New technologies in the areas of computers, medicine, environmental science, neuroscience, and a plethora of other areas aren’t the only things the Start-Up Nation has invented; it has also largely created a new way of investing, one that democratizes opportunity “and gives the average person with $25,000 or $50,000 to invest an opportunity to get in on the ground floor of the next MobileEye or Waze,” said Jon Medved, CEO of OurCrowd, now the largest crowdfunding platform in the world.
“Crowdfunding has not only opened up a whole new world of opportunity for investors, it’s given start-ups a new way of not only raising money, but of tapping into a community that can provide them a lot of help on their journey.”
And the best is yet to come, adds Medved. “More multinationals are coming to Israel by the day looking for more technology, and that’s creating a virtual snowball effect — where more entrepreneurs are encouraged to build companies, which results in more tech development, and more innovation.”
Medved, one of the most important figures in Israeli high-tech, has been running OurCrowd since 2012 — but he’s been working in Israeli tech for decades, as a serial entrepreneur who has opened and closed numerous tech businesses. But with OurCrowd, Medved had taken Israeli tech to a new level — and it’s for that reason that he is to be awarded the Bonei Tzion (Builders of Zion) prize on Tuesday at the Knesset.
Medved — along with five other Anglo immigrants to Israel — is being honored by the immigrants organization Nefesh B’Nefesh. The six will each receive a prize of $10,000 for “exemplifying how olim are making historic advancements and contributing, each in his own field, to the success of the country and our nation,” said Nefesh B’Nefesh chairman Rabbi Yehoshua Fass.
For Medved, crowdfunding is a combination of three themes that have dominated his life, he told The Times of Israel in an exclusive interview. “I first came to Israel in 1980, after working as a campus organizer for the Jewish Agency at US colleges. I was a community organizer before Barack Obama, helping raise consciousness in Israel by speaking about the importance of aliya — eventually falling for my own ‘propaganda’ and making aliya myself.
“I was also always into technology — one of the first advocates of the Start-Up Nation,” recounted Medved. “I’m proud to say that I am the guy Saul Singer and Dan Senor consulted with long before they wrote their book of that name. And I’ve also been a serial entrepreneur, opening a number of businesses that were either bought out or are still operating.” Among these is the video-app firm Vringo, which, eight years after its founding in 2007, is still going strong. Intimately related to tech, said Medved, is his third passion — entrepreneurship.
All three of those interests coalesced into the idea of crowdfunding, a system under which accredited investors (with a specific minimum net worth) can join a fund that lets them invest relatively modest sums in promising tech companies, instead of the millions of dollars that angels or venture-capital funds invest in tech companies.
“I have made hundreds of speeches about Israel, about tech, and about entrepreneurship, all over the world, and inevitably I get dozens of business cards each time, with people asking me to ‘find them a deal.’ That was really the only way small investors could get in on the ‘next big thing.’ I realized there was a huge need here — a desire by average investors to tap into investing in Israel.”
Fortunately, the time was right for building a system for the small investor; the US had just implemented an investment rule change (part of the Jumpstart Our Business Startups, or JOBS, Act) that allowed start-ups to solicit investments publicly from “accredited investors” (individuals with over 1 million dollars in liquid net worth, or incomes of more than $200,000 per year) via social media, print materials, email and other means.
Medved, along with several partners, raised some money — “We used most of it for lawyers, because we wanted to make sure we were doing it right” — and eventually found some companies that were willing to go along with the new, unknown investment model.
“We started out with seven companies, and they actually thought we were joking,” continued Medved. “We were signing them up on term sheets and negotiating investment contracts, without having raised a shekel.” Soon enough, though, crowdfunding became not something “weird,” but a good — maybe even better — way to raise funds.
But crowdfunding doesn’t just help investors; it’s good for the start-ups as well, Medved explained. “Our investors are very active, and we encourage that. Last year, we held about 200 events and meetings around the world to keep our investors in touch with the start-ups. Investors in our companies have taken their role very seriously, and we filter down the good advice we get at these events to our entrepreneurs. For us, it’s about building a community, not just the money.”
In just two years, OurCrowd has invested over $110 million from accredited investors for its 68 — “Wait a minute, we just signed up a new one yesterday, so now it’s 69,” said Medved mid-sentence — companies, in the areas of cybersecurity, medtech, agritech, big data, robotics, financial technology, the Internet of Things, and more.
Currently, 80% of the companies in OurCrowd’s portfolio are Israeli, while most of the others are “Israeli affiliated” — located in the US with Israeli-American partners, etc.
But increasingly, companies that have nothing to do with Israel are contacting OurCrowd, seeking to enter the world’s biggest crowdfunding platform, and Medved is amenable to accepting them. “It’s good for us, of course, but it also helps cement relationships in the tech world with Israel. We’re proud to manage these companies’ funding from Jerusalem. That, to me, is a great example of Zionism.”
As is the great rush of multinationals to open up operations and make acquisitions in Israel. “We are in a golden age here, and there is no question that the multinationals have had a lot to do with Israel’s prominence as a tech power around the world.” While some complain that the multinationals “steal” Israeli talent and make the big bucks abroad, Medved sees it differently. “In the last two years, we have had 10 billion-dollar exits, half of them M&A deals and half of them IPOs on world stock exchanges. And in the past few months, we have something new: The private equity funds have discovered Israel, and they are scouring the country looking for opportunities.”
OurCrowd itself has extensive relationships with multinationals, most notably GE — and the growth of Israeli tech feeds on itself, attracting more and greater ties. An example, said Medved, is OurCrowd’s own new president, Anthony DeChellis, who previously served as CEO of Private Banking Americas at Credit Suisse, headed Private Wealth Management at UBS, and held a range of leadership positions at Merrill Lynch, including manager of the European Private Banking Business. “He’s a pretty high-profile guy who could go anywhere. But he wants to be here, with us in Israel, because he realizes our potential.”
A potential that is on the upswing — and has a long way to go before it crests, Medved added. “The deals are getting bigger — the average exit size in 2014 was eight times that of 2008 — and they will continue to get even bigger. That’s because the next big explosions — big data, machine vision, cybersecurity, the Internet of Things, and other hard-tech areas — are exactly the kinds of things Israel excels at. As successful as we have been, I believe we are just at the beginning of our tech journey.”