A high-tech park in Haifa, Israel. Photo: Zvi Roger / Wikimedia Commons.

Israel approved plans on Tuesday to provide a safety net for institutional investors taking part in late-stage funding rounds by high-tech companies, seeking to encourage them back into a sector vital to the economy.

Burned by the tech bubble that burst in 2000 and hampered by regulatory constraints, Israeli pension funds and other institutions have since shied away from high-tech, during which billions of dollars have been generated by high-profile takeovers or flotations.

An institution that is approved under the new plan will be eligible for investment protection in the event of a decline in the value of the portfolio of Israeli tech firms and would receive 40% of the nominal investment.

Should the value increase, the institution would transfer 10% of the difference between the portfolio’s return and the government’s bond yield for the comparable period to Israel‘s Innovation Authority, which is part of the Economy Ministry.

The portfolio would need to be managed for 8-1/2 years and the state’s protection would be provided for investments made during the first 18 months. The Economy Ministry expects the tech sector to gain a boost of 2 billion shekels ($570 million).

In a joint statement, the ministries said the plan serves two aims — to help Israeli tech businesses survive the coronavirus crisis while boosting institutional investment in a sector that is a key economic growth driver.

“It is precisely at this time that we must focus our efforts on moves that will strengthen the high-tech engine to pull the economy out of the economic crisis,” said Aharon Aharon, head of the Innovation Authority.