IIA Pre-Seed Track within the Startup Fund of the Israel Innovation Authority

Startup Fund – Pre-Seed Track

1.     About the Track

The Pre-Seed Track in the Startup Fund is designed to encourage the creation and growth of high-risk, early-stage, R&D-intensive startups in Israel by expanding their available funding sources. The Israel Innovation Authority (IIA) will co-invest in Pre-Seed stage companies along with private investors, which helps reduce the investment risk for investors and encourages investment realization.

2.     Track Goals

• Promote the germination of deep-tech innovative startups in Israel – By supporting early-stage companies focused on groundbreaking technological advancements, the program aims to foster a vibrant ecosystem of innovation.
• Expand available funding sources for high-risk, R&D-intensive Pre-Seed startups – The program seeks to provide startups with more funding options, helping them to secure the capital needed for their high-risk ventures.
• Encourage private investor Pre-Seed investments in Israeli startups – By reducing investment risks, the track incentivizes private investors to back early-stage startups.
• Increase investor activity, particularly in underrepresented sectors – The track aims to boost investor participation in fields with fewer specialized investors and limited private capital availability. 

3.      Eligibility

The track is targeted at Israeli startups that are in the Pre-Seed stage and are developing high-risk, R&D-intensive products. Eligibility criteria include:

• Israeli Pre-Seed startups developing R&D-intensive, high-risk products – Companies must be focused on technological innovations with significant research and development components.
• Funding Limits – Companies that have raised no more than 1.5 million ILS from their incorporation until three months before the application date.
• Revenue Limits – Companies with annual revenues not exceeding 300,000 ILS in the last calendar year before the application date.
• Investment Round Limits – The requested investment round should not exceed 4.5 million ILS, with at least 80% allocated to R&D activities, over a period of up to 36 months. 

4.      Benefits

The Pre-Seed Track offers several advantages to participating startups:

• IIA Grants – The Israel Innovation Authority provides a grant covering 60% of the investment round, up to 1.5 million ILS. For preferred companies (where at least 33% of the founders are from underrepresented groups in high-tech such as Arabs, ultra-Orthodox, and women, or operating in development areas), the grant can reach up to 1.65 million ILS.
• Pre-Approved Multi-Year Grants – Companies receive a pre-approved multi-year grant at a fixed rate, providing financial stability.
• Synchronization of Capital Raising – The grant process is synchronized with the startup’s capital raising efforts, ensuring seamless funding.
• Risk Reduction for Private Investors – By lowering the risks for private investors, the track helps startups secure the necessary capital.
• Support for All Company Activities – The grant supports the entire range of the company’s activities without diluting the company’s equity.
• Non-Dilutive Funding – The Israel Innovation Authority does not take equity in the company in exchange for its share of the investment.
• Participation in Development Risks – The Authority shares in the risks associated with the development process. Companies repay the funding through royalties from sales only if they reach the sales stage.
• IIA Quality Seal – Receiving a grant from the Israel Innovation Authority serves as a quality seal, attracting further private investments.

5.     Evaluation Criteria

The Israel Innovation Authority evaluates applications based on several key criteria:

• Technological Aspect
  • Innovation and complexity of the product.
  • Challenges and feasibility of the R&D plan.
• Business Aspect
  • Economic growth potential of the company following the program’s success.
  • Market size and growth rate.
  • Competitive advantage and market validation.
• Economic and Capital Availability Aspect
  • Contributions to the Israeli economy.
  • Activities in sectors with low availability of specialized capital.
  • Market entry challenges and potential for company development.
• Company Capabilities
  • Ability to complete the development plan and reach financial milestones.
  • Management, technological/engineering, and business/marketing capabilities.
  • Previous achievements and program feasibility.
  • Investor experience and the added value to the company’s activities.

6.     Additional Information

• Application Process – Companies must complete the investment round and present final agreements with investors within a time frame set by the committee (up to 6 months).
• Detailed Conditions – Further details and conditions can be found in the IIA incentive track guidelines.

7.     Submitting an Application to the Israel Innovation Authority

• Submitting an application to the Israel Innovation Authority requires careful planning and professional expertise. Professional assistance in the submission process can enhance your chances of securing a grant and help your company meet the track’s requirements. Professional and precise preparation of grant applications is a crucial part of the process.
• If you are uncertain about how to apply for the Pre-Seed track, need assistance in preparing the materials, or require guidance in the submission process, we invite you to contact us. Our professional team specializes in assisting startups through the process, including writing the application in a way that improves the likelihood of receiving the grant.

8.     Comprehensive Fundraising Support

• Companies must complete the investment round and present final agreements with investors within a time frame set by the committee (up to 6 months). We, at Outstand Consulting offer comprehensive fundraising services to support you through every step of the process. We will work with you to develop all the necessary investor materials, prepare you for investor pitching, and lead the fundraising efforts on your behalf. Our expertise will increase your chances of meeting the committee’s deadlines and securing the necessary funding for your startup.