Articles

Money from the State? Sounds Chinese to Me

April 12, 2017
Print
PDF

Every entrepreneur understands that in order to facilitate the innovative project conjured by him he needs funding. How? From whom? and how much would it cost? These are the main questions that bother many entrepreneurs because their significance is acute in realizing the project and turning it from a "brilliant idea" into a successful start-up. Not many know that it is possible to raise capital for the enterprise from the State and even to enjoy funding through one of the international development plans, including ones in cooperation with the Chinese government. So, how does it work?

Due to the realization that in order to fulfill the tremendous potential of the Israeli industry (which is known worldwide as the "start-up nation") and in order to preserve and strengthen Israel's position in the global innovation front, the State of Israel made a strategic decision to change the structure of the Office of the Chief Scientist (Which was also renamed to the Authority of Innovation), and turn it into a dedicated authority that provides a safety net and an adaptive environment for the Israeli entrepreneur at any stage of development of the project, from providing strategic planning support to the development of the enterprise, through finding investors and raising capital for research and development, and making it sustainable during the process. The entrepreneur receives an additional safety net in the form of scholarships, tax benefits and even a financial investment by the State.

The Chinese government allocates more than $ 200 billion a year in the research and development of new technologies and part of this budget is now dedicated to a common project with the Israeli Innovation Authority. This route is mainly meant for young, technological and innovative start-up companies dealing with research and development and intending to pave their way to new markets in Israel and abroad.  The main benefit of this route is the ability to receive financing of 50%-80% of the research and development budget of the project (the main expenditure), plus assistance throughout the process by various professionals and experts appointed by the Authority.

However, it is important to remember that entering the support route requires certain bureaucracies, such as submitting forms and documents to review compliance with the terms of admission and understanding the legal implications, both short and long term, of the cooperation with a foreign investor.  The process requires self-capital and one must remember that most of the funds are given as refunds and not in advance and thus, this route requires proper budgetary planning.

For this purpose, it is advisable to employ, both during the funding process and until the project is completed, an attorney who specializes in the field of start-up companies and is knowledgeable in the work with the Innovation Authority and with a business consultant who knows this field.