In the fast-emerging space of equity crowdfunding, Silicon Valley insiders are pretty familiar with players like AngelList. But there’s actually a startup crowdfunding site out of Israel with a veteran team that has a good deal of momentum as well.
OurCrowd, which is run by serial entrepreneur and venture capitalist Jon Medved, has put at least $70 million to work in roughly 50 companies and has plans to invest $100 million more over the next year. One of their companies, ReWalk Robotics, an exoskeleton company that helps disabled people walk again, just IPO-ed a little over week ago and now has a market cap of about $360 million.
This is an apples-to-oranges comparison for reasons I’ll explain in a second. But for comparison, what OurCrowd is raising and committing is more than the $40 million CircleUp has put to work and the roughly $20 million that Y Combinator-backed Funders Club has done.
Why are OurCrowd’s volumes larger?
Well, on the spectrum of having a wide-open market for companies and investors to connect with each other versus the traditional and more restricted venture route, OurCrowd leans toward the latter.
It’s an entirely different model.
While OurCrowd takes accredited investors on one side, they have a 50-person due diligence team on the other side that vets deals. Then they let investors pick and choose which qualified companies they want to invest in. OurCrowd puts in about 5 to 15 percent of the funding for every deal, unlike other platforms which might just take carry and not have skin in the game. Investors don’t have to commit to every single OurCrowd deal, but they can choose which ones make sense for them.
OurCrowd also has more requirements akin to established venture funds. They take board seats and have rights like pre-emptive or anti-dilution rights.
“We’re more like a VC,” said Medved, who previously started a venture fund called Israel Seed Partners and ran an early publicly-traded mobile company called Vringo in the ringtones and content space. “A lot of it has to do with my background as a venture capitalist. I don’t think you need to throw everything out.”
He went on, “What if you could essentially have the best of both worlds — somebody who is picking the deals, taking care of legal, and giving you the protection that the venture guys get — but you still have discretion? I don’t think the Valley understands the need for this. Not everyone is an angel and most rich people have never invested in a startup.”
But Medved isn’t overly critical of other platforms. He just stresses that his model is fundamentally different.
While the company is not as well-known in the Valley because it’s headquartered in Jerusalem, it has global ambitions. It doesn’t want to be some kind of in-road to the Israeli market, although Medved is deeply connected there. About half of OurCrowd’s investment money comes from the U.S., with the rest from overseas and less than 10 percent from Israel.
The Israeli roots have helped in one regard, however; the country moved more quickly than the U.S. and SEC in liberalizing laws around equity crowdfunding, so OurCrowd has had a bit of a head start on U.S. companies.
Medved is also totally focused on the accredited investor market right now, which requires that participants have at least an income of more than $200,000 per year or a net worth of more than $1 million. This is pretty much in line with what many other equity crowdfunding companies are doing for now.
“One day, maybe the great masses will come in. But right now, we’re focused on the accredited, 8 million households in the U.S.,” he said.