The Israel Innovation Authority and the Ministry of Economy and Industry have announced the founding of three new technology incubators in outlying regions. The incubators will host companies in the medical cannabis, cleantech, agritech, industry 4.0, and plastics sectors. The budget for the incubators, which will be located in Yeruham, Karmiel and the Bnei Shimon Regional Council (northern Negev), will be NIS 80 million.
The Innovation Authority, which has selected three franchise holders for the incubators, believes that the incubators will encourage the founding of 130 ventures during the franchise period with a budget of up to NIS 1 million per venture. The Innovation Authority said that entrepreneurs would benefit from support provided by the incubators and their shareholders in investments, experts in all of the value chain, strategic partners, and other investors in Israel and abroad, as well as from access to laboratories, production facilities, pilots, etc. Minister of Economy and Industry Eli Cohen believes that founding the centers will improve the state of the technology industry in the outlying areas and reduce migration to central Israel.
The tender is part of the changes being introduced by the Israel Innovation Authority in the incubators' activity to induce them to operate in close cooperation with parties in the region, such as factories, academic institutions, and local entrepreneurs. The Israel Innovation Authority realized that the incubators founded in outlying areas in the past were cut off from activity in the area, and the companies that operated in them therefore did not remain in the outlying areas. "Companies have to be founded that will stay in the outlying areas. For example, a media company founded in Katzrin will probably not stay there. On the other hand, there is a much better chance that a company in agriculture that works with local industry will remain in the area," Innovation Authority VP and startup division head Anya Eldan previously told "Globes."
Innovation Authority CEO Aharon Aharon told the press, "The entrepreneurship incubators will bring significant and essential added value for encouraging technological entrepreneurship in the outlying areas through activity with entrepreneurs and research institutions to make the their extensive network of connections and potential customers accessible and through their vast business and technological experience in bringing products to market. The entrepreneurship incubators are based on a strong partnership with concerns having supplementary capabilities: large industrial companies in the incubators' fields of activity, and concerns with experience in investing in startups."
The selection was made from 12 bids in a competitive proceeding. The host communities were not determined in advance; they were selected according to the winning bids. Three of the bids, one quarter of the total, were for activity in Yeruham. The franchise holders will benefit from the Israel Innovation Authority's support for five years, with an option for a three-year extension.
The incubator in Karmiel will deal in industry 4.0 - connecting industrial enterprises and buildings to the Internet in order to improve their activity. One example could be connecting machinery to the Internet, gathering information and data on its activity, and analyzing it in order to test its functioning. The shareholders in the incubator include Wipro Givon, Kusto (Tambour), Keter Plastic, Trellidor, Flying Cargo, and Klil Industries.
The incubator in the northern Negev, which will operate from the Idan Hanegev Industrial Park, will deal with cleantech, agritech, plastics, and advanced industry. Among the shareholders in the incubator are investment concerns Alpha Capital Holdings, Hatzerim, and industrial companies SodaStream, Raval ACS, Netafim, TAMI (Israel Chemicals), and Dolev. The third incubator, which will operative from Yeruham, will focus on medical cannabis. This incubator is based on a consortium consisting of an investment concern, the OurCrowd crowdfunding platform, pharmaceutical company Perrigo, and medical cannabis company BOL.
Yeruham Mayor Tal Ohana announced at a large conference in July, which attracted many people from government and industry, that she intended to make Yeruham the cannabis capital of Israel. She told "Globes" today, "The beginning was the crisis point when they notified us of that the Phoenicia Glass Works plant and the Emilia Cosmetics plant were closing down. I said, 'This is a great opportunity.' Soon after that, I got a call from a Russian oligarch who wanted to build a factory. I said, 'Drugs? We don't want that here,' but I sat down to read about it that evening, and I saw that there was a great opportunity here, so I started reading up about it."
At a conference just two months afterwards, Ohana met with leading companies in the sector, and offered them a package of benefits, including a 30% refund on the investment under the Law for the Encouragement of Capital Investment, 7.5% corporate tax, a $40,000 grant for each new employee, and an option for a large space in the area. She knew, however, that in order to create a complete ecosystem, a technological incubator was the best thing.
"I spoke with OurCrowd CEO Jon Medved, who is a patriot. I started the ball rolling with him. Then I contacted Perrigo and said, 'Excuse me, I know that you're a serious company, but you're our anchor here.' To my surprise, they agreed immediately to join as franchise holders, and also invested their money in the incubator."
Breath of Life (BOL) Pharma, the fourth member of the consortium, will be responsible for obtaining licenses for researching and growing cannabis for the incubator. Ohana says, "We have already prepared office and agricultural space and an extraction plant… Ministry of Health medical cannabis unit director Yuval Landschaft has been a partner with me in the venture from day one, and I think that the ministry won't put unnecessary obstacles in our way." The dream includes establishing a cannabis standards institute in Yeruham.
The incubator will deal with matters such as producing cannabis using biotechnology methods, developing cannabis-based drugs and medical devices for improving consumption, and agricultural improvements.
No technological incubator has ever operating in Yeruham. The town received three different offers this year, two of which were in the cannabis field: the winning bid and a competing bid by the group formed by cannabis expert Saul Kaye, the founder of iCAN, which produces and manages cannabis conferences throughout the world. The third bid was in educational technology. The plan here is to recruit parties from the losing group to the incubator.
All of the entrepreneurs made a commitment to at least NIS 10 million in follow-on investments in incubator companies. Ohana says that the intention is to invest more than that. The investment in operating the incubator, supporting startups, and follow-up investments is estimated at NIS 150 million.
Two cannabis technology incubators are already operating in Israel outside the framework of the Chief Scientist's technological incubators program: the Shizim group's Cann10 incubator, with participation by the Rosh HaAyin-based Seach cannabis company, and the Nextage incubator of the Ness Ziona-based Nextar Chempharma Solutions company.
Ohana emphasizes, "Besides the pharmaceutical sector in Yeruham, we have the cleantech field, including connection to natural gas. We're a focus of logistics centers. We're working with the Ministry of Defense and Elbit Systems to make Yeruham a power in drones, and good news is expected in this. We also have desert tourism between Makhtesh and Yeruham Lake Park. Our hotel recently doubled the number of its rooms, and I lit a Hanukah candle yesterday with a group of tenants from France in an apartment that they ordered through Booking.com. They decided to make their first visit to Israel in our town."
The new incubator will be called CanNegev. According to the tender terms, the consortium will operate the incubator for five years, with a three-year extension option. The incubator will accept six startups each year that will present groundbreaking medical cannabis technologies - a total of 30 startups in the first five years.
Medved says, "The government and the consortium intend to position Yeruham as the spearhead in the global medical cannabis market, which is projected to grow to $59 billion by 2025. We'll find groundbreaking startups, make seed investments and follow-on investments in them, and equip them with all of the tools to make them successful in the global market. The consortium companies have extensive knowledge and experience in medical sectors, including medical cannabis, and will make themselves completely available to the entrepreneurs. Perrigo already has a world-class innovative drug plant in Yeruham, and its acquaintance with the town and the area will also contribute to the venture's success."
BOL Pharma CEO Dr. Tamir Gedo says, "This is a seminal moment, in which the Ministry of Economy and Industry and the Innovation Authority are recognizing the medical cannabis industry as a future growth engine for the Israeli economy. The Ministry of Health and its medical cannabis unit have built a regulatory and research ecosystem that gives Israel a competitive advantage in the medical cannabis industry, and the incubator in Yeruham is another important element for this ecosystem. It will provide initial financing for startups in the sector in order to utilize this advantage and build a medical cannabis industry in Israel replete with knowledge and personnel for many years."
Sharon Kochan, EVP and president of Perrigo's Rx Pharmaceuticals division, said, "Together with its partners, Perrigo is delighted to have won the tender for establishing an entrepreneurship incubator in the outlying areas that will focus on medical cannabis ventures. In recent years, Perrigo has enlarged its activity in Yeruham, and today has over 650 employees there. The activity in the outlying area incubator will contribute to the company's entrepreneurship and innovation, and will strengthen the decades-long connection between Perrigo and Yeruham, and the fruitful cooperation with Mayor Ohana."
Ori Sobovitz, OurCrowd head of government relations and Israeli partnerships, said, "We are very proud to extend the boundaries of the Israeli ecosystem to the outlying areas with the opening of a food-tech incubator in Kiryat Shmona several months ago, and now with the founding of the medical cannabis incubator in Yeruham. We are great believers in the human capital in Yeruham, and are confident that the incubator will generate many jobs and provide an employment and business horizon for the town's residents."
Published by Globes, Israel business news - en.globes.co.il - on December 24, 2019
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