Investing isn’t just for “accredited” people with $200,000 in the bank anymore, as crowdfunding platforms that operate in the US require. At Israeli funding platform ExitValley, anyone with a thousand shekels can become an investor in a start-up that could turn into the next big exit.
It’s crowdfunding for the masses. “In our model, investors become direct partners in early-stage companies for a minimal amount,” said CEO Yaniv Shiryon, who founded the site with partners Oded Federbush and Yaron Adler – all three veterans of the Israeli financial markets.
“Most of the companies we work with are looking for smaller amounts of money as well, in the $500,000 to one million dollar range,” Shiryon said.
ExitValley’s investment model is sort of a cross between straight investing (crowdfunded or otherwise) and crowd money-raising campaign platforms like KickStarter. ExitValley gets all the information about a company – its products, business model, business plan, etc. – and presents it to investors, who then decide how much to invest in the company.
Each investment campaign has an investment requirement (ExitValley’s minimum is a thousand shekels, about $260, but companies can set higher levels) and has a set investment goal, which, if reached, results in the issuance of “shares” in the company to investors. If the goal is not reached within an allotted time period (usually 75 days), the fundraising effort is reversed, and everyone gets their money back.
ExitValley is different from KickStarter and other similar sites, said Shiryon, because those do not actually provide investors with a stake in companies. “When you ‘invest’ in a KickStarter campaign, you are essentially donating money, or reserving your right to purchase the product they are offering in advance at a discount. With ExitValley, you are actually getting a share in the company, which could pay off nicely if the company is a success.”
Under Israeli law, direct investors in a company, as opposed to investors in companies’ stock market shares, must generally be “accredited” as high net-worth individuals (with NIS 12 million in financial assets) – but companies are also allowed to solicit up to 35 “regular” investors, and it is this group ExitValley targets.
In that, it’s different from the other better known crowdfunding platforms, including OurCrowd and iAngels. The former, said Shiryon, “is a venture capital fund for all intents and purposes, with the fund making the decisions about investments. The investors essentially help build the fund, which is then managed by OurCrowd.” iAngels, meanwhile, has a model where a major investor (an angel) makes an investing decision and the smaller investors join in – and, that, too, differs from ExitValley, said Shiryon. “On our platform, everyone is free to decide which company to invest in, and you don’t have to recruit a major investor to lead an investment.”
Technically, any organization that incorporates under Israeli law can solicit its own investors – the 35 average investors and an unlimited number of high net-worth investors – but a platform like ExitValley makes it easier for investors to find good companies to invest in, said Shiryon. “We do all the field work to ensure that the companies have good ideas, are serious about their development, and are likely to succeed in the market.”
The investments remain with the company even if there is an exit or an IPO (in which case investors would get stock certificates relative to the amount of their investment). “We spent a lot of time and effort working on exit agreements, which we provide to investors when they first begin working with a company,” Shiryon said. “We also keep in touch with investors and help the start-ups administer relations with them, run meetings, distribute reports, etc.”
ExitValley began funding companies in February (so far it has raised money for half a dozen companies), but is planning to extend its offerings beyond high-tech, said Shiryon. “There are a lot of opportunities for investors both in and out of high-tech. For example, we could help entrepreneurs open restaurants, grocery stores, barbershops, etc. We are actively looking for all kinds of investments, and we hope to be able to offer a wider range of opportunities to investors in the near future.”