R&D Fund - English Innovation Site

Program Overview

The Israel Innovation Authority (IIA) operates the R&D Fund, Israel’s flagship program for co-investing in breakthrough technologies. Grants of up to ₪5 million help startups and established companies de-risk product development, accelerate time to market, and maintain Israel’s leadership in deep tech sectors such as cybersecurity, semiconductors, digital health, agritech, and climate technologies. Funding is awarded on a competitive basis to projects that demonstrate global market potential, technological novelty, and the capacity to generate high-quality jobs within Israel. Because the grants are repayable only through modest royalties if commercialization succeeds, the program provides founder-friendly financing that preserves equity while aligning public support with long-term economic returns.

Strategic Rationale

Israel’s innovation economy thrives on rapid experimentation and tight collaboration between academia, industry, and government. The R&D Fund is a cornerstone of this ecosystem, providing a safety net for projects that carry significant technical or regulatory risk. The program aligns with national priorities such as strengthening regional development zones, integrating diverse populations into high-tech careers, and advancing solutions that address global challenges from water scarcity to cybersecurity threats. Many of Israel’s most successful unicorns—including in mobility, AI, and medical devices—received early IIA support that enabled them to achieve proof-of-concept and attract venture capital.

Funding Model and Eligible Costs

Grant intensity typically ranges from 20% to 50% of approved R&D expenses, depending on company size, project scope, and location. Projects based in Israel’s peripheral regions or led by minorities and women founders may qualify for higher support levels. Eligible expenses include:

• Salaries and social benefits for R&D staff, including engineers, scientists, and product managers.
• Subcontracted research and testing performed by universities, hospitals, or certified labs.
• Materials, components, equipment leasing, and prototype manufacturing.
• Clinical trials, regulatory submissions, and compliance audits.
• Intellectual property costs such as patent drafting, international filings, and freedom-to-operate analyses.
• Travel and business development directly related to R&D milestones.

Disbursements occur quarterly after submission of expense reports and milestone updates. When commercialization generates revenue, companies repay grants through royalties (usually 3%–5% of sales) until the grant plus interest is recovered. If commercialization fails, no repayment is required.

Eligibility Requirements

To apply, companies must:

1. Be incorporated in Israel and conduct the majority of R&D activities domestically.
2. Own or license the intellectual property developed under the project, with restrictions on transferring IP abroad without approval.
3. Demonstrate technological innovation beyond existing products or incremental upgrades.
4. Present a credible commercialization plan showing global market potential and competitive differentiation.
5. Prove financial capacity to fund non-supported costs and sustain operations during the project period.

Projects may involve collaborations with multinational corporations, academic institutions, or international partners, but the lead applicant must retain control over IP and strategic decisions.

Application Process and Timeline

The R&D Fund accepts applications year-round with several cut-off dates. Companies typically follow these steps:

1. Pre-Application Consultation: Meet with IIA program managers or regional incubators to validate fit, review funding rates, and clarify documentation needs.
2. Online Submission: Submit the proposal via the IIA portal, including technical descriptions, work plans, financial projections, ownership structure, and declarations regarding IP and export controls.
3. Expert Evaluation: Sector-specific committees evaluate innovation level, technological feasibility, market opportunity, and team capability. They may request supplementary materials or schedule an interview/pitch.
4. Budget Negotiation: Approved projects finalize eligible costs, matching contributions, and royalty terms. The IIA often adjusts budget lines to match policy guidelines.
5. Grant Agreement: Companies sign a legal agreement detailing milestones, reporting cadence, IP obligations, and repayment mechanisms. Once signed, the first disbursement is released.

Turnaround times vary but typically range from eight to twelve weeks depending on project complexity and responsiveness to information requests.

Building a Winning Proposal

A compelling application integrates the following elements:

• Technology Narrative: Provide a clear explanation of the scientific or engineering innovation, current technology readiness level (TRL), and expected breakthroughs. Include preliminary results, prototypes, or patents that demonstrate feasibility.
• Market Strategy: Quantify addressable markets, customer segments, and pricing models. Present letters of intent, pilot agreements, or regulatory clearances that validate demand.
• Competitive Analysis: Map global competitors and describe how your solution delivers superior performance, cost efficiency, or user experience. Highlight barriers to entry such as proprietary algorithms or complex hardware integration.
• Team Credentials: Showcase founders and key employees with relevant domain expertise, commercialization experience, and execution capacity. Mention advisory boards or investors who strengthen governance.
• Impact Metrics: Outline projected exports, job creation, and contribution to national priorities (e.g., climate resilience, healthcare innovation, digital security). Companies operating in development zones should detail regional economic impact.

Project Plan and Milestones

Design a work plan spanning 12–24 months with specific milestones. Example structure:

Include KPIs such as performance benchmarks, regulatory submissions filed, or customer pilots launched. Use risk matrices to identify potential delays (supply chain, regulatory, IP) and mitigation strategies (alternate suppliers, phased trials, additional advisors).

Budget Framework

Prepare detailed cost tables aligned with IIA templates. Example allocation:

Ensure matching funds are evidenced through bank statements, investor commitments, or revenue projections. Remember that certain expenses (marketing, general corporate overhead) are not eligible.

Compliance, IP, and ESG Considerations

Applicants must adhere to Israeli regulations regarding export controls, dual-use technologies, and IP transfer. If the project involves AI, health data, or defense applications, address privacy safeguards, cybersecurity, and ethical use. Highlight workforce diversity initiatives, collaborations with periphery communities, or sustainability impacts (e.g., reduced emissions, water conservation). The IIA increasingly rewards proposals that combine technological innovation with responsible, inclusive practices.

Reporting and Royalty Obligations

During the project, companies submit quarterly technical and financial reports with supporting invoices, payroll records, and milestone updates. The IIA may conduct audits or site visits to verify progress. After commercialization, companies track revenues attributable to the funded technology and remit royalties until repayment is complete. If the company is acquired or transfers IP abroad, pre-approval is required and may trigger additional payments according to the Law for the Encouragement of Industrial Research and Development.

Application Checklist

Before submission, compile:

1. Executive summary and pitch deck in Hebrew or English outlining technology, market, and financial plan.
2. Detailed work plan with Gantt chart, resource allocation, and milestone definitions.
3. Financial statements (audited if available), cash flow forecasts, and evidence of matching funds.
4. IP documentation—patent filings, licensing agreements, or exclusivity letters.
5. Market research, customer validation, and competitive benchmarking reports.
6. Team CVs highlighting relevant experience and roles.
7. Risk assessment, regulatory strategy, and ESG commitments.
8. Corporate governance documents, capitalization table, and shareholder agreements.

Leveraging Ecosystem Support

Applicants can strengthen their proposals by engaging with Israel’s innovation infrastructure: technology incubators, accelerators, the Magnet consortium program, and international cooperation tracks (Eureka, Horizon Europe). Consider pairing the R&D Fund with complementary instruments such as the Early-Stage Incentive Program, the Bi-National Industrial R&D Foundation (BIRD), or regional grants for periphery expansion. Demonstrating a holistic funding and commercialization strategy signals readiness to maximize the R&D Grant’s impact and build globally competitive ventures rooted in Israel.

Insider Tips to Win Israel Innovation Authority R&D Grant

• Align milestones with reporting cycles. Synchronize development sprints to quarterly reporting expected by the Authority.
• Demonstrate export intensity. Provide sales forecasts showing foreign revenue potential above the minimum thresholds.
• Plan royalty repayment scenarios. Model best and base-case payback schedules based on projected sales to show sustainability.