OurCrowd, a crowdfunding-VC hybrid reinvents entrepreneur funding in the Startup Nation.
This past October I took an intense trip to Israel where I met with leaders in the sizzling tech scene. Learning about technology in Israel was an incredible experience! Among those I met was Jon Medved, a bearlike, Berkeley grad from Santa Monica who moved to Israel at the onset of his career as a serial entrepreneur. Since then Jon has gone on to invest in over 100 start-up companies. He was previously the CEO of Vringo and the co-founder of a leading venture capital firm in Israel, Israel Seed Partners. I spoke with Jon about his latest venture, a hybrid VC-crowdfunding site called OurCrowd that has recently been in headlines for raising $12M in its first months of operations. As he puts it, OurCrowd is “off to a fast start.”
“OurCrowd is a totally new kind of crowdfunding platform,” according to Jon. As an equity crowdfunding platform, OurCrowd vets hundreds of companies seeking early stage investment and brings the best opportunities to its membership. The company itself invests in every deal it offers its members. OurCrowd members then get to choose which deals they invest into alongside OurCrowd, giving investors the ability to create their own angel portfolio.
To the uninitiated it may sound similar to sites like Angel List and Funders Club, but on the spectrum from Kickstarter to Sequoia Capital, OurCrowd fits in much closer to the pros. Unlike other crowdfunding platforms, OurCrowd’s team of investment professionals perform in-depth due diligence on the deals they present; what an investor would expect from a venture capital fund. It isn’t an open platform, either. While virtually every equity crowdfunding site employs some measure to keep from featuring half-baked startups (or worse), OurCrowd’s team (which TheNextWeb said “rocks”) stands out by sifting through the incredible volume of Israeli startups and investing in but several spectacular companies.
Where Crowdfunding Fits In
In Israel I got a glimpse of the incredible level of entrepreneurial activity in clusters like Tel Aviv, Jerusalem, and Haifa. “Start-up Nation” is producing tons of unique young companies that are scrambling for investment, which like everywhere is a challenge. You may have heard the gloom and doom around the impending series A funding crunch. The recent explosion of seed investing and the growth of accelerators like YC and TechStars, has thrust hundreds of startups into the fray, competing for series A funding; meanwhile, venture capital has declined, leading Pando Daily to predict that this crunch will “orphan” at least 1000 companies in the next years. Seed is exploding, but where have the follow-on investors going?
Meanwhile, angels and non-investors alike have been delegated to the sidelines, unable to invest in these types of rounds. “Every time I speak to people about Start-up Nation, they want to get involved,” Jon told me. “I used to tell them to buy Israel bonds or support Israel politically, but they always asked about deals – people are really excited about the amazing companies coming out of Israel.” The hordes of potential investors had few options – until OurCrowd launched, Jon had little more to offer than to take their business cards. When starting OurCrowd, he had a small fortress of shoeboxes of contacts built up in his basement. “As much as I wanted to help people get involved in the Israeli startup scene, there wasn’t an outlet for me to do it,” he said. So he made one.
Earlier this month, OurCrowd announced it had finished a $5.5M series A round for its own company, right on the heels of completing $6.5M in funding to its first startups. Here are a few investment highlights:
- AbesMarket.com – the leading organic and natural products store online
- Parko – won the Google Mobile Challenge Competition in Israel
- TradeOS – automates shipping between businesses; think eBay for intermediate goods
- Fireblade – website security
I’ve been following the progression of crowdfunding as a force in the world of investing, and will definitely be interested to see how OurCrowd expands!
What is crowdfunding? Watch below.