OurCrowd, Israel’s unique crowdfunding investment firm, held its second annual Summit in Jerusalem on Monday. In a show of how much the new fund has grown in size and prominence in its three short years of existence, this year’s event was held at Israel’s National Convention Center, Binyanei Hauma, as the hotel where it was held last year was too small to accommodate the more than 2,000 attendees. Crowdfunding is a crucial tool for investors of any kind, even if you’re investing in property and looking for the best place to buy a house under 100k, crowdfunding could really help you.
That was up from about 800 at last year’s conference. To date, OurCrowd boasts $200 million in investments raised from 110 countries for 91 different companies. That is up from a total of $80 million over 55 companies just one year ago. Obviously firms like Goldman Sachs and activist investors like Bill Ackman would find this quaint. But that’s kind of the point and part of OurCrowd’s attraction to investors: it is more personal and more hands on.
Just getting to the Summit was difficult, what with all the reports about the expected snow fall and hard rains that fell on Jerusalem nonstop since the previous day. Participants were worried that they might find themselves trapped in the Israeli Capital should snowfall force the closure of roads. No, we were not expecting anything like the Blizzard which just hit the U.S., but here even a light snowfall can paralyze the city.
Fortunately for grownups the snow never came, but there were some flurries throughout the afternoon. Yours truly was soaking wet by the time he went through the front door.
The day was epic in and of itself. Not only was I able to converse with people from all over the world, including China, Romania and Macedonia (and no they were not Jews), but I was also able to learn about a number of exciting new high tech firms based here in Israel. So much happened in one short day which was worth writing about that I will need to break it up into a few separate reports.
So what exactly is OurCrowd? You have certainly heard of venture capital firms and hedge funds. These are firms where large sums of investors’ money are pooled together to make investments. Some deal exclusively with new companies known as startups and others mainly buy and sell securities. OurCrowd is a version of the former.
You may have also heard of the relatively new phenomenon of crowdfunding. That is where small projects raise small amounts of money – usually well less than $1 million – from a large number of donors. People do not invest, merely help the respective project in exchange for small items such as a number of the product to be made once the goals of the campaign have been met. For more lucrative investment opportunities you should be looking to buy bitcoin in Australia; cryptocurrency is booming at the moment. Investing in cryptocurrencies is certainly an alluring prospect for many but due to the steep learning curve imposed by the sophisticated and often complicated technologies involved, entering the world of cryptocurrencies can seem daunting; this can be overcome with the useful articles from VanillaCrypto which help to explain everything in a simple manner.
Then there are people known as “Angel” investors. These are individuals with deep pockets who look for new companies to invest their money in, hoping to get in on the ground floor of something big.
OurCrowd is a hybrid of the three, so to speak. It pools people’s money together to invest in startups. But it does not just help people who are already rich to invest their wealth. Nor is it a general pool of money spread out over different companies.
And more importantly, one does not need to be a millionaire to get in on the ground floor of something. With OurCrowd it only takes a minimum investment of just $10,000 to be one of the first owners of a startup that could be the next Google or Twitter. Could be, but obviously there are no guarantees. One also need not be a millionaire with millions of Dollars available to invest in a more traditional VC firm.
So maybe you will only get a fraction of a percent interest in the new company. And if it has a successful exit your thousands will probably not become millions. So don’t expect to be like Mark Zuckerberg’s former college roommate who became a billionaire after getting his family to put up just a few thousand Dollars to help get Facebook started.
But OurCrowd has already had several successful exits including ReWalk, a company which has developed futuristic like tech that allows paraplegics to walk again. Being a part of the development of such technologies is another plus in being an OurCrowd investor. In fact, when reviewing all of their portfolio companies, you will see that they mostly deal with improving the standard of living throughout the world and are not simply trying to knock off Facebook or sell toys like smart phones and tablets.
Two of the many OurCrowd startups represented at the summit were Argus and Highcon. The first helps to protect the cars of the future from hackers and the second offers a new, much smaller and more affordable printing machine. (Look for more about them in a separate report.) Many seem to deal with green technology, medical advancements and other ways to improve people’s lives.
There are obviously caveats. This is not for the risk averse investor. Those people should stick to bonds and blue chip stocks. But OurCrowd helps the small investor by doing all of the leg work for him. They vet their portfolio companies first and only accept about 2% of all of the firms which come looking for funding.
And, most importantly, OurCrowd does not pool an investor’s money with everyone else’s: you can pick a specific startup in which you want to invest.
This is a relief for anyone who remembers what just happened in the world of finance with the whole sub-prime mortgage debacle in 2008. If you saw the Oscar nominated movie “The Big Short” (you should) or more importantly have read Michael Lewis’ brilliant book of the same name on which it is based (you really really should) then you already know why so called top rated investment tools may literally not be worth the paper on which they are printed.
In addition, OurCrowd deals primarily with Israeli startups in the high tech sector. So your money goes to building what may turn into the next Checkpoint, or just a modest company that gets bought out by a larger one. And even if you do not make money in the end at least it went into jobs and an attempt to innovate and advance technology.
Basically, now the little guy like me – and probably all of you reading this – has a chance to make a few Dollars while also actually helping to build something. Something new and something that creates jobs and is not just a way of pushing pieces of paper around to squeeze every dime from charging fees and creating wealth on paper.
OurCrowd CEO Jon Medved said of the event, “While most eyes are on stock market retreats on Wall Street and global markets, we are proud that we are hosting in Jerusalem a glimpse of a much brighter investor future. Israel’s technology sector is setting new records and continues to boom. We are delighted that we have so many investors joining us to build the next generation of Israeli tech giants.”
So what is the drawback? Well like I said this is much riskier than just buying stocks and bonds or putting your money in a mutual fund. But then again the big Wall Street firms all dropped the ball when it came to sub-prime mortgages and many even ripped off their own customers as they dumped their investments in it on the unsuspecting public.
Mr. Medved also made a questionable comparison about investing in general to the attendees during his opening remarks. He presented a graph which showed how much the value of the stock in high tech titans such as Microsoft and Apple has grown since there IPOs. In stark contrast, the stocks of Facebook and Apple have seemed to stagnate since theirs. His point was that there is more money to be made by getting in on the ground floor of something new than in just playing the market. But, as I have already pointed out, this is also much riskier. As the saying goes, “the higher the return, the higher the risk.”
One also must remember that the former companies both went public more than 30 years ago and have each grown considerably in value with new software, products and growing sales over that time.
Twitter and Facebook had already pretty much maxed out on their values by their IPOS and are only now looking for ways to diversify. They both rely almost exclusively on advertising for their sources of revenue as they do not charge fees for their services. And as anyone will tell you, ad revenue plummets for everyone in a time of recession.
OurCrowd is now offering new funds, however, for investors who do not wish to place all of their eggs in one basket. OurCrowd First is a $10 Million fund which required a minimum investment of $50,000. The funds raised were equally distributed over twenty different startups. So if you have a bit more to invest in such a fund it increases your chances of betting on the right horse twenty fold.
The fund is closed for a period of up to ten years, but the OurCrowd team asserts that it should only take half that time for the respective companies to either have their exit or fold. They also claim to get as much as 3 to 4 times a return for the fund’s investors. If that sounds high, it is. Again, there are no guarantees in investments. If you want security buy US Treasury Bills.
The new funds do guarantee, however, that an investor’s shares in a given company will not be diluted.
So was the Summit a triumph? Well when asked, the OurCrowd people refused to set a Dollar value on what would constitute a successful convention.
Audrey Jacobs, OurCrowd’s Vice President, said that the purpose of the Summit was to provide the, “ability of the crowd to meet with the companies. The connection between the companies and the crowd is the most important part. We call that crowd building.”
“It is very important for the investors and the CEOs to come together and strengthen their relationships,” she added.
But not everyone attended the conference to invest or to network with other business people. Many came to learn about the world of Israeli business and how to innovate in the way that what has become known to the world as “Startup Nation” succeeds at doing.
But that is another part of the story so look forward to part II about the OurCrowd Summit. Don’t worry, you won’t have to wait as long as for the next Star Wars movie to come out. I know that you will be eagerly awaiting it as people once waited for the next episode of “Lost” or “Seinfeld.”