According to the first report on equity crowdfunded investments in Israel, over the past five years 145 Israeli high-tech companies have raised money via the nine equity crowdfunding platforms active in Israel. Seventeen of these companies have made an exit – either an initial public offering or via acquisition.
“Equity crowdfunding” is similar to consumer-focused crowdfunding platforms like Kickstarter or Indiegogo, except that the investor gets shares in the company rather than an early release of a product. Equity crowdfunding platforms also allow individuals to invest relatively small amounts in a number of companies, spreading their risk.
Crowdfunding took off in 2012 following the US JOBS act (Jumpstart Our Business Startups), which eased securities regulations in order to make it easier to fund small businesses.
The new data on crowdfunding comes from the IVC Research Center in Tel Aviv. The report shows that 2015 was the most prolific year for equity crowdfunded (ECF) portfolio companies in Israel, with $298 million raised. Of that, $57 million came from the crowdfunding platforms and the remainder from investors in subsequent rounds.
In the first half of 2017, Israeli ECF portfolio companies have raised $173 million – that’s 73 percent of the total amount raised in 2016.
The average financing round for ECF portfolio companies was $4.1 million, with the crowdfunding platforms contributing an average of just under $1 million.
The ECF ecosystem resembles general high-tech industry trends, with Internet and software companies comprising the biggest chunk of ECF portfolio companies – 55%.
Sixty-eight of the ECF portfolio companies were in seed or early stages when they received their ECF platform investments; 29% are now considered “mid-stage” companies.
IVC expects the crowdfunding phenomenon to continue. “The key to successful financing in the Israeli high-tech market involves a co-investment strategy, which leads to larger financing and support in later stages of company development,” Marianna Shapira, research manager at IVC Research Center, said in a release. ECF investors joined venture capital investors in follow-on rounds 33% of the time.
Jerusalem-based OurCrowd was the most active ECF platform in Israel, both in terms of the number of investments made (58%) and capital invested (81% of the total). OurCrowd portfolio companies accounted for 88% of all ECF exits in Israel.
OurCrowd portfolio company ReWalk was the first Israeli ECF startup to make an exit, completing a successful IPO in 2014. Two other ECF portfolio companies have gone public in the last four years, while 15 have been acquired – half of those in 2016. The largest exit was the $175 million acquisition of Replay Technologies by Intel. The largest IPO was made by UroGenat on the NASDAQ stock market, raising $67 million.
Other leading ECF platforms active in Israel include iAngels (with 30% of the total number of investments), ExitValley and Pipelbiz. The latter two jointly accounted for 11% of the total number of investments but, according to the IVC data, do not stand out in terms of capital invested.