Support Programs – Office of the Chief Scientist (OCS) in Israel

1. State of Israel Ministry of Industry, Trade & Labor Office of the Chief Scientist Support Programs –Office of the Chief Scientist (OCS) in Israel

2. Content • The OCS in the Ministry of Industry, Trade & Labor • OCS’s activities in Israel • Competitive R&D • Pre-Seed & Seed R&D • Generic R&D • OCS’s international activities • Bi-national activities • Multinational activities • Conclusions & future dilemmas

3. Office of the Chief Scientist • OCS is part of the Ministry of Industry and Trade, operating since 1973 • Responsible for implementing government policy regarding support and encouragement of industrial R&D • Governed by the “Law for the Encouragement of Industrial R&D- 1984” (last amendment in June 2005) • Sharing the risk inherent in industrial R&D

4. The Law for the Encouragement of Industrial R&D – 1984 • Strengthen the Israeli economy • Enhance the development of local science-based industry • Create employment opportunities in the industry • Leverage Israel's highly capable scientific and technological labor force

5. The amendment of the R&D Law – June 2005 • The revised law brings it into line with the age of globalization. It allows the transfer of know-how abroad under clearly defined costs and conditions • Article 19B (b) - The Research Committee may, in special cases, approve an application to transfer abroad know-how resulting from Research and Development according to an Approved Plan, not being the Product developed within the framework of such Plan

6. OCS Annual Budget(millions USD)

7. Total Requested Funding vs. Approved Grants (millions USD)

8. Activities of the OCS Chief Scientist Dr. Eli Opper Activitiesin Israel InternationalActivities Bi-National Funds R&DFund Magnet Magneton, Nofar Bi-National Agreements Tnufa R&D Centers in Universities EUR&D Program FP-6 FP-7 TechnologicalIncubators Support of Research Institutes Eureka Seed Fund Global Enterprise R&D Cooperation Framework Support of Traditional Industry US-Israel Science & Technology Commission

9. The R&D Fund Competitive R&D • 2003 Budget – $ 284 M (73% of total OCS annual budget) • Supports competitive industrial R&D projects • Grants are awarded on a sliding scale from 20%-50% R&D budget • Royalties payment is 3%-6% of future products’ sales • Supports over 1000 projects from more than 500 companies each year

10. The Process of Projects Evaluation & Approval – R&D Fund Second evaluation by one of the OCS’s heads of industrial sectors A request for R&D grant Evaluation by one of the OCS’s professional evaluators Failure - End OCS pays grant based on actual expenses F Decision of the Research Committee End / Appeal Yes No S Success - Royalties payment

11. Support of Traditional Industry Competitive R&D • New support program - launched in 2005 • Separate evaluation & discussion for projects of the traditional industry • Private consulting for companies that have never addressed the OCS before

12. Tnufa Pre-Seed & Seed R&D • 2004 Budget – $ 3 M • Provides pre-seed grants and business development services to technopeneurs, to help them obtain private seed money, VP funding and corporate partners • Grants (up to 85% to a maximum of $50,000) can be used for building a working prototype, preparing a business plan and filling a patent • Tool for Go / No Go decision

13. Technological Incubators Pre-Seed & Seed R&D • 2004 Budget – $ 26 M • Provides a framework & support for nascent companies to develop their innovative technological ideas that can attract private investors • Each Incubator is an independent legal entity and has skilled and experienced general manager & board of directors • Each Incubator provides suitable facilities for R&D activity & administrative and logistic support to projects

14. Technological Incubators–Cont.Pre-Seed & Seed R&D • Each project can stay in the Incubator for a maximum period of 2 years • 24 Incubators, part of them in peripheral areas (13 out of the 24 have been privatized- 1 is a biotechnology incubator) • 8-10 projects in each Incubator - Approx. 200 projects per year • Grants are awarded up to 85% of the approved budget to a maximum of $500,000 per 2 years

15. Graduated Projects 844 - 100% Further investment 486 - 58% No further investment 358 - 42% Discontinued 278 - 33% Discontinued 196 - 23% Continuing 290 - 35% Continuing 80 - 9% Operating 370 - 44% Technological Incubators–Cont.Pre-Seed & Seed R&DStatus of graduate projects - 2004

16. Technological Incubators–Cont.Pre-Seed & Seed R&DGovernment versus Private Investments in Incubator Graduates (millions USD)

17. Government Seed Fund Pre-Seed & Seed R&D • 2004 Budget – $ 6 M • Designed to encourage investments and increase the number of new start-up companies • The government & the investor will invest matching funds in a seed company in return for shares • The investor will be given an option to purchase the government shares • Grants are awarded up to 66% of the approved work program for a maximum of $1 M

18. Magnet Consortium Generic R&D • 2004 Budget – $ 48 M • Supports the formation of consortia comprised of industrial companies and academic institutions in order to jointly develop generic, pre competitive technologies • The technology cannot be acquired from commercial sources at competitive prices • The potential sales are sufficient to economically justify the R&D investments • Grants of up to 66% of approved budgets are available with no royalty repayments • Niche programs: Magneton, Nofar

19. R&D Centers in the UniversitiesGeneric R&D • The aim: To Create & to develop technological infrastructure for industry uses • Establishment of the “Russell Berrie Institute for Nanotechnology” at the Technion. Total investment of $76M of which $26M is a governmental contribution • Under process of evaluation: Biotechnology Center at Ben-Gurion Uni., Nanotechnology Center at the Bar-Ilan University • Counterparts members of the Telem Forum – OCS, Ministry of Finance, Vatat, Ministry of Defense,

20. Preferred Industrial Sectors • Biotechnology • Biotechnology Incubator in Jerusalem • Preferred treatment for biotechnology projects at the Incubators Program and at the Heznek Fund • Biotechnology Center at the Ben-Gurion Uni. • Biotech Fund? • Nanotechnology • Nanotechnology Center at the Technion

21. International Cooperation in R&D • Enables participation in a joint R&D project with a foreign counterpart • Access to new technologies • R&D partnerships often lead to business alliances • Government participating in risk • Government gains R&D spillovers • Grants up to 50% of R&D expenses of each counterpart from each state

22. Bi-National R&D FundBi-national Activities • BIRDF-with U.S.A • SIIRDF-with Singapore • CIIRDF - with Canada • BRITECH –with the UK • KORIL-RDF - With S. Korea

23. Company from country - 1 Budget (£X) Bi-lateral Industrial R&D Foundation Up to £1/2(X+Y) Conditional Grant Project Company from country - 2 Budget (£Y) Bi-National R&D Fund –Cont.Bi-national ActivitiesThe Model Business plan/ Proposal £(X+Y) Repayments up to 150% of grant when commercialized

24. France • Belgium • China • Finland • Germany • Holland • Russian Federation Sweden • Hong-Kong • Italy • India • Taiwan • Portugal • Spain Parallel Funding AgreementsBi-national Activities Turkey Victoria (Australia) Maryland(USA) Ontario (Canada)

25. The Global Enterprise R&D Cooperation FrameworkBi-national Activities • Encourages cooperation in industrial R&D between Israeli companies and Multinational Companies (MNCs) • Each and every cooperation framework is being tailored to the MNC’s specific needs • Grants of up to 50% of the Israeli company’s R&D approved costs • Agreements with Alcatel, IBM, Oracle (Microsoft?)

26. Multinational Activities • 6th Framework Program for R&D of the European Union (7th Program between 2007-2013 will be much bigger) • Eureka • Matimop – Promotes and assists participation of Israeli companies in international cooperation programs for industrial R&D

27. Future Dilemmas • Should the Government take a more proactive role? • Should preference be given to certain sectors? (Targeting – Biotech, Nanotech) • To what extent should the Government protect the IP of its co-investments? • How to promote both foreign & local investments? • What about traditional industries & unemployment?

28. Main Indicators 2000-2004

29. Highlights • National expenditure on civilian R&D amounted to $ 5.1 Billion in 2003. • 4.7% of the GDP in 2003, compared with 2.6% of GDP in 1995 • Total civilian R&D financed as follows: 25% by the government 71% by the business sector 4% by non profit organizations

30. Jaffa Oranges vs. Software Exports (millions USD) Source: Dept. Economic & Planning Admin., Ministry Industry, Trade and Labor

31. Investment climate in IsraelForeign Direct Investmentin Israel Source: Bank of Israel

32. VC Investments(by quarters) Source: IVC Online

33. Microsoft Pratt & Whitney AOL Time Warner Intel IBM Boeing Enterprises Cisco Systems GE Lucent 3Com Hewlett Packard Merrill Lynch Motorola Sun Microsystems Siemens DaimlerChrysler Volvo Cable & Wireless Baan Volkswagen Deutsche Telecom L’Oreal British Telecom Danone Ares Sereno Unilever Saap Investment climate in IsraelForeign Companies Invested in Israel- Some Examples US Europe Asia • Samsung Electronics • Daewoo • Nomura • Hutchison Telecomm. • LG Group • Sony • Toyo Ink • Hyundai • Acer Computers • Sumitomo Trading • Fuji • Honda

34. International Centers for R&D About 60 foreign R&D centers are located in Israel

35. Israeli Revenue-driving Innovations & Technology Start-ups • Medinol’s minimally-invasive cardiovascular stent technology • AOL Instant Messenger technology, ICQ • Given Imaging’s ingestible video camera • Israel is one of the largest world centers for start-up enterprises, with ~800 (year 2003) active start-ups.