In a bid to bolster investments in Israeli high-tech companies during the ongoing period of local and global economic fluctuation, the Israel Innovation Authority (IIA) and the Ministry of Finance recently unveiled a program designed to encourage institutional entities like insurance companies, pension funds and provident funds to invest in Israeli venture capital funds supporting local businesses.

Operating for the next 20 months, the Yozma Fund 2.0 initiative will use government funds to invest significant amounts in venture capital funds supporting early-stage Israeli startups, and will increase institutional participation in the Israeli venture capital scene, promoting stability and minimizing financial risks in the long run.

The program has a budget of $160 million in state funds, intended to attract at least $700 million from institutional investors. The IIA will contribute 30 cents for every dollar invested by institutions in Israeli venture capital funds, and will also waive its share of returns to boost returns for investors.

Unlike previous initiatives, the Yozma Fund 2.0 operates independently from the IIA, allowing investors to make decisions aligned with their investment policies.

Institutional entities can opt to buy out the IIA under specific conditions, including annual interest rates and proportional loss-sharing in loss-making funds.

Additional incentives are offered for investing in deep technology companies, including the option to buy out the IIA without interest, so as to maximize returns for investors and the public.

IIA Chairman Alon Stopel highlighted the complementary nature of the Yozma Fund 2.0 with the recently launched Startup Fund, both directed at fortifying support for Israeli tech companies, especially those in deep technology sectors.

“The Startup Fund, initiated in March, directly invests grants in startup companies, while the Yozma Fund, introduced today, focuses on supporting venture capital funds,” he said. “Together, these initiatives are designed to ensure a robust funding environment for Israeli startups in the coming years.”

Gila Gamliel, from the Ministry of Innovation, Science, and Technology, noted the program’s significance in stabilizing the venture capital market during the current turbulent period.

“This is a very significant move aimed at increasing the stability of the local venture capital market in the face of macroeconomic shocks and fluctuations, increasing funding in the early investment stages of Israeli startup companies, and subsequently establishing connections between institutions and the Israeli venture capital market,” Gamliel said.

“All of these are for the benefit of strengthening the Israeli high-tech sector and economy.”