Recently, the Israel Innovation Authority (the “IIA”) has been conducting surveys and holding discussions with representatives of the hi-tech and venture capital industries, in order to respond better to the needs of the Israeli hi-tech sector during Operation Swords of Iron.
In response to the data it has collected, the IIA has published a fast track for grant approval under the existing R&D Track (the “Fast Track”) in order to help innovative companies with a short runway.
The IIA has ear-marked NIS 400 million (around USD 102 million) for grants under the Fast Track. The Fast Track is a temporary solution for the current crisis and will be open for applications only until February 1, 2024. In many ways, this Fast Track is similar to the one published during the COVID-19 pandemic; companies which received grants under the COVID-19 Fast Track may find the application process to be familiar.
Under the Fast Track, the IIA will assist innovative technology companies which are in their R&D phase or close to the marketing stage. The current Fast Track (unlike the COVID-19 one) is not meant for companies in the seed or pre-seed stage.
The IIA funding is intended to provide an investment bridge for applicants which are experiencing difficulties in obtaining funding to cover their expenses in the current situation. The applicant must demonstrate that it has a good chance of surviving the crisis, while currently experiencing liquidity problems. i.e. a short runway of up to 6 months.
A company’s short runway will be calculated in the following manner: the sum of the current assets (less current liabilities) plus expected current receipts from income and investment/loans, plus unused line of credit is divided by the company’s monthly burn rate. The IIA provides an excel on its website to assist companies in performing these calculations.
Companies can apply for an IIA grant to cover 20%-50% of their R&D expenses of up to NIS 7,500,000 (approximately US $1,900,000) for a nine month project period. Companies located in peripheral areas of Israel are eligible for an additional 10% in support and companies located near the Gaza Strip are eligible for an additional 25% in support.
One of the main benefits under the Fast Track is that the IIA promises to address the applications quickly, with the Research Committee meeting once every two weeks and with final decisions promised within 4 weeks of the application.
Another important benefit is that the IIA will pay 50% of the approved grant amount as soon as the company can demonstrate that it has received the mandatory supplementary funding by its investors.
Companies are required to submit certain documents, including the following:
- The grant request form;
- The requested budget;
- List of bank accounts of the company together with balance confirmation as of the end of the month preceding the application submission date (“cut-off date”);
- Trial balance for the period January 2023 ending on the cut-off date;
- Trial balance for a period of three months ending on the cut-off date;
- Audited financial statements for 2022 or a trial balance for 2022, together with the last audited financial statement;
- ESNA reports for the year 2022 and for the period of January 2023 until the company’s last report to the VAT authorities;
- Any investment agreements being negotiated, including SAFEs;
- Cash flow projection; and
- Payroll reports
The regular obligations under the Encouragement of Research, Development and Technological Innovation Law and the R&D Track will apply to the grants under the Fast Track, including, without limitation, the obligation to repay the grant by means of royalties and the restrictions on transfer of know-how or manufacturing out of Israel. For more information please see:
Additionally, the IIA has published various leniencies for all IIA grants. The most significant ones include: extending the period for submitting clarifications during the application process, extending the period allowed for obtaining mandatory matching funding from 2 months to 5 months, extending the period for submission of periodic reports (while also allowing their more frequent submission when a company wishes to receive the IIA funding at a faster rate than once every three months), more flexibility in requests for changes in the approved terms of a grant, allowing zoom audits in certain situations and certain leniencies in connection with the payment of royalties.
For more information please see The following article >>
Please let us know if we can be of further assistance with respect to these or any other IIA-related matters. For further information, please contact Miriam Friedmann, miriamf@arnontl.com
