Crowdfunding, an investment model that lets small investors become venture capitalists with as little as $10,000 to put into a start-up, has come of age. On Monday, OurCrowd, an Israel-based crowdfunding platform started by veteran Israel tech investor Jon Medved, announced that it had entered into a co-investment agreement with GE Ventures, the US company’s corporate venture capital unit.
Under the deal, GE Ventures will be able to co-invest with OurCrowd in select early-stage companies in the areas of energy, healthcare, software and advanced manufacturing.
While investment agreements like this are not uncommon between large investment houses, banks, venture capital firms, and the like, it’s notable for the fact that GE will be investing with OurCrowd, which provides investment opportunities for individuals who want to invest in tech and start-ups but don’t have the millions of dollars that angels or venture capital funds can provide, as is usually required for investments in start-ups. OurCrowd allows “small” accredited investors (individuals with over a million dollars in liquid net worth or incomes of over $200,000 a year) to invest as little as $10,000 in its fund and get a piece of what could be the next big thing in Israeli tech.
GE Ventures is no stranger to the Israeli investment scene; the firm has invested in dozens of companies, on its own and in partnership with VC funds. But the OurCrowd deal is different, said Medved. “Obviously they are big enough to get in on any investment they want, and you would expect a company like that to gravitate to one of the established large VCs. The fact that we were able to conclude an investment agreement with them shows that they believe the crowdfunding model is as good, if not better, at finding innovative investments as the traditional model.”
GE Ventures agrees, said CEO Sue Siegel. “OurCrowd has created a unique platform for dynamic early stage origination and funding,” she said. “They offer a quality investment environment and the partnership will give GE increased access to early innovation.”
Because the investors in OurCrowd’s funds are arguably more concerned about the fate of their money that big investors who are used to risk, they may be more involved in the ups and downs of their investments — and Medved and his team have to do a better job of finding investments that will pay off. “We empower investors to get involved in the investment decision-making process,” he said. “Investors might like the investment the fund makes and they might not like it, but they are a part of the process.”
GE Ventures has invested in a variety of Israeli companies, both advanced and early-stage, with an emphasis on life sciences — an area that OurCrowd has targeted as well. The fund has invested in Argo, the company that makes ReWalk, an exoskeleton suit with motorized legs that power knee and hip movement to provide even paraplegics with “walking technology.” OurCrowd, said Medved, “invested in Argo right before Japanese robotics leader Yaskawa did,” and the fund is working on several other health investments as well.
With OurCrowd, said Medved, GE Ventures will find “a wide variety of investments in all sorts of Israeli companies — from start-ups to advanced stage, from ‘seed stage’ to ‘C-stage’ investments. The fact that they want to invest with us means that they realize that they have to get into opportunities more quickly, before they are gone.”
Because of its need to ensure that investors are taken care of, OurCrowd needs to be more agile than traditional VCs, checking out opportunities that others might pass over, and GE Ventures will benefit from that agility, Medved added.
Besides the prestige, the deal with GE Ventures will benefit OurCrowd investors by allowing them to utilize their new partner’s considerable resources in vetting investments, performing advanced due diligence and enabling OurCrowd to better determine the market potential of investments.
Perhaps most important, said Medved, the partnership, for the first time, levels the playing field between small investors and big ones.
“It truly democratizes investing,” Medved said. “When GE Ventures invests with us, they will be investing with the small investors, the ones who have given $10,000 to OurCrowd to get into a deal, which will be based on the same conditions and arrangements. The investor with only a small stake will be getting the same deal as the one with millions. That, more than anything, shows how important the crowdfunding platform is, and we are honored to be working with GE Ventures. To partner with a company of GE’s size and stature will allow OurCrowd to help break new ground in innovation finance.”