Israel launches NIS 1 billion startup lifeline as strong shekel squeezes tech sector
The Israel Innovation Authority is rolling out a $322 million fast-track program to help startups whose runways have been cut by the strengthening shekel, allowing them to extend operations by up to six months while avoiding premature fundraising rounds.
The Israel Innovation Authority is launching a new NIS 1 billion ($328 million) fast-track funding program for technology companies affected by the sharp appreciation of the shekel against the U.S. dollar.
The new program is designed to help young technology companies cope with the shortened operating runway caused by the rapid strengthening of the shekel. It targets companies with less than 12 months of runway remaining and aims to extend their operating horizon by up to six months through a combination of grants, matching financing, and an accelerated application and approval process.
The sharp appreciation of the shekel has hit startups that raised capital in dollars in two ways. First, it has shortened their operating runway, forcing many to bring forward their next fundraising round. Second, it reduces the amount of money they are expected to raise in that future round without any corresponding improvement in the business. Early-growth companies that already generate revenue in dollars have also been affected, as the stronger shekel reduces the value of those revenues when converted into local operating expenses, potentially limiting their ability to invest in growth.
Companies accepted into the program will receive grants designed to extend their runway by up to six months. The grants will cover either 33% or 50% of the additional funding required, effectively providing the equivalent of two to three months of operating expenses, while companies will be required to secure matching financing through new equity investment, SAFEs, loans, new revenue, or other funding sources. The maximum grant available is NIS 15 million ($4.9 million).
Speaking to Calcalist, Dror Bin, CEO of the Israel Innovation Authority, said: "There are hundreds of companies at this stage with significant technological assets. Their ability to finance themselves has been weakened by the appreciation of the shekel, despite being excellent companies. This program is designed to help them bridge that gap."
"The companies will still need to bring in additional funding, whether through loans backed by revenue, new investment, or other financing. There is no requirement to complete a full funding round. Our goal is to prevent companies from slowing down or cutting costs. We are concerned that the pace of global market penetration will decline and that companies will fail to reach their full potential. Israeli startups should not lose to competitors abroad simply because of currency movements."
Bin said the program will open next week and remain open until November. "Companies that apply early could receive funding before the High Holidays. Applicants will receive decisions within 20 days. We have opened the program to all technology sectors, any strong company that needs support can apply."
The program is based on the Authority's assessment that companies that raised enough capital to finance approximately two years of operations have effectively lost around 20% of their planned runway because of the shekel's appreciation. As a result, many startups are being forced to seek additional funding before reaching the technological and commercial milestones they had originally planned. The objective is to give these companies additional time to continue research and development, complete key technological milestones, validate their products, strengthen their commercial position, and approach their next funding round from a stronger position.
The program is intended for startups and early-stage growth companies whose expenses exceeded their revenues during the 12 months preceding their application. Eligible companies must have annual operating expenses of between NIS 1.5 million ($483,000) and NIS 100 million ($32.2 million). At least half of their spending must be dedicated to research and development, and at least half of their total expenses must be incurred in Israel and denominated in shekels. Companies must also have less than 12 months of runway remaining and be no more than 15 years old.
