The BIRD Model
Any two companies, one registered in Israel and the other in the U.S., may jointly apply for BIRD support, as long as they have the combined capability and infrastructure to define, develop, manufacture, sell and support an innovative product or service, referred to as "the Product". The two partnering companies are collectively referred to as "the Proposer". One key criterion is that each company shall have the demonstrated ability to carry out its part of the Product's joint development program, referred to as "the Project", as well as its part in the commercialization. Another key criterion is that the nature of the business relationship between the two companies is that of sharing; both in the Product's development program and in the revenue derived from its commercialization.
Click here to read about BIRD's funding policy for related companies.
The ProductThe jointly developed product(s) or service(s) must have significant technological innovation or must introduce an innovative business/ marketing concept. Ideally, one or both companies shall possess intellectual property rights to the technology to be developed and to the product commercialization. The Product should target an attractive and growing market that is geographically non-specific, and is familiar to and serviced by at least one of the two partnering companies.
The Project The Project is defined as the scope and duration of the development program undertaken jointly by both companies, at the end of which the Product should be close to market-ready. All activities required for subsequent commercial manufacturing, specification, and market introduction, should be detailed in the Project, including beta-site testing, regulatory approvals, and test marketing. Project start date may be as early as the 1st of the month in which the final Project proposal is submitted jointly by the companies, and Project duration may be as long as 3-4 years, if deemed necessary for reaching commercial readiness.
The Proposer The U.S. company and the Israeli company are collectively referred to as the Proposer. Both companies should have the necessary operations required for the Project in their respective countries, whether R&D, manufacturing or marketing. The two companies should have the combined, proven capability and infrastructure to define, develop, manufacture, sell and support the Product defined by the Project. Typically, the Project partners include one larger company (in most cases, the U.S. company), and one smaller company (in most cases, the Israeli company). Both partners should contribute and share their technological expertise and intellectual property in execution of the joint development program, but their respective contributions do not necessarily have to be equivalent. Nevertheless, the task assignments should be divided in such a way that neither partner's portion in the combined budget is less than 30%. Manufacturing responsibilities of the Product can be divided between the companies as they see fit, and can be performed by subcontractors in any geographical location. Marketing and sales support of the Product can be divided between the project partners. However, at least one partner (usually the larger U.S. company) should have extensive market presence, as well as a proven track record in marketing and infrastructure, to successfully realize, upon product commercialization, the bulk of the sales projections indicated in the proposal.
The Project Budget is estimated by the Proposer and is submitted as part of the project proposal in the grant application process. The budget that BIRD recognizes includes practically all development expenses to be incurred during the course of the Project, including direct labor and its associated overhead, materials, subcontractors, consultants, travel, depreciation (33% per year) on new or used equipment employed, and marketing expenses related to the development effort. The budget is prepared and submitted separately by the Israeli company ($X in the diagram) and the U.S. company ($Y), and covers the entire project duration.
Back to top
Upon product commercialization, the revenue (and not the profit) derived by either partner from sales of the Product or subsequent products based on the technology developed in the Project, form the main basis for repayment of the BIRD's Conditional Grant. Repayments are made at the rate of 5% of each dollar of reported sales revenue. Only revenue generated from sales to third parties is applicable, so sales between the two partners are not considered a basis for repayments. Additional sources of repayments to BIRD are from any revenue derived by either partner from extending licensing rights to the technology, at the rate of 30% of the revenue earned, or from the outright sale of the technology to any third party, at the rate of 50% of the sales value. The maximum repayment amount due by the Proposer is dependent on the length of time that it takes to complete the repayments, as detailed in the table below:
For the period extending from Project start, up to a full year after Project completion (1st year of product commercialization), the repayment amount due is the actual cumulative sum granted by BIRD to the Proposer, linked to the U.S. Consumer Price Index (CPI). The repayment sum due does not increase beyond the 5th year after Project completion, so the maximum repayment obligation that the Proposer can ever assume is 150% of the total sum granted by BIRD, linked to the CPI. In addition, BIRD will accept early retirement of the Conditional Grant, if so desired by the Proposer. If the commercialization of the Product is unsuccessful, and no sales revenue is generated, whether due to technological or marketing failure, BIRD will not seek repayment of the Conditional Grant. Thus, BIRD participates with the Proposer in the risk of an unsuccessful product development investment.
Off-Balance Sheet Financing
Seal of Approval