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IVC Research Center is proud to present the first report on equity crowd funding investments in Israel. The equity crowd funding trend first appeared in 2012, following US legislation, also known as the JOBSact (Jumpstart Our Business Startups). The legislation regulated and authorized funding of small businesses by easing many of the country's securities regulations. The ongoing trend of equity crowd funding is apparent in Israel, with the launch of OurCrowd, a leading global equity crowd funding platform for accredited investors.
According to IVC, between 2012 and H1/2017, nine active equity crowd funding platforms (including two foreign) invested in 145 Israeli high-tech companies. Financing 2015 was the most prolific year for equity crowdfunding (ECF) portfolio companies, with $298 million raised from different types of investors. ECF platforms invested the largest amount in 2015 - $57 million, in 50 deals. 2017 is expected to be another successful year for ECF portfolio companiesin capital raising, as H1/2017 capital ($173 million) already equals 73 percent of the entire amount raised in 2016. The average financing round for ECF portfolio companies rose to $4.1 million in 2012-H1/2017, while the average crowd funding platform investment stood at $0.9 million. The largest average financing by equity crowd funding platforms was recorded in 2015 -$1.1 million. Marianna Shapira, research manager at IVC Research Center, explained: "Overall Israeli high-tech market is growing annually, both in number of new companies established and in financing rounds. IVC has observed in the few past years that more companies reach mature stages of development, demanding larger financing rounds.Therefore, VC funds focus on growth financing. This transition leaves a void in earlier development stages, which is sorely needed by seed & R&D startups. Equity crowd funding platforms perfectly fit into this niche, answering this financing demand, mostly because of their natural tendency to invest smaller amounts per round." Sectors and stages IVC observed that the ECF ecosystem resembles the general high-tech industry trends in sector preferences. Internet and software companies comprise 55 per cent of the total ECF portfolio companies (44 internet and 36 software companies) Sixty-eight percent of the portfolio companies were either in the seed or early stages when first investments were made by ECF platforms.
As the portfolio companies matured, 29 percent of the ECF portfolio are currently in mid-stage. Shapira added: "It seems that equity crowdfunding has found a way to successfully invest in Israeli high-tech market, participating in follow-on financing rounds of 33 percent of portfolio companies. We shouldn't forget, however, that the key to successful financing in Israeli high-tech market involves a co-investment strategy, which leads to larger financing and support on later stages of company development.Although the volume of this financing model is still modest, IVC review exposed it's expanding and growing potential." Successful exits are evidence of the viability of an investment vehicle, IVC found that 12 per cent of the companies that raised capital from ECF platforms made an exit. ReWalk, an OurCrowd portfolio company,was the first Israeli ECF portfolio company that reached the milestone of a successful IPO in 2014. In past fouryears, two ECF portfolio companies went public and 15 companies were acquired. Interestingly, OurCrowd portfolio companies comprised 88 percentof all ECF portfolio exits. Almost half (47 percent) of all ECF M&A deals were madein 2016. The largest exit was the $175 milliona cquisition of Replay, an online entertainment company, by Intel. The largest initial public offering ($67 million) was made by UroGenat on NASDAQ.
17 Israeli equity crowdfunding portfolio high-tech companies made an exit.
88 of exits were done by Our Crowd portfolio companies.
Nine equity crowdfunding platforms are active in Israel; two of these are foreign.