An Interim Progress Report of the

Technological Incubator Projects in Israel

By Rina Pridor

Program Manager Technological Incubators

The first technological incubators were established in 1991 as support organizations that gave fledgling entrepreneurs an opportunity to develop their innovative technological ideas and set up new businesses in order to commercialize them. The incubator program is now applied in all parts of the country, under the guidance and with the support of the Office of the Chief Scientist of the Ministry of Industry and Trade.

The Chief Scientist Office of Israel (CSO) budgets approximates $30 million annually for technological incubators that provides support for entrepreneurs and offers them an opportunity to develop their innovative technological ideas and set up new businesses. The program supports novice entrepreneurs at the earliest stage of technological entrepreneurship and helps them implement their ideas by turning them into exportable commercial products and forming productive business ventures in Israel.

There are no predetermined fields of specialization at the incubators. Some incubators – especially those located near research institutes – prefer projects that can benefit from the technological infrastructures available to them. Some of the incubators are gradually becoming more specialized, after several projects in a shared discipline have matured there.

The following summary contains information relating to the Technology Incubators Program over the last few years:

1. State support

The CSO provides a grant of up to NIS 598,000 (about U.S. $150,000) per year for up to two years, i.e. a total of about $300,000. The level of the grant is based on up to 85% of the project’s approved budget. Since establishing the technology incubators program, the government has invested nearly NIS 600 million (approximately $150 million) in the program.

2. Incubator projects

The following table shows the breakdown of Technological Incubator graduates through 1998. The percentages apply to the total number of incubator graduates - 476.

Company stage	Number of companies	Percentage of total
Total Incubator Graduates	476	100%
Continuing entity	239	51%
Self-generated funding	51	11%
Received Outside investment	188	40%
Ceased functioning	237	49%
During Incubation period	46	10%
Following incubation period	191	39%

3. Post-incubator outside investments

As shown in the table above, 188 companies have continued to attract outside investments following their incubation period. In 1998 alone, $90 million were invested in companies that completed the technological incubator phase. The total accumulated investments in incubator graduate companies, from its beginning up to the end of 1998, amounted to $202 million.

The table below presents a breakdown of the additional investments according to financing rounds and the average amount invested in each company during the respective round.

Post-Incubator Investments
Financing Round	Number of Companies	Total investment	Average investment
First round	188	$74,606,000	$396,840
Second round	67	$73,219,000	$1,092,821
Third round	14	$39,194,000	$2,799,571
Fourth round	1	$15,000,000	$15,000,000
Total	270	$202,019,000	$748,219

A breakdown of the amount invested by outside sources in the incubator program companies is presented in the following table.

Range of Investment	Number of investments	Percentage of Investments
0 - $100,000	38	20%
$100,001 - $300,000	60	32%
$300,001 - $1,000,000	40	21%
$1,000,001 - $3,000,000	34	18%
$3,000,001 - $25,000,000	16	9%
Total	188	100%

The table below shows the geographic breakdown of follow-on investors in the incubator companies.

Investors by Country
Israel*	76%
U.S.	15%
Other	9%

  Note – A significant amount of the money invested is from VCs and
external investors. 

4. Sales

In 1998, the combined sales of all companies that completed the technological incubator phase amounted to $24.2 million. The accumulated sales of the incubator graduate companies amounts to $64 million.

A total of 110 companies have reached sales figures of varying amounts. A breakdown of the range of companies’ accumulated sales is provided in the following table:

Total company sales	Number of Companies	Percentage of Companies
$0 - $50,000	39	35%
$50,001 - $100,000	16	15%
$100,001 - $500,000	30	27%
$500,001 - $5,000,000	25	23%
Total	110	100%

5. Incubator companies

The following companies are just a sample of the most promising of the technological incubator projects that have evolved into thriving and successful businesses.

Compugen

Compugen Ltd., a leading provider of computational technologies for the life sciences, develops bioinformatics solutions that enhance the ability of pharmaceutical and biotech teams to extract meaningful information from genomic and protein sequence data, and accelerate the discovery of new drug leads. The company supplies hardware and software products to facilitate analysis.

Nanomotion

Nanomotion is engaged in developing, manufacturing and marketing electronic motors which are compact in size, offer extremely accurate and precise movement coupled with remarkable speed and force. Nanomotion has developed a series of unique electronic motors that have no moving parts and have no external or intrinsic magnetic fields. Motion is achieved as a result of oscillating ceramic elements, which are driven and controlled electronically.

Pro-Laser

Pro-Laser Ltd. is a hi-tech company operating in the field of quality control and measurement for different types of lenses, spectacle lenses and contact lenses. Founded in 1995 by a group of Israeli physicists and engineers, Pro-Laser develops, manufactures, and markets electro-optical measuring and quality control systems. In the lens industry over 20% of the product cost consist of quality control. The company’s inspection systems operate at major lens manufacturers around the world including: Essilor, Sola, Transitions, Polycore, Seiko and others.

In December of 1998, Pro-Laser issued its shares in an initial public offering on the Euro.NM Belgium public stock exchange.