More than two decades have passed since the state-declared incubator project was announced by the country's chief scientist in the Economy Ministry in 1991. Today, venture capital funds, investment firms and international organizations are all vying for the right to establish similar incubators for preening and raising the next generation of startups.
The entrepreneurs who enter the incubator program, which lasts up to two years, receive 2 million shekels ($576,000) as well as strategic and administrative support, a workspace and direct channels to investors in Israel and abroad.
Israeli incubators have achieved success not just because of the companies they foster, but also because they have become a model for other countries to replicate. Every few months, a new company with roots deep in the incubator is unleashed into the world. Take Sagacity Transportation, bred in the NESTech technological incubator, which developed the WeGo social transport app launched this month in Brazil. It enables users to connect with others and share rides, potentially saving them money and time, as well as reducing the number of cars on the road and pollution.
According to Ayal Zaum, the CEO of Sagacity, "Cities across the globe are dealing with difficult transportation issues and pollution, which hurts the residential quality of life as well as the economy and the municipal system. We are offering a new transport solution that doesn't demand new, expensive infrastructure, and which will reduce the number of vehicles on the road. The solution also eases the load on public transportation while making more efficient use of the travel already taking place anyway. Mainly, our service is meant to provide users with a cheap, easy and personally adapted solution to reduce transportation costs. At the same time, WeGo allows users to get to know their neighbors, coworkers and like-minded strangers while simultaneously sharing and contributing to the environment."
Junior startup investment firm NESTech is focusing on three new social ventures in the fields of transportation, small business and medicine. The company provides support and personnel for initiatives, investing $100,000 in each project.
The incubators usually specialize in specific fields. Incubator Explore.Dream.Discover, in the Yokneam high-tech zone, invested in more than 20 companies in fields ranging from media to mobile, Internet, programming and cyber-related industries. Some 16 companies in a variety of different fields are working in the incubator, which is owned by Plus Ventures, part of the Moldawsky Group and the Cheshin family's 2B Angels.
Developers at Explore.Dream.Discover work with a professional, venture-capital experienced team, receiving legal counsel and administrative services and being hooked into a community of local and international consultants, mostly comprising senior developers in fields related to the specific startup. It offers most companies unusually substantial initial investments to allow developers the ability to focus on expediting their entry into the market, rather than finding investor money. The Explore incubator has produced some of the hottest companies on the market today, including Carambola, which has received $4 million from Pitango Venture Capital, and Yotpo, which managed to secure a $10 million investment from Bloomberg Capital, among others.
Impact-TerraLab Ventures is another of Yokneam's incubators. It was founded in 2013 by Terra Venture Partners, and is the fruit of an initiative by Dr. Astorre Modena, Dr. Harold Wiener and Barak Goldstein -- veteran industry people who seek through technology to improve the lives of millions of people worldwide. Cooperative economy, smart transport, technology that connects the physical world with the virtual realm and wireless, non-radioactive charging for all home appliances are just a few of the projects on the incubator's list.
The incubator selects a professional staff to work with entrepreneurs and serve as a conduit between foreign investors and large companies looking for the best innovative technological solutions that will help the consumer save money and pollute less, from consumer goods to energy and transport. Projects that leave the incubator get an investment from a fund, which helps entrepreneurs focus on developing their products without having to worry as much on financing or economizing after leaving the incubator. In most cases, TerraLab offers a sum that is substantially higher than the sum normally offered by the state's chief scientist to facilitate significant progress in the early phases of these startups.
According to Goldstein, TerraLab's CEO, "There are brilliant minds here in Israel, and we are here to help them transform ideas into sustainable companies. We are looking for initiatives that can add value to the well-being of humanity. We want technologies that can lead to real change in all aspects of life -- from the way in which we consume energy and connect with home electric appliances, all the way to online shopping. We are representatives of the Cleanweb organization here in Israel, which gives us direct access to investors and energy companies, the largest retail sector in the world."
The incubator is managed by Trendlines, an investment group comprising private investors and headed by Steve Rhodes and Todd Dollinger. The group invests in medical technologies, several of which have already had a positive effect on mankind. Today, the incubator is serving some 14 companies, some of which are still within their first two years of development, while others are older. Among the companies are Stimatix and Etview, which are listed on the Israeli stock exchange.
Another long-time incubator is Incentive, located in Ariel. It was the first incubator to be privatized in 2002, and is controlled by Peregrine Ventures, which specialized in early-stage investments. The incubator invests in three to five fledgling companies every year. Several years ago, the incubator was joined by five capital investment groups, two local and three foreign. The incubator invests in internet projects, innovative business software and medical equipment. Some of the more well-known companies to emerge from Incentive include Eurikifi, which was sold to software giant CA, and medical technology companies Valtech and Rocketick.
The CITI Innovation LAB in Tel Aviv's Kiryat Atidim neighborhood is not a classic incubator, but it gets partial funding from the chief scientist and is one of the most interesting international organizations to set up shop in Israel in recent years. The lab deals only with finance technology, which has become one of the most competitive startup fields in the last two years. It is a breeding ground for technologies such as smart wallets, algorithmic trading, investment management, cyber industries and more. The lab also operates an accelerator, which today serves nine companies.