How It Works
OurCrowd: Funding the Next Generation of Startups
What is crowdfunding?
Over the past few years, a new way of funding ideas and projects has emerged; crowdfunding uses the collective cooperation of a group of people (the “crowd”) to pool resources together in support of a specific project. There are two main crowdfunding models: equity-based crowdfunding where people contribute funds to a business or project in exchange for equity and donation-based crowdfunding where people donate to a project in exchange for tangible, non-monetary, rewards.
A relatively new phenomenon, crowdfunding is booming worldwide. As of April 2012, according to crowdsourcing.com, there were 452 crowdfunding platforms active worldwide. Donation-based crowdfunding (sites like KickStarter and IndieGogo) has seen tremendous growth in the past couple of years; as of October 2012 Kickstarter had launched over 73,000 projects, and raised almost $400M in pledges. Now, equity-based crowdfunding is about to take off. As of April 5 2012, with the passing of Jumpstart Our Business Startups (JOBS) Act in the US , “registered portals” will be able to engage in equity-crowdfunding and even “non-accredited investors” will be able to make direct investments into private companies under new proposed regulations.
Why start in Israel?
Each year in Israel there are 500+ venture financings and over 1000+ angel financings. Deal flow continues to rise and there is huge pent up and growing demand among Israelis and foreigners to participate in Israel’s “StartUp Nation” culture – and not just through investing in public stocks or mutual funds. If this is the case, why should the majority of crowdsourcing platforms remain in North America and Western Europe?
OurCrowd is a world-leading equity-based crowdfunding platform, built for accredited investors to provide venture capital funding for Israeli (and later global) venture capital start-ups. Membership in the community is vetted and offered only to people who meet the stringent accreditation criteria. Accredited investors who are accepted into the community can make minimum investments of $10,000 per deal. The initial focus of OurCrowd will be the dynamic early stage funding market in Israel and only companies that have passed a rigorous due diligence process will be added to the platform. All term sheets will be pre-negotiated and OurCrowd’s management company and affiliated mentor network will lead the investment with their own money. OurCrowd has become the first Israel focused, equity-based investment platform to launch and one of the world’s leading accredited investor only platforms.
Who are we?
Jon Medved, the co-founder and CEO of OurCrowd, is a leading Israeli venture capitalist and serial entrepreneur. He is the founder of Israel Seed, which has raised and managed $262M over four funds. He has made 100 investments (including both his angel and VC investment) in Israeli startup companies, 12 of which have reached an excess of $100M in value. Most recently, Jon founded and was the CEO of Vringo, publicly traded on NYSE MKT (VRNG).
Steven Blumgart, the co-founder and Chairman of OurCrowd, is a leading investor and philanthropist. Steven was part of the senior management team at Glencore International (GLEN.LE) where he headed their aluminum business.
Please read about the rest of the team in the Our Team page.
How are we different from the competition?
OurCrowd is building a much needed new venture capital strategy for providing adequate and efficient capital to fast growing companies. Commitments to traditional Venture Funds are down, and many funds are avoiding early stage opportunities. Investors are increasingly unwilling to make large commitments to funds, with their concomitant large management fees and carries. While Angel investing is rapidly increasing as a funding alternative for early stage companies, most Angels and their groups, remain largely ad hoc, and are not scalable. Investors want the organization, deal sourcing and management capability of a venture fund without the large up front commitment and fees, together with the ability to pick and choose those investments that interest them.
OurCrowd’s unique solution
OurCrowd is building an exclusive crowdfunding platform to address these issues. OurCrowd will offer its members the services and management of a Venture capital organization together with the flexibility and choice of angel investing. We will source, vet and organize the investments to be presented to our members, who then will be able to choose only those companies that interest them and make individual investments starting as low as $10,000. The fees and carries associated with OurCrowd will be significantly lower than those associated with traditional Venture investing. OurCrowd will utilize the efficiency of web based crowdfunding via special software solutions to simplify the investment process and make it as painless as possible.
The promise and pitfalls of Crowdfunding
While crowdFunding offers the promise of a new way to raise capital for small companies, there are a host of problems with the existing other crowdfunding models: What startup wants to deal with several hundred or even a thousand small investors with all of the administrative headache that entails? Which startup wants to forego the expert advice and guidance as well as networks of connections offered by experienced mentors and investors? What startup wants someone investing as little as $100 as an individual in a seed round, and at the same time be limited to only raising $1M in aggregate? Which startup wants a crowd funding portal to be a passive one time intermediary, and then be stuck managing, reporting and answering the often detailed questions of this potentially unruly crowd of investors? OurCrowd solves these problems. By only admitting select accredited investors and forming individual limited partnerships for each investment , OurCrowd protects companies from the nightmare of handling a large number of small , inexperienced private investors. OurCrowd will select and diligence each deal for which money is to be raised, and will invest its own management funds as an active investor. OurCrowd will pre-negotiate and sign all term sheets and administer the deal logistics, paperwork, and future reporting on behalf of its investors. OurCrowd also provides support and guidance to all the companies on the platform by providing an OurCrowd mentor to join the company’s board. Investors will be able to invest as little as $10K in each company and there is no limit on the funds that companies are able to raise per partnership. Moreover, OurCrowd will retain pre-emptive rights and thereby provide the companies and investors a framework to raise and invest additional funds in future rounds and follow-ons.
How do I join?
It is really simple to sign up at OurCrowd: Visit our website and register.
Once we verify that you meet the criteria (we may call you as part of this process), you can log into the OurCrowd site and have full access to information about the OurCrowd companies available for investment. Note that there may be additional accreditation requirements that you must fulfill before making investments.
You may also sign up for our newsletter to stay in touch if you do not meet our accreditation criteria.
How do I make an investment?
View the deals available to accredited investors in the “browse companies” section of the website. You will be provided with material about the company, including videos, presentation, analysis, deal terms, team backgrounds and more. You will also be able to participate in a webinar, call or meeting with company management as per request. Once you have decided to make an investment, you will indicate your amount on the Commit button. We will make allocations based on a process which combines both a first-come first-served and pro-rata calculation. We will send you deal documentation for signing and then transfer instructions.
The deal documentation includes your signed certification that you meet your country’s income, asset, and/or experience criteria. In the US, you must have a licensed professional (broker, lawyer, accountant, investment adviser) sign a letter that certifies that you qualify. More details on our accreditation page.
Carmel Ventures, Qualcomm Ventures