The Israeli government has taken a significant step to support its tech startups in the face of a strong shekel. A new 1 billion shekel ($328 million) funding program has been launched to assist startups and early-stage growth companies that are struggling with the rapid appreciation of the shekel against the U.S. dollar.
This initiative, a joint effort between the Israel innovation Authority and the Ministry of Finance aims to provide a financial bridge for local tech companies that have lost 20% of their planned operational runways due to recent exchange-rate fluctuations. The program seeks to prevent companies from being forced into premature fundraising rounds in a challenging market.
The impact of the strong shekel on Israeli tech startups
The sharp appreciation of the shekel has had a significant impact on Israeli tech startups, particularly those that raised capital in dollars. This currency fluctuation has shortened their operating runway, forcing many to bring forward their next fundraising round. Additionally, it reduces the amount of money they are expected to raise in that future round without any corresponding improvement in the business.
Early-growth companies that already generate revenue in dollars have also been affected. The stronger shekel reduces the value of those revenues when converted into local operating expenses, potentially limiting their ability to invest in growth. This has created a challenging environment for many startups, prompting the government to step in with a supportive funding program.
Eligibility and funding details
To qualify for the funding program, tech companies must meet several criteria. They must be no more than 15 years old and have less than 12 months of operational runway remaining. Eligible firms must show annual expenses between 1.5 million and 100 million shekels—exceeding their revenues—and dedicate at least 50% of their total expenditures to research and development incurred locally in shekels.
Startups relying on sales revenue may also qualify if they can demonstrate that at least half of their revenue is generated in foreign currency. Funding will be awarded based on a comprehensive review of a company’s technological assets, competitive advantage, intellectual property, and potential contribution to the Israeli economy.
Grant structure and application process
The program offers grants designed to extend a company’s runway by up to six months. These grants will cover either 33% or 50% of the additional funding required, effectively providing the equivalent of two to three months of operating expenses. Companies will be required to secure matching financing through new equity investment, SAFEs, loans, new revenue, or other funding sources. The maximum grant available is 15 million shekels ($4.9 million).
The application process has been streamlined to ensure quick decisions. Companies that apply early could receive funding before the High Holidays, with decisions made within 20 days. The program is open to all technology sectors, and any strong company that needs support can apply.
The broader implications for Israel’s tech ecosystem
The launch of this funding program underscores the Israeli government’s commitment to supporting its tech ecosystem. By providing a financial safety net, the program aims to prevent companies from slowing down or cutting costs, which could otherwise hinder their global market penetration and potential for growth.
Dror Bin, CEO of the Israel Innovation Authority, emphasized the importance of this initiative. ‘There are hundreds of companies at this stage with significant technological assets. Their ability to finance themselves has been weakened by the appreciation of the shekel, despite being excellent companies. This program is designed to help them bridge that gap,’ he said.
The program is intended to give these companies additional time to continue research and development, complete key technological milestones, validate their products, strengthen their commercial position, and approach their next funding round from a stronger position. By doing so, it aims to ensure that Israeli startups do not lose out to competitors abroad simply because of currency movements.
