Israel’s OurCrowd has announced its expansion down under, seeking to provide a “third pillar” of funding to Australian startups in addition to angel investors and venture capital.
OurCrowd is a capital crowdfunding platform, but unlike a company like Kickstarter, is open only to accredited investors and selected startups.
OurCrowd vets both the startups and investors and then plays matchmaker — grouping several investors into one funding vehicle. OurCrowd then manages and invests some of its own capital in the vehicle — typically US$50,000.
The platform will allow investors from abroad to fund Australian companies and also Australian investors to fund companies in other countries, said OurCrowd CEO Jon Medved. OurCrowd is friendly to new investors, with many of its current active members first-time investors, he said.
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Currently, OurCrowd has about 4000 accredited investors from around the world, Medved said. More than 300 of them have made at least one investment through OurCrowd, he said. On average, each of these active members has invested $100,000 and made about four investments in the year since OurCrowd launched, he said.
OurCrowd plans to select “a handful” of Australian tech startups to fund in its first year in the country; the actual number will depend on the quality of the applicants, he said.
Nathan Cher of NCN Investments, who will help lead OurCrowd in Australia, said he would be “very happy if there were three or four or five Australian tech companies within next year’s group of 60-odd companies on the platform.”
Medved said his group is seeking “deep technology” companies that are looking to take their product or service to the global market. The target will already have some customers and have demonstrated some traction in the market, he said.
“Typically we’re not the first money” the startup has received, Medved said. While it will occasionally provide seed funding, the group is “focusing on series A and series B funding.”
Medved said he is excited about the Australian startup market. “Our sense is there is unbelievable technology and innovative juices flowing in Australia,” he said.
“But there’s an arbitrage situation here where there simply has not been adequate money to fund startups.”
OurCrowd seeks to be the “global cavalry,” providing a new form of funding — equity crowdfunding — which combines the best parts of angel investment and venture capital, he said.
Globally, while angel investment has been on the upswing, availability of venture capital is way down, said Medved. “What we are essentially is … a hybrid of the two prior models.”
The pros of angel investing include that the investor has total discretion and freedom of how much money to invest, he said.
A con is that one angel’s money is not usually enough and the investor must coordinate with several others and assign responsibilities, he said. This can lead to a drawn-out process when future decisions must be made since every investor has to sign off, he said.
When venture capital does show up, individual angel investors can get “squeezed” because they end up with relatively small shares in the company, Medved added.
The good part for an investor of being involved in venture capital is that the fund will handle due diligence and command a large share in the startup, he said. However, the investor will not get as much discretion as he would as an angel, he said.
OurCrowd’s equity crowdfunding model is the “best of both worlds,” Medved said. “We look to the company like a normal venture fund. We look to the investor like it’s an angel investment.”
Rather than merely herd investors around a company, OurCrowd also puts “skin in the game” for every startup it selects, said Cher. Medved said OurCrowd typically contributes US$50,000 of its own money into every deal.
Medved said OurCrowd will not require Australian companies to move headquarters out of the country. He said he is sympathetic to the so-called “brain drain” issue because he has seen several major Israeli companies purchased by American companies and moved to Silicon Valley.
“I’m sensitive to the fact that as you develop in an ecosystem, you don’t just want to have these cool ideas cherry-picked by the big guys and [not] get any of the add-on value or any of the additional jobs or ecosystem pluses,” he said.
“The idea is to build long-term value here, and I would hope that some of these companies that we can build [into] global companies will continue to be headquartered or have significant presences here.”
In Australia, OurCrowd will be led by Nathan Cher and David Shein, who were the co-founders of Com Tech, a tech IT services firm that was sold to Dimension Data, as well as Geoff Levy, chairman of Monash Private Capital.
The launch of OurCrowd in Australia follows expansion here by Indiegogo, a rewards-based crowdfunder that works similarly to Kickstarter.
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