Avi Hasson is the chief scientist of Israel’s Ministry of Industry, Trade and Labor, a government office that specializes in helping entrepreneurs turn ideas and science into commercial companies. Prior to his appointment last year he spent 10 years as a general partner at Gemini Israel Funds, one of Israel’s top VC firms. At Gemini, Hasson managed the fund’s investments in the communications, storage and consumer electronics sector. He also spent a decade working at ECI Telecom, ECtel, and Tadiran Systems, three Israeli companies specialized in telecommunications. Hasson recently spoke to Informilo’s Jennifer L. Schenker about recent changes in the government’s approach to fostering the tech sector in Israel.
Q: What exactly does the Office of Chief Scientist do?
A:We cover technology companies including Internet, life sciences, clean tech, semiconductors, plastics, food, you name it through all the life cycles, excluding basic research. We offer pre-seed grants – up to $60,000 – for companies to create a prototype or write a business plan. We work with entrepreneurs before a company is established, then through incubators. We see more than 3,000 projects every year. In addition to that we formally serve as government advisor for the knowledge industry, covering the whole ecosystem of innovation, including academia and venture capital. My first role is do no harm but if there is a market failure or a need to create an infrastructure that is not there – it is our role to initiate and design it.
Q: Can you tell us about the new legislation you have drafted to promote early-stage investing in Israel?
A: A couple of weeks ago we came up with two initiatives around early-stage funding. One involves rewriting the angel’s law. A few years ago a larger plan to promote high tech was adopted that included benefits for angel investors. The idea was a very good one but the way it was implemented was cumbersome. We are working with the Ministry of Finance and tax authorities to make it simpler so that — bottom line — investment in a seed company is recognized against any income. No other expense has that besides charitable donations. In the next few months we will see a new, very clear structure and process. We think angels are becoming a very important part of the ecosystem so as a government we want to promote that.
The other initiative focuses on Series A investments. VCs in Israel are moving to later-stage investing. The really early stuff is picked up by angels. Series A is the most challenging place today so we have set aside a dedicated budget for series A that gives preferential terms for investors in that space. – up to 50% in matching funding and support for R&D. We saw a problem in Series A and wanted to come forward and help. It shows our DNA – we are not telling the private sector which sectors to invest in, we have not created a VC fund, we don’t take equity in the companies, what we do is help with risk reduction; we share risks with the private sector.
Q: Beyond grants how does your office help start-ups?
A:More than 20% of our budget is for international collaboration. Every year we help foster hundreds of joint projects. It is a big part of what we do. Typically we do a lot of match-making and we help them with funding once a joint R&D project has been developed or designed.
Q: How does the Office of Chief Scientist work with incubators?
A:The government has been working with incubators for 20 years. The government does not own the incubators, fund their operations or take stakes in the participating start-ups. It is a franchise model. Incubators are given a franchise and the ability to present projects to the chief scientist. If approved we provided a portion of the funding to the start-ups and the incubator provides the rest. We send our evaluators and their review is sent to an incubator committee. The program has gone through several reforms. The most recent ones have occurred in the last 18 months.
Q: What has changed?
A: To optimize the system we have opened up to new applicants, which include multinationals; [market research company] Nielsen won in Haifa*. I think we are going to see more incubators run by multinationals applying. We are no longer providing 85% of the funding; from now on it will be 50%. Also in the past franchises were for three years and automatically renewed. Incumbents can re-apply but now there is a chance for newcomers to get in.
Q: How do you see incubators and the tech sector evolving?
A: Some 26 incubators applied from the northern border in the Golan to the deep Negev. One of the winners is in Nazareth, an Arab-Israeli incubator. We want more Arabs to participate in the high-tech scene. The direction is a positive one; more and more Arab entrepreneurs are setting up companies. It is a great resource we need to use it. The same is true for ultra-orthodox Jewish men who up until now have not been part of the work force and Arab women, who have been absent for cultural and economic reasons. I see it as a personal mission to bring in the periphery of the population. It is something we have to do in the next decade to maintain and strengthen the Israeli tech industry.
*The Israeli government has appointed Nielsen Innovate, Nielsen’s majority-owned subsidiary in Israel, to launch a technology incubator in the country which aims to support start-ups in marketing, consumer and advertising research technologies. Technologies developed at the incubator will then be put on a “fast track” to be used by Nielsen’s clients around the world.