Israeli Government Approves program to Promote Institutional Investment in Advanced-Stage Israeli High-Tech Companies
The program will provide a state guarantee for equity portfolios invested by institutional investors in high-tech companies with advanced-stage funding. This guarantee will be provided for investments made within 18 months after the program’s introduction. The Israeli Finance Minister will hold a special meeting with the Israel Ministry of Economy and Industry, as well as other relevant entities, to ensure the program’s success.
The institutional investment program, approved by the Israel Finance Ministry, Israel Ministry of Economy and Industry, the Capital Market Authority, the Israel Securities Authority and the Israel Innovation Authority, was finalized in consultation with leading entities in Israeli industry and academia. The program has two main goals: assisting companies facing financial duress to improve their situation by attracting investments from Israeli investors; and providing incentives for institutional investors which invest in the high-tech sector. The financial model at the heart of the program was created in collaboration with Prof. Zvi Wiener, Professor of Finance and Dean of the Jerusalem School of Business Administration at the Hebrew University of Jerusalem.
As a sign of the program’s significance for the high-tech sector, the diversification of institutional investors’ portfolios, and the value provided to the general public, the Israeli Finance and Economy Ministers will meet with relevant entities to ensure the program’s success.
The program is a central element of a broader financial plan to help the business sector cope with the current financial crisis. The support program being offered to the high-tech sector also includes dedicated grants provided via the Israel Innovation Authority.
More information about the program:
- An institutional investor approved in the program will be entitled to an investment yield guarantee of 40% on its nominal investments in Israeli high-tech companies in the event that its portfolio depreciates.
- In the event of appreciation at the end of the program, the institutional investor will transfer 10% of the difference between the return on the portfolio and the return on the government bonds for the duration of the portfolio to the Israeli Innovation Authority, taking into consideration transaction and management expenses.
- The portfolio will be managed by the institutional investor for an investment period of 8.5 years (18 investment months + 7 holding years), similar to industry practices. As part of that, a state guarantee will be provided to investments made during the first 18 months of the program’s operation.
Israel Katz, Israeli Finance Minister : “It is critical to strengthen the growth engines of the Israeli economy – especially now. I applaud the collaboration between the Finance Ministry, Ministry of Economy and Industry, the Israel Innovation Authority, the Capital Market Authority and the Securities Authority, for creating a platform for institutional investors to invest in the high-tech sector. This will help strengthen research and development in technological companies and create additional jobs in this sector.”
Amir Peretz, Israeli Minister of Economy and Industry: “This is one more program designed to meet the challenges posed by the corona crisis. High-tech is the growth engine driving Israeli industry. Strengthening the high-tech industry will build up the economy and local employment, as together they complement one another, creating a “humane economy.” The purpose of this program is to incentivize institutional investors to invest in high-tech, as part of a larger government plan to provide financial support to the high-tech sector following the coronavirus crisis. I applaud this important collaboration between the Finance Ministry, the Israel Innovation Authority and the Capital Market Authority.
The program, which will be overseen by the Israel Innovation Authority, is expected to infuse the high-tech sector with an additional 2 billion NIS, constituting a significant part of the financial aid provided by the state to Israeli industry in order to withstand this crisis.
In addition, the program provides guarantees for invested funds which will prevent losses and ensure that this investment in the high-tech sector – which has enjoyed significant growth of late – will bring substantial yields to pension funds – and all of our savings.”
Aharon Aharon, CEO of the Israel Innovation Authority: “The collaboration between the Innovation Authority, the Capital Market Authority, the Securities Authority, and the Ministry of Finance, will expedite the specialization of the Israeli capital market in technology sector investments, and will play a significant role in the growth of Israeli high-tech, bringing the Israeli capital market into the next technological era. Israeli investments in Israeli industry are key to the growth of the high-tech sector and to building large-scale Israeli high-tech companies, which employ a wide variety of high-earning employees in various professions. We need to focus our efforts during this difficult period on steps that will reinforce Israel’s high-tech engine and leverage it to help pull the entire economy out of the financial crisis, while significantly expanding the quality employment opportunities the sector offers.”
Dr. Moshe Bareket, Supervisor of the Capital Market, Insurance and Saving Authority,: “All citizens with savings deserve to benefit from the success of Israeli high-tech, provided that investments are made in a judicious, sensible manner. The significant level of risk-protection provided by the state to savings investments as part of the program, coupled with the program’s extensive screening process, provide ample protection against the risks and a potentially significant upside from the success of high-tech investments. It is important to emphasize that according to the terms of the program, the target companies are mature companies which have already raised tens of millions of shekels. In any event, every such investment is at the full discretion of the managing institutional investor, who should properly examine and analyze each and every investment.”
Anat Guetta, Chairperson of the Israeli Securities Authority: “We have bolstered the connection between the local capital market and Israeli high-tech for two years – this is a strategic and natural connection. We have put this connection on the Authority’s agenda, aiming to create substantial value for Israeli citizens and for industries at the forefront of the Israeli economy. This decision is a significant step on the way to realizing the vision that we have outlined together with other steps that include making the capital market accessible to high-tech by approving a new platform to raise capital and credit and creating specialization for investments in technologies. I applaud this collaboration and am confident that together, we will be able to create a holistic solution that will produce the desired outcomes.”