Yozma 2.0

Request for Proposals to invest in Yozma 2.0 Fund by Israeli institutional investors

Open Date:

18/04/2024

Deadline for Submission:

27/06/2024

Time zone:

Israel

Summary:

The Yozma Fund 2.0, a new program aimed at encouraging investments by institutional entities in Israeli venture capital funds that support Israeli companies. The fund targets institutional investors such as insurance companies, pension funds, and provident funds, providing them with a unique mechanism to enhance returns on their investments in Israeli venture capital funds over the next 20 months.

The Israel Innovation Authority will provide additional funding to the institutional investors, with a return-increasing incentive, similar to the historic “Yozma” program of the 1990s.

The program’s budget, $154M, is intended to incentivize investments at a scope of $670M. It is dollar-based and was established in collaboration with the Ministry of Finance, and its budget will ensure a suitable financing environment for early-stage start-ups in the years to come, in synergy with the Startup Fund (Innovation Authority Program no. 7), which provides direct funding for Israeli high-tech companies.

Program Description

  • For each $1 invested by an institutional investor in a VC fund, the Israel Innovation Authority will add $0.3
  • Maximal investment limit for institutional investor – $200M (representing $46M in state funds + $154M of the institutional investors’ funds)
  • At a date of the institutional investor’s choosing, the investor may buy out the State’s share
    • In the first 4 years from the date of investment in the VC fund, the institutional investor may buy out the State’s share with a 1% compound annual interest (retroactive from the first date of investment in the VC fund);
    • After the first 4 years, the institutional investor may buy out the State’s share with a 5% compound annual interest (retroactive from the first date of investment in the VC fund);
  • If the fund has a negative IRR– the Israel Innovation Authority will bear the loss along with the institutional investor, at a relative rate to its share of the investment. Investments are possible in venture capital funds as they are defined in paragraph (9) of the first addendum to the Securities Law, 5728-1968. An Israeli venture capital, as defined in the Program’s (benefit track or incentive program ?) instructions, will entitle the institutional investor to benefits. Such a VC fund must meet the following conditions:
    • Over 70% of the funds the VC is investing, at the time of account settling (which the institutional investor chooses), are invested in Israeli high-tech companies (companies with 12% of their expenses being R&D expenses in Israel, and additionally, companies that are incorporated in Israel or with at least 70% of their R&D expenses in Israel)
    • The funds raised overall by the VC fund do not exceed the sum of $200M.

Compliance with the Program’s terms will be examined at the account settling stage. The institutional investor must present accountant confirmations as required in the Program’s procedures.

  • Investment scope:
    • Maximal investment by a single institutional investor in a single Israeli VC is $7.5M by the Israel Innovation Authority and $25M by the institutional investor ($32.5M institutional investor and Authority);
    • Maximal investment in a single Israeli VC, if there are several institutional investors who invest within the Program, is $18M by the Israel Innovation Authority and $60M by the institutional investors ($78M institutional investors and Authority).
  • Execution period:
    • Institutional investors will be given an 18-months’ period (from the date of phase 1 deadline) to sign an investment commitment with the VCfunds;
    • Institutional investors will be given the option to request two extensions of up to 12 months each;

Criteria

  • This is a “green lane” program, meaning that any institutional investor can apply for and receive funding;
  • If demand by institutional investors is higher than the budget allocated for the Program ($154M), an equal percentage will be deducted across the board from all applying entities.

Application Process