Israel stands as a global hub for innovation, offering a thriving environment for investors, multinational corporations and entrepreneurs alike. With world-class governmental incentives and a robust economy, Israel is one of the most attractive places to invest in cutting-edge technologies. Whether you’re looking to invest in transformative innovations or seeking strategic investment opportunities, the Israel Innovation Authority is here to connect you with pioneering companies that are shaping the future.
The Israel Innovation Authority offers a competitive investment environment by de-risking private sector investment through government-backed non-dilutive investments, from ideation through pre-seed, seed and A rounds. This guide is aimed at simplifying and making it easier for you to understand the main commitments regarding the IIA investment and the calculation of the payment amount to the Innovation Authority in the event of knowledge transfer abroad.
Conditional Royalties:
Startups selected by the IIA investment committee receive a non-dilutive conditional grant, which is repaid only once the company generates revenue from the IIA-funded project. Repayment is made through royalties of 3%-5% of annual revenues, continuing until the repayment of the full grant amount, plus annual interest (based on SOFR). The baseline for receiving a grant form IIA is that the funded R&D is done in Israel.
Sale/Transfer of Funded Know-How Outside of Israel
The sale or transfer of know-how outside of Israel is subject to repayment and IIA’s approval. The repayment is determined by a formula that takes into account the grant, the sale price and R&D expenses, minus the royalties paid (see the formula below)*. In any case, the minimum repayment will equal the total amount of the IIA investment + annual interest, minus the royalties paid.
- Repayment Cap: The repayment for the transfer of know-how outside of Israel is capped and will not exceed x6 the grants + interest. If the acquiring company commits to keep the company’s R&D jobs in Israel for at least three years, the repayment amount will not exceed three times (3X) the grants + interest.
Global Opportunities
- Enabling Global Business Opportunities – Non-Exclusive IP Licensing: The repayment of IP licensing is paid (back to back) from the license’s revenues at a rate of the grant divided by the related R&D expenses. The repayment shall not exceed x6 the grants + interest.
- Global R&D Efforts – Licensing Flexibility: MNCs (Multinational Companies) may license their IIA funded know-how within the MNC outside of Israel (subject to the IIAs approval) and pay royalties of 5% of the funded company’s license revenues up to x1.5 + interest.
Between 2005-2024, the median start-ups repayment to the Israel Innovation Authority for transfer of funded know-how outside of Israel was less than x1.5
* Only the original Hebrew text published on the Israel Innovation Authority Hebrew website would be valid legally
For further information please contact:
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