The Israel Innovation Authority and Ministry of Finance have launched the Yozma Fund 2.0 to incentivize institutional entities to invest in Israeli tech companies through Israeli venture capital funds. In the first stage 18 institutional entities in Israel will receive funding of $155 million for investment in Israeli venture capital funds that invest in Israeli startups
Yozma 2.0 is designed for institutional investors such as insurance companies, and pension and provident funds and offers a range of incentives for increased returns on their investments in Israeli venture capital funds over the next 18 months. The track is a green track, meaning without any intervention by the Innovation Authority in the investment decisions of the institutions or the managers of the venture capital funds.
The Innovation Authority said that the initiative was oversubscribed by about $474 million, with almost all Israel’s institutional Investment entities choosing to participate. To address this over-demand, a second phase of the fund is planned for the 2025 budget year.
Full financing by the state
As part of the plan, the Innovation Authority will provide matching funding for institutional investments in Israeli venture capital funds under the program and will fully or partially waive its share of the returns from the investments in these funds, thereby increasing the returns for institutional investors from these investments. The program is state-funded and upside-oriented, because there is full confidence in the Israeli tech industry’s ability to overcome the current crisis and continue to be the growth engine of the Israeli economy.
The fund’s aim is to support Israeli high-tech companies, expand the ties between institutional entities and local venture capital funds as is customary in leading markets worldwide, and increase the stability of the local venture capital market against shocks and macroeconomic fluctuations.
As a result of the program, the scope of institutional investments in Israeli venture capital funds is expected to grow, thereby increasing the availability of capital for Israeli tech companies.
Among the institutional bodies that will receive a grant from the fund are Altshuler Shaham Provident & Pension Fund Ltd., The Phoenix Insurance Co. Ltd., Harel Insurance Investments and Financial Services Ltd., Call Insurance Ltd., Migdal Insurance Co., Menora Mivtachim Insurance Ltd., and Meitav Provident Funds and Pensions Ltd.
Tempering cycles of downturns in the venture capital market"
Minister of Finance Bezalel Smotrich said, "The high-tech sector is the engine of the economy, and we must ensure the diversification of its funding sources. The last quarter was the best for high-tech in two years, but we are not stopping."
Ministry of Finance commissioner for budgets Yogev Gradus added, "The goal of the Yozma 2.0 Fund is to increase the share of local investment in the high-tech sector and create stability in long-term investments. We are pleased with the high demand for the program and hope that its objectives will be achieved over time."
Israel Innovation Authority chairman Alon Stopel said, "The Institutional investors in Israel trust Israeli high-tech. Especially at times when raising capital globally is becoming more challenging, the technological and financial ecosystem in Israel is coming together to encourage the resilience of Israeli high-tech. This partnership strengthens the connections between institutional investors and Israeli venture capital funds and brings us closer to global institutional investment relationships in venture capital."
He continued, The fund creates and conveys certainty and stability to foreign investors and, in the future, will temper cycles of downturns in the venture capital market. The launch of Yozma Fund 2.0 is one strategic step among a series of measures taken by the Authority since October 7th across various vectors to ensure, among other things, capital flow to the industry for continued R&D, investments in companies developing deep technology at early stages, and the creation of new incubators for nurturing startups in Venture Creation."
Published by Globes, Israel business news - en.globes.co.il - on August 1, 2024.
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