The Israel Innovation Authority (IIA) represents Israel’s principal source of government startup capital, which is provided in the form of risk-sharing grants that do not dilute ownership and are made available throughout the development stages of an idea to the early stages of commercialisation (net of repayment only if the funded project generates sales). In addition, R&D-intensive firms that qualify under the “Preferred Technological Enterprise” programme and other associated reforms can receive a lower corporate tax rate.

How the Government Financing Works

The most common type of IIA grant funding is a conditional [i.e., not dilutive] grant that is repaid by the payment of a royalty on annual revenues only after revenue-generating sales have occurred. Typically, the expected royalty is in the range of 3%–5% of annual revenues, and the grant recipient is also expected to pay interest on the outstanding royalty balance at the Secured Overnight Financing Rate (SOFR) plus an assumption that R&D funded by the grant will be performed in Israel.

Across the different tracks of assistance, the IIA assesses the [cost-benefit] viability of projects based on five factors: (I) the technical novelty of an invention; (ii) whether there is a viable economic rationale for pursuing the project and generating additional revenue for Israel; (iii) the capabilities of an applicant and/or a company to deliver and commercialise the technology; (iv) the degree of collaboration with other partner organisations (if applicable; and (v) whether the application is clear and readily understood?

Core IIA Programs for Startups

Purpose of Funding – In One Line: Tnufa provides funding for ideation or proof of concept (PoC); the Start Up Fund provides matching funding for private funding rounds from Pre Seed through to round A; the R&D Funding Subsidy provides funding for R&D programme expenses; incubators provides a framework for creating new ventures; and pilot funding tracks support real life testing of funded R&D (including with very large companies or in regulatory markets).The table’s contents include a summary of various programs available to entrepreneurs and new startups in Israel, funding ranges, and eligibility requirements. They specify whether a startup or corporation is required to pay back their funds received through a program and the general timelines for which each program is open to funding requests.

All funds awarded in the table above may require an applicant to submit a financial performance history prior to being granted funds. IIA A) or 0 % take part in the MNC trial-ready products; little additional research done for an MNC regulatory block on pilot regulation pilots called MNC for limited years, but sometimes. Tnufa’s english site implies funds with the only prototype/ IP / business developed, and not with overhead and/or salaries

Additionally, as it relates to going to global market, the Bilateral Funds Incentive Programme by IIA supports research and development performed jointly with registered partners in the US, India, Singapore, and Korea maximum documentable percent funding for approved expense of up to 50% of the annual research budget: calls varied.

Tax Incentives Most Relevant to Startups

The startup tax incentive exists as follows:

CBS reports and the preferred tax company enterprise received corporate tax reductions through 12% or 7.5% in development area “A” compared to the overall federal standard of 23%. The reported tax rate also applies to special reform. In accordance with the Israel tax office form 973 and process, the registering entity must submit their annual notification report within the year of filing their tax return; and must provide a report of a ratio that the R &D expenditures equal at least 7%, or) as an alternative test) that the annual R&D costs are equal to no more than 75K NIS.

On 2nd November 2025 the Israel tax office, II O, and the ministry of finance announced high tech tax reform to bring about quick tax certainty and space for funding; the summary states at the end of the article indicates that VC fund taxation (on established tax office policies such as VAT/capital gain distributions) and other tax exemptions for foreign businesses also included.

Application Process / Time Frame / Standard Operating Procedure

Application Process / time frame / standard operating procedure by II O for application and receipt of funds states that a company must submit an application to $I statistics “each area” and that the application time ( from submission of the application until their application is an ” approved application is scheduled) is within ten (10) calendar days following committee decision and through the email) received within ten (10) calendar days from final approval by IIA. Following the committee’s approved decision (consecutive), the approved applicant will be given a grant agreement and the applicant will sign by the required time for authorisation of funds prior to a partial pay from the arising grant – within 10calendar days from the grant issued, in addition the remaining funds for the applicant will only be paid based upon an approved expense report by the grant holder. Prior to the closeout of all grant funding and funds received and before 90calendar days following the contractor’s initial request for the IIA to close out the agreement, an audit will be executed by the IIA to determine whether the final of the grant was spent on eligible projects as approved and perform annual financial auditing / final reconciliation.

Personal area submission Review Clarifications would have to be completed on each application to the committee for the determination of the amount of research expenses. Committee decision – approval & grant will notify of grant decision within an approximate 10 calendar day period from committee decision the process to receive starting becomes finalize grant agreements with and pay all grant holders’ the advance & future payments second have audits performed – close out process

Recent Developments / Examples of Government Programs

Recent developments /examples of government programs and models that may apply – During 2023-2024 war, the IIA utilized a temporary fast track for companies experiencing a severe liquidity constraint and developed specific program criteria: deadline; 22/02/24 – and a liquidity/burn rate for review of a submission.

This example illustrates a viable submission on March 29, 2026, to receive staged grants to develop new venture incubators that contain no KLP or funding phases but will determine which company(s) have provided documentation related to the incubator. The estimated financial value for the new incubator is NIS 21,000,000 prior to closing the incubator.

FAQ

Is IIA funding free?

Typically, not, as it is a conditional grant required to pay back to the IIA at tracking or multiple-year expenditures through an investment payment.

Is it necessary for me to have investors; Not all programs require an investor (i.e., Tnufa), but all programs requiring financing are typically run in conjunction with the Investor’s funding.

What can I do to increase the chances of receiving grant funds?

This will be based upon alignment to the IIA’s published technology/market criteria and being well qualified.

Where do I get up-to-date information regarding the funding status of each program?

The funding status for all programs can be found at IIA’s program pages. Be aware of changing deadlines and terms for each program.