The Israel Innovation Authority is launching a new program to invest in venture capital funds that specialize in Israeli deep-tech companies, as part of its Yozma Fund. The track aims to accelerate the fundraising process for Israeli venture capital funds and attract foreign funds to establish dedicated vehicles for investment in Israel. Experienced managing partners in the deep-tech sector who are interested in establishing new funds will also be eligible to apply.
The program will total approximately 250 million shekels (around $70 million) and will provide grants to help funds reach a “first close,” expand their capital base, and begin investing in companies developing advanced deep-tech products. These include sectors such as semiconductors, energy, climate, quantum computing, and healthcare.
The Authority will provide grants of up to 12.5% of the fund size, capped at $10 million per fund. These grants are designed to serve as leverage, increase the attractiveness of the funds, and create a matching effect that draws in additional investors. The funds, in turn, will increase the capital available for Israeli deep-tech startups and supply vital financing for research, development, and growth.
The Authority will not take equity in the companies themselves. However, in the event of returns, it will be entitled to up to 12.5% of the proceeds, proportional to its investment. At least 50% of each fund’s investments must be directed toward companies focused on tangible products or production processes, and at least 70% must be invested in Israeli companies or those conducting their primary R&D in Israel.
To qualify, funds must raise a minimum of $32 million, including $28 million in private capital and $4 million from the Authority. Each fund must reach a first close of 30% of its planned size within six months, though funds that meet this target within three months will receive eased terms. The grant may also be used to finance management fees, facilitating smoother operations in the early stages.
The Authority emphasized that the program is designed to increase returns for limited partners, as it will not take a share of profits. Instead, profits will be distributed among the other investors. Additionally, public investment from the Authority will serve as a “seal of quality,” signaling trust and helping fund managers attract further investment both domestically and internationally.
