The Office of the Chief Scientist of the Israeli Ministry of Economy ("OCS") has published new competitive processes for four franchises to form and operate government- supported technological incubators in Israel.
The franchises are for eight years. Each franchise is for an incubator in a certain district: Tel Aviv (two franchises), Jerusalem (one franchise) and Judea and Samaria (one franchise). The tenders for the franchises in Tel Aviv and Jerusalem are expected to be highly competitive.
Deadline for submitting a proposal is December 21, 2015.
A government franchise to form and operate a technological incubator is based on a unique model that offers business opportunities for Israeli and foreign corporations and investment funds. Multinational corporations, such as Hutchison, Philips, Teva Pharmaceutical Industries, Nielsen, Takeda, Johnson&Johnson and Elbit, operate government- supported incubators in Israel, following their selection through prior tenders.
By forming an incubator, the franchisee gains access to Israeli deal-flow and innovation (entrepreneurs, startups, academia) in the franchisee’s technological field of interest and is able to invest in and work with the entrepreneurs and ideas it finds the most promising.
The franchisee also receives substantial equity (20%-50%) in startups that operate in the incubator in exchange for a relatively small investment (15% of the startup's R&D budget for two years), while the government funds the bulk of the costs (the remaining 85% of the two-year R&D budget). The franchisee is also obligated to operate and fund the incubator with an annual budget of at least NIS 1.26 million.
Participation in a tender requires comprehensive preparation and submission of a detailed bid proposal, which requires, for example, recruiting the incubator's management team, preparation of investment and business plans, presentation of a budget and financial resources and locating office space.
Preference is given to bidders that are comprised of more than one party. Therefore, potential applicants may wish to find partners with complementary abilities for joint participation in the tender. If their joint proposal wins, they will share the rights under the franchise and the related obligations.
In light of the long-term commitments involved in the franchise, it is essential to consider in advance all structuring and legal implications, including tax, IP ownership, financing, labor and commercial issues. Structural changes may not be permitted after winning a tender.