Israel deserves its moniker “startup nation”. There are 3,000 tech-related startups based in and around Tel Aviv alone, and over $6bn flows into the country each year through exits, according to the IVC Research Centre.
And this makes it ripe for the picking for equity crowdfunding and VC firms looking for strong deal flow to offer retail and professional investors.
Headquartered in Israel, OurCrowd is one of the pre-eminent equity crowdfunding platforms in the world, and a significant VC investor. We have already seen two IPOs and multiple exits, and have overseas branches in New York, Sydney, Singapore and San Diego. The more global your investment platform and access, the better for your investors and companies. Global reach unlocks value and delivers better opportunities for growth.
These are my eight tips for investors considering the sector.
1. Impact works
The amazing thing about harnessing the power of the crowd is that investors respond best to doing good while also doing well. We have successfully supported and made money with amazing companies like ReWalk, which listed on the Nasdaq in 2014. The Israel-based firm makes exoskeletons for the disabled that literally help people who have suffered devastating injuries and amputations walk again.
2. The morning after
I can’t emphasise enough the importance of choosing a platform, or indeed any investment vehicle, where managers focus on the day after an investment is made, and are not just focused on raising the money.
3. Organised into a single entity
Like some other platforms, we bring the crowd together into a single entity, a Special Purpose Vehicle (SPV). This is important as it means the platform can act on behalf of a crowd of shareholders, giving them more clout, and in turn giving the company one strong shareholder with a board seat and preferred stock.
4. Startup ecosystems
Being based in Israel has been a major competitive advantage for us. Similar benefits flow to platforms investing in London and Silicon Valley. Each year in Israel there are almost 1,000 venture financings and 100 M&A transactions. Accessing this amazing deal flow continues to excite investor demand among Israelis and foreigners who want to participate in the startup nation’s success.
5. Skin in the game
At OurCrowd, the managers and owners of the platform invest their own money alongside the crowd in each and every investment. As with any VC investment, investors have to be aligned with the platform organisers to ensure the best results.
6. Embrace technology
Don’t be afraid of technology. Some say you should only invest in things you understand, but in the right framework and with the right advice, you can drive some truly dramatic returns.
Great returns are awaiting investors in deep learning, medical devices, machine vision, drones, big data, analytics, agtech and more.
7. Think of the way out, not just the way in
There are still far too many equity crowdfunding platforms that have never made an exit. Check the track records and pick the guys who pick the winners. Also, make sure they are not being compensated just by getting your money into the deal, but on returning your money to you.
When choosing a platform, make sure you have done your homework on the site operating procedures, business model, and those responsible for the site. There is real risk involved in picking these investments and you need to make sure that this is be carefully managed.
8. Not all the crowd were created equal
Crowdfunding platforms have different criteria for accepting investors. Some allow anyone and any amount, others only sophisticated investors based on net worth, income or experience, plus high minimum investments.
Don’t be afraid of being elitist. If you have the wherewithal, then investing with the “incrowd” – alongside those who have money, know–how and connections – can be good for your bank account in the long run.