 totaling approximately NIS 600 million expected to leverage around NIS 2 billion from Israeli institutional funds.[12] The Venture Creation Incubators program was updated with approximately NIS 150 million.[12]

In 2017 and 2018, the Authority's annual budget was reported at NIS 1.6 billion (more than $450 million), representing approximately 3.6% of Israel's total civilian R&D expenditure of NIS 57.8 billion in 2017 — down sharply from roughly 25% of such expenditure about two decades earlier.[6][13] By 2020, the budget had grown to approximately NIS 2.25 billion.[10]

Between 2022 and 2024, Israeli startups received NIS 2.1 billion in grants from the Authority — roughly half of its total grant funding during that period.[14] Semiconductor companies received the highest level of government support over the same span.[14] The Authority's 2022 report cited $27 billion in capital raised, 40 Israeli firms valued above $1 billion, and 75 Israeli companies that had gone public.[5]

SAPIR Journal argues that the Authority's annual budget of approximately NIS 2 billion has not been substantially raised in the last decade, and that the percentage of Israel's R&D funding coming from the government is the lowest in the OECD — a situation it characterizes as placing an unsustainable burden on private-sector investment alone.[15]

The Authority's official pages describe its operations through several divisions, though different documents reflect different organizational snapshots over time. One overview lists five operational divisions: Innovation Infrastructure, supporting research infrastructure, breakthrough technologies, and bridges between academia; Startup, helping entrepreneurs develop early technological ideas into products; Growth and Advanced Manufacturing, supporting company growth through innovation and social-purpose solutions; International Collaborations, financing R&D partnerships with foreign companies; and ISERD, supporting Israeli participation in European Union research and development framework programs.[2]

Another organizational overview identifies six primary divisions — Startup, Technological Infrastructure, International Collaboration, Societal Challenges, and separate Growth and Advanced Manufacturing units.[16] The Startup Division is described as supporting pre-seed and initial R&D stages; the Technological Infrastructure Division as supporting applied R&D, academic research, technology transfer, and dual-use technologies; and the Societal Challenges Division as using technological innovation to improve public services, social welfare, and quality of life.[16]

After Hamas's terrorist attack on October 7, 2023, and the outbreak of war, the Authority launched an emergency grant program for early-stage companies with no more than six months of operating cash remaining.[1][17] Applicants were required to secure an equal amount from private investors. The initial NIS 100 million allocation was expanded to NIS 400 million; 700 startups applied and 172 received grants, according to Authority data.[17]

Authority vice president Kerem Nevo characterized the program as an emergency measure rather than a growth program, saying the grants could extend a startup's life by three to four months, with the matching-fund requirement designed to encourage continued private investment.[17] The Authority's 2024 report described high-tech as relying heavily on foreign investment and lacking a significant local safety net, recommending a multi-year government investment plan, investment in quality education across population groups and regions, and support for later-stage companies and international collaborations in technology manufacturing.[12]

The Authority serves as a central node in Israel's bilateral science and technology agreements. Under 22 U.S.C. § 8607, a designated U.S. State Department Coordinator for U.S.–Israel research and development may oversee civilian science and technology programs jointly with Israel in coordination with the Authority.[18] The Authority, the BARD Foundation, and Israel's Ministry of Finance are cooperating on a multi-year program to fund food and nutrition research.[19]

The Authority is a partner in the BIRD Foundation cooperation agreement implementing BIRD Energy, which supports joint U.S.-Israel clean-energy technology development; projects are evaluated by expert reviewers appointed by the Authority, the U.S. National Institute of Standards and Technology, and the U.S. Department of Commerce.[20] The Authority also co-established a U.S.-Israel Center of Excellence for Energy, Engineering and Water Technology with the U.S. Department of Energy and Israel's Ministry of Energy.[20] In 2020, a project led by Northwestern University and BGN Technologies received $9.2 million in public grants over five years from those three partners, part of a $21.4 million budget to develop technologies addressing global water challenges.[20]

New York State's energy authority and the Israel Innovation Authority signed a Memorandum of Understanding in 2018 to support bilateral collaboration on clean-energy projects.[21] A UK-Israel AI collaboration announced in February 2026 included a £20 million framework for joint academic and R&D initiatives, with business-led projects backed by Innovate UK and the Authority; the collaboration also included an AI Drug Discovery Taskforce bringing together pharmaceutical companies, start-ups, universities, hospitals, and government agencies.[22]

Following NVIDIA's 2025 announcement of a planned R&D campus in Kiryat Tivon, Authority executive Shlomi Kofman said the project would position Israel "at the core of AI solutions" and have a "huge and long-term impact" on the economy and education in northern Israel.[23]

The Authority funds high-tech training for disadvantaged populations as part of its mandate to create quality employment across Israeli society.[24] It awarded grants to the Jerusalem College of Technology to train up to 90 male and female ultra-Orthodox cyber experts, with the stated aim of supporting Israel's cybersecurity sector.[24] The Authority also identified a growing shortage of skilled development workers, which its 2022 report connected to the transfer of R&D activity abroad and a weakening of Israel's innovation potential.[5]

Several aspects of the Authority's model have drawn analytical scrutiny. The INSS argues that the Authority's method of financing risks for entrepreneurs in expectation of economic growth can encourage companies to seek an "exit" — a purchase by a larger, often foreign, company — and that the effects of such acquisitions vary: some leave development centers and employment in Israel, while in others workers and assets move abroad over time.[3] These are the Institute's own assessments of the model's consequences rather than uncontested findings.

Former Authority chair Ami Appelbaum publicly criticized political involvement in board appointments and the Authority's transfer between government ministries, arguing that its statutory independence from political decision-making was essential to its effectiveness.[8] His statements represent his personal perspective.

Budget estimates for 2024 varied, with the Finance Ministry describing an annual total of approximately NIS 2.3–2.4 billion while market sources expected approximately NIS 1.7 billion.[11]