Developments in Startup Funding –
Beyond VC
Jon Medved
1
Israeli High
Tech
Investment
A great decade gets even better
2013 highest
in a decade
25
Israeli high-tech capital raising
Hundreds of Millions of $
20
Israeli VC Share
Other Investors
15
10
5
Israeli VC share at 24%;
at an all-time low
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: IVC Quarterly Survey, Q3 2013, IVC Research Surveys 2010-2012
Trends: Israeli M&A
M&A of Israeli firms
18
16
93
84
16.4
12
88
79
60
63
10
58
# of Deals
80
73
80
63
6
25
0
2000
7.6
5
0.5
2
1.1
1.9
2.7
2001
2002
2003
2004
2005
3.5
2006
50
50
10
23
2
70
60
62
8
4
90
2007
2.7
2008
2.6
2009
5.5
30
20
10
1.2
2010
40
0
2011
2012
2013
# of Deals
$ Billions
14
Volume
100
Trends:Average
Israeli
M&A
M&A size increasing
120
100
Average M&A
price by year
Millions of $
80
60
40
“…the average deal size has
grown nearly 3½ times, from
$32 million in 2008.”
111
81
83
51
32
35
20
Wall Street Journal
Israeli 2012 Tech Exits Top $5.5B
Jan 7th, 2013
“Recently, we are seeing Israeli companies
grow, and become world leaders in their
areas. We are seeing companies with
revenues of over $100 million. We did not
see these in the past. They were being sold
much earlier, often pre-revenue.”
Rubi Suliman
PwC High-Tech Partner
0
2008 2009 2010 2011 2012 2013
Source: PWC Israeli Exit Report 2012
The role of angel investment – angels vs “crunch”
# global startup financings – CB Insights 2013
500
400
300
200
100
0
2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4
Series A Deals
Seed Deals
The role of angel investment – angels vs “crunch”
# global startup financings – CB Insights 2013
“[the crunch]… will
result in over 1000
seeded startups being
orphaned…”
CB Insights Blog
December 19, 2012
“Companies we never
really got to know are
simply starting to fade
away…”
2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4
Series A Deals
Seed Deals
Pando Daily
November 2012
Market Disruption: Crowdsourcing in Finance
Massolution: Crowdfunding portals will
raise $5.1 billion in 2013 – nearly double
the amount raised in 2011
•
•
•
•
Consumer Lending
Rewards-based
Donations
Venture Capital
“Venture capital-type crowdfunding is the wild
card for 2013. It could raise more than a billion
dollars …”
Source: Massolution Crowdfunding Industry Overview 2013
Source: Deloitte TMT Predictions 2013 “Let's get together: crowdfunding portals bring in the bucks”
7
Israelis master the art of crowdfunding
Crowdfunding as the new seed round
Pressy: the standardization of
crowdfunding your startup
$700K raised on Kickstarter – November 2013
Israeli team that realized there is a rhyme and
reason to getting funding on Kickstarter – even
more so than going person to person to angels.
Getting off the ground is a systematic process that
can be “hacked”. Everything from the product
focus to the customer pitch had been optimized so
that they passed half a million dollars within the
first day.
8
Donation-based crowdfunding’s impact
Crowdfunding as the new seed round
Pebble: the big splash
Kickstarter: $10.3M / May 2012
E-Paper Watch with deep smartphone
integration
Proved the ability for a great idea that
major brands ignore to get off the ground
via online donation crowdfunding
Donation crowdfunding is a way to pre-sell
and to prove the existence of a market
9
Donation-based crowdfunding’s impact
Crowdfunding as the new seed round
Ouya & Star Citizen
Ouya: $9M on Kickstarter August 2012
Star Citizen: $38M ongoing on multiple
channels
The multi-billion dollar video game
industry is being turned on its head by the
ability for small players to win the faith of
video gaming audiences and fund
development with pre-sales of their
products. This has changed the hardware
and software side of things.
10
Donation-based crowdfunding’s impact
Crowdfunding as the new seed round
A campaign from
an angel’s perspective:
Team that knows how to market itself
MVP or better has already launched
Product in the hands of consumers
Initial user-base is likely a “tribal” one
– highly dedicated to the “cause” of
the product and happy to give
feedback.
11
Donation-based crowdfunding’s impact
Crowdfunding as the new seed round
Andreesen, Spark, Matrix Partners back Oculus
Rift with $75M Series B… then Facebook acquires
the company for $2B
Andreesen, KPCB, GE back
crowdfunded NY Startup Quirky
December 2013 … March 2014
After raising $2.4M from Kickstarter, Oculus
Rift gets the attention of major investors
November 2013
Internet of things company first gets mass
appeal via several high profile campaigns
Now the deals are
de-risked, venture
capital steps in
Naturally, this plays into
the rise of equity
crowdfunding platforms
12
Crowdfunding from the general public
coming to a town near you…
How does Title III crowdfunding factor into things?
Do these trends mean that the
JOBS Act and Title III crowdfunding
are about to unlock a major
investment class?
13
Crowdfunding from the general public
coming to a town near you…
How does Title III crowdfunding factor into things?
Challenges as a startup
Challenges as an investor
Cost of raising is impractical – one
estimate puts a $100K raise at almost $30K
legal fees and other costs
Direct investment means no manager,
disorganized control of the investment
Restrictions on round size, who you can let
in, and time frame can prevent effective
follow-ons with bigger investors.
What happens when your company
hits the limitations of the Title III
funding and can’t raise an additional
round?
Direct investment – nightmare cap tables
What about board representation?
14
Crowdfunding from the general public
coming to a town near you…
How does Title III crowdfunding factor into things?
Does the future of this type of raise indicate a path to a “mini” IPO for
companies?
Will lobbyists trying to fix Title III JOBS Act fundraising before it is “dead
on arrival” (TechCrunch, Feb ‘14) succeed in keeping the administrative
costs of raising under Title III reasonable for entrepreneurs?
Plus… focus on Title III misses the enormous and largely untapped
accredited investor opportunity.
15
The Accredited Investor Opportunity
8 million accredited households in the US are eligible to invest in private
securities, have the sophistication to be solicited for these types of investments.
Given potential updates to the accredited definition, this investor class may soon
expand its ranks. Meanwhile, only a handful of these households have ever
invested in private companies. Smart firms are taking note…
Carlyle lowered its minimum commitment to $50,000 –
Time Magazine says they’re allowing “everyone to be a
Mitt Romney” by participating in PE deals
Carlyle lowered its minimum commitment to $50,000 –
Time Magazine says they’re allowing “everyone to be a
Mitt Romney” by participating in PE deals
16
Updates from the VC-Crowdfunding world
A maturing industry is winning over major players
Virgin America Partnership
GE Ventures – OurCrowd Partnership
February 2014
Sharing hot consumer brands with Virgin
Airline’s amenities procurement team
November 2013
Exclusive dealflow sharing agreement allowing GE
Ventures allocation in crowdfunding rounds
17
“The Crowdfunding Economy
is About to Pop”
24 September 2013
18
OurCrowd Overview







Global leader in equity crowdfunding, just one year after founding
Raised $40M for 36 companies
18 companies with over $1m raised
Truly Global Reach: 5 of last 10 companies funded are from outside Israel
First follow-on deal funded in 4 hours, 12 follow-on deals total
Largest equity crowdfunded deal - $3.5M for a round on our site
Approaching 4000 Accredited investors, over 400 active, many high
profile/strategic
 Average active investor committed to over $100K on site
 Experienced investment team - 150 years combined VC experience
19
OurCrowd: Moving Up and Fast





Investment amount 2013: $26.4M
Investment amount Q1 2014: >$13M
New accredited investors for March 2013 : 400
Accredited Investors now from 53 countries
Biggest deal so far, Biocatch: $3.5M indicated (raised in 3
weeks)
20
OurCrowd offers the professionalism and experience of a
venture fund, plus the flexibility and choice of angel investing
•
•
•
•
Independence, self-selection
Low fees
No large upfront commitment
Relative speed and ease
•
•
•
•
Angel Investing
•
•
•
•
Very limited dealflow
Term sheet negotiations
Limited due diligence capabilities
No protection, no rights
Legal issues/termsheets handled by firm
Exposure to top dealflow
Professional due diligence
Preemptive/other rights
Venture Capital
•
•
•
•
Large Commitment
Hefty management fees
Carried interest fees
No control, no choice
21
OurCrowd’s Investment Model
22
OurCrowd’s Leadership Team
Jon Medved Co-Founder & CEO
Steven Blumgart Co-Founder & Chairman
 Washington Post: "one of Israel’s leading high tech
venture capitalists”
 12 exits >$100M
 Co-founder, CEO of VRNG
 Founder & GP Israel Seed Partners, $260M AOM
 Co-director of Glencore's aluminum division
 Senior executive, management committee at
Glencore 1998-2012
Elan Zivotofsky General Partner Investments
Pini Lozowick General Partner
 15yrs experience in Israeli investing
 Managing Partner at Prelude Israel
 Former Head of Technology Banking, Lehman Brothers
Israel
 Top-ranked Israeli tech research analyst for Goldman
Sachs
 General Partner at Alta Berkeley
 Among first employees at Broadcom, Dir.
Marketing
 Chairman of Provigent
 Founder and GM of Verisense
 5 exits; total value $3B
Geoff Levy Chair of Advisory Committee
Gadi Mazor General Partner & CTO
 Extensive experience in law, banking and investing
 Non-Executive Chairman of Monash Private Capital,
Specialty Fashion Group and Cromwell Property Group
 Non-Executive Deputy Chairman of Investec Bank
(Australia) Limited




Serial entrepreneur in mobile/wireless
US Senate Advisory Board
RIM entrepreneur of the year 2013
Ex-8200
23
Mentor Program
Profile
Role
Role in companies
Relationship
- seasoned entrepreneurs
- experience with board
seats
- active role in diligence
- pre-funding review of
companies
- directors in OC companies
- also availability for
consultation
- biannual mentorcompany event started
June 27th
Some recently joined mentors
Eli Campo
Dov Rubin
Mike Berman
- GM Israel @ LivePerson
(NASDAQ LPSN)
- SVP @ Shopping.com/Ebay
Israel
- Co-founder of NDS (sold to
Cisco, $5B)
- CEO Itamar Medical
- President Cardiology @
Boston Scientific
- Serial entrepreneur in
medical device space
Raanan Gewirtzman
Ron Moritz
Warren Adelman
- GM @Microsoft
- SVP CTO @Symantec
- SVP Chief Security Strategist
@CA
- CEO GoDaddy
- VP at McAfee
- VP at Bigfoot International
- CEO Broadlight (sold to
Broadcom $200M)
24
OurCrowd’s Mentors & Advisors
New recent mentor additions:
• Applango: Hannan Carmeli (Former President and Co-CEO
ClickSoftware,Nasdaq traded enterprise software company), joined as OC
director
• Crosswise: Josh Wexler (Head of Buyer Cloud for Rubicon Project, leading
provider of advertising automation solutions), joined as OC director
• Boatbound: Victor Mizrachi (Formerly chief scientist at Ciena), joining as
OC director
25
OurCrowd’s Portfolio
Serial Entrepreneurs/Strong Backgrounds
Dr. Amit Goffer &
Larry Jasinski
Founded Odin Medical
Technologies (acquired
by Medtronic)
CEO Soteira (acquired
by Globus), Cortek
(acquired by Alphatec)
Bob Rosenschein
Founded Answers.com
($127M exit), Accent
Software ($400M on
NASDAQ)
Jeff Pulver &
Jacob Ner-David
Benny Landa &
Aviv Ratzman
VoIP pioneer, founded
Vonage, VOX, FWD,
investor in Twitter and
Foursquare
Indigo, major global
force in digital
printing; HP
acquisition ~$800M
Founded Delta Three
($1.8B NASDAQ),
founded Nomadiq
27
Serial Entrepreneurs/Strong Backgrounds
Eitan Bauch &
Avi Yehuda
Collectively sold
startups to Intel, F5,
Salesforce.com
Zvi Schrieber
Richard Demb
Founded TradeUM
($500M exit), Unicorn
(acquired by IBM),
Lightec (acquired by GE)
Founded GC Zone,
Founded Popcorn
Indiana (acquired
by Goldman Sachs)
28
Not just capital – we’re creating opportunities
“I am excited about the value that
OurCrowd brings to early stage investors
who invest in startup companies. Not only
did we raise our seed round on OurCrowd
in a week, but we had people from all over
the world invest in Zula thanks to this
platform”
Jeff Pulver
Co-Founder, Zula
29
Co-investing with leading angel investors
Mort Meyerson
Gideon Ben Zvi
Tzachi Sultan
Briefcam
Clal Underwriting
Dell
EDS
Gigi Levy
Rami Lipman
Ajay Shah
888
Amdocs
Microsoft Israel
Silverlake Sumeru
Shah Capital Partners
Moshe Lichtman
Benny Landa
Yigal Jacoby
Microsoft
Indigo
Allot Communications
30
Announcing Strategic Co-Investment Agreement
with General Electric Ventures
• GE will co-invest with OurCrowd in select early stage companies in
the areas of energy, healthcare, software and advanced
manufacturing
• Investing on the same terms as our members/investors.
• First time major corporation has made such a commitment to an
equity crowdfunding platform
• Huge validation for OurCrowd.
Sue Siegel, GE Ventures CEO :“OurCrowd has created a unique platform for
dynamic early stage origination and funding. They offer a quality investment
environment and the partnership will give GE increased access to early
innovation.”
31
Portfolio Reserve: A New Way to Build an OurCrowd Portfolio
Funded accounts to invest across OurCrowd with opt-out functionality
Making it easy to build a real portfolio, one set of docs, auto-invest, but
maintaining discretion
Automatically starting deals with $400K spoken for – powerful tool to build
immediate demand for rounds
•
•
•
•
•
Launch: Sep. 2013
Minimum commitment: $100K
Total Value: $5M
Allocation per deal: $400K
Already have had re-fills from satisfied investors
32
Press Coverage in 2013
“The 5 Most Important New
Companies You Need to Know”
Forbes Online | April 2nd
“Medved's latest mission is to blow up the
exclusivity around tech fundraising”
Bloomberg BusinessWeek | August 1st
“An Israeli company trying to change
the way startups are funded”
CNN Business 360 | April 30th
"The most interesting investment of
the week goes to OurCrowd”
WSJ | Feb 8th
“Crowdfunding for
real investors”
thestreet.com | November
“The platform has been an
enormous success…the
ultimate win-win-win
situation, brought to you by an
new and improved Israel –
innovative & confident.”
33
Press Coverage in 2014
34
Summary










Meeting a demand for a better online way to invest in startups
Platform works—Raised record sums for 36 companies online
Industry-leading performance to date – worldwide leadership
Strong Israeli base, global investor reach into 53 countries
50% of last ten new deals originate from outside Israel
Recruited industry-leading team
Strong and impressive initial portfolio
16 companies have completed additional funding rounds after initial funding
Have provided real value-add for our startups
Achieving strong traction in a gigantic market
35