The Incubator Model

The origins of the Israeli Incubator  program was government sponsored and took of in the early 1990's and has been widely recognized as a huge success with high Return of Investments. Below is a short overview of how it all evolved and snowballed. The history and process is a case study and has caught the eyes of the whole world, including th Danish Government, who has signed a deal to lean the lesson and replicate the idea.

Experts in Israeli business policy often depict it as being pragmatic but without an actual long-term strategy. 

This characterisation notwithstanding, the turning point for modifying Israel’s business policy, and thus its commitment to technology-driven start-ups, seems to have occurred in the early 1990s, where a wide selection of government-initiated programmes kiked off, all aiming to promote the prerequisites for changing over to a research and knowledge-based economy. The most important role model was the US and the success already manifested by Silicon Valley at the time. In the early 1990s, Israel’s situation was very similar to California’s. Israel had few natural resources, but it did have a large number of highly educated, unemployed workers, a good educational system and a budding IT sector.

Two government initiatives in particular, which were otherwise inextricably intertwined, are worth emphasising: the Yozma Programme and Israel’sincubator system. Both were initiated during the 1990s, and today both are credited with Israel’s success

Already before the Yozma Programme, and as a result of an increasing influx of immigrants from the former Soviet Union, a nationwide network of incubators was being established all over Israel. The underlying idea was to use the incubators to integrate a large number of technically skilled Russian immigrants into the Israeli business community (Shefer and Frenkel, 2002). For this purpose, small regional centres for newly started enterprises were set up with research facilities, consultancy about product development and access to capital.

Concurrent with the success of the Yozma Programme, the Israeli government learned the lesson that a successful growth process requires capital and commercial skills in the earliest stages of an enterprise’s life. This so-called “pre-seed” funding was typically not available from the private-sector venture market, because these fledgling projects were considered so risky that no private investors would touch them.


The incubator helps to start a company and over a two year period supply them with all the administrative and logistical support they need. This includes help with marketing and business development. The transformation from innovator into entrepreneur takes place through a hybrid of education, training and apprenticeship.

Out of consideration for the need for seed capital, the integration of immigrants and commercial expertise, the solution was to gather a national incubator system under the Israeli Ministry of Business Affairs during the course of the 1990s. 
At the beginning there was a rule that at least 50% of the innovators accepted by the incubation programme should be new immigrants. This rule is now about to be withdrawn on the grounds that the wave of immigrants has now subsided. Aliya Incubator aims to take the program back to its roots, however not as a means to integrate new olim, but rather to provide "the last push" for the hesitant and potential immigrant with concernes for his financial opportunity in case he takes the leap of faith and make Aliya,
The program became a huge success, with huge private investments as depicted in below graph.55% of the innovators accepted by the incubators succeed in developing a product prototype and creating a company which develops, often through the participation of external investors

Each government sponsored  incubator receives annually around $200K USD from the state to cover costs of premises and administration (David Nordfors). For these activities to break even, they are dependent on further support from non-commercial organisations, regional organisations, research institutes and industry.


One of the criteria for a product idea to be accepted by an incubator is that it should not only be commercially viable, but a product which can be made in Israel and exported.