The Israel Innovation Authority and the Ministry of Finance on Sunday announced the launch of Yozma Fund 2.0, a new program aimed at encouraging institutional investors to invest in Israeli venture capital funds that support Israeli companies. The fund targets institutional investors such as insurance companies, pension funds and provident funds and offers a mechanism to increase returns on investments in Israeli venture capital funds over the next 20 months.
The program will operate without direct intervention from the Innovation Agency, which will not influence the investment decisions of institutions or venture capital fund managers and will allow them to invest in accordance with established investment policies.
The fund’s goal is to support Israeli high-tech companies, expand the interface between institutions practicing in major markets around the world and local venture capital funds, and respond to global and regional macroeconomic shocks and fluctuations. to increase the stability of the local venture capital market. This mechanism is similar to his historic Yozma program of the 1990s, which is credited with starting Israel’s venture capital industry.
The program’s budget is approximately $160 million in state funds. These funds will be leveraged to leverage at least $700 million in investments from institutional investors. As part of the program, the Israel Innovation Authority will contribute 30 cents for every dollar invested in institutional venture capital funds in Israel. In addition, we intend to fully or partially waive a relative proportion of the profits from these investments with the aim of increasing the interests of the institutions involved.
As part of the program, institutions have the option to “buy out” the Israel Innovation Authority under the following conditions: An institutional investor can buy out government shares during his first four years from the date of investment in the institutional fund. Cumulative annual interest rate of 1%. After the first four years, the institution can buy out the government’s shares at a cumulative annual interest rate of 5% (backdated from the fund’s initial investment date). If the fund loses money, the Israel Innovation Authority will share the loss pro rata with institutional investors based on their investment percentages. Additionally, additional incentives will be provided to institutions that invest in funds that support deep technology companies.
