Presentation on theme: "Developments in Startup Funding – Beyond VC"— Presentation transcript:
1 Developments in Startup Funding – Beyond VC Jon Medved
2 Israeli High Tech Investment A great decade gets even better2013 highest in a decadeIsraeli VC share at 24%; at an all-time lowSource: IVC Quarterly Survey, Q3 2013, IVC Research Surveys
3 Trends: Israeli M&AM&A of Israeli firms$ Billions# of Deals
4 Trends: Israeli M&A Average M&A size increasing Millions of $ “…the average deal size has grown nearly 3½ times, from $32 million in 2008.”Wall Street JournalIsraeli 2012 Tech Exits Top $5.5BJan 7th, 2013“Recently, we are seeing Israeli companies grow, and become world leaders in their areas. We are seeing companies with revenues of over $100 million. We did not see these in the past. They were being sold much earlier, often pre-revenue.”Rubi SulimanPwC High-Tech PartnerMillions of $Source: PWC Israeli Exit Report 2012
5 The role of angel investment – angels vs “crunch” # global startup financings – CB Insights 2013“[the crunch]… will result in over 1000 seeded startups being orphaned…”CB Insights BlogDecember 19, 2012Seed deal explosionSeries A funding“Companies we never really got to know are simply starting to fade away…”Pando DailyNovember 2012
6 The role of angel investment – angels vs “crunch” # global startup financings – CB Insights 2013“[the crunch]… will result in over 1000 seeded startups being orphaned…”CB Insights BlogDecember 19, 2012Seed deal explosionSeries A funding“Companies we never really got to know are simply starting to fade away…”Pando DailyNovember 2012
7 Market Disruption: Crowdsourcing in Finance Massolution: Crowdfunding portals will raise $5.1 billion in 2013 – nearly double the amount raised in 2011Consumer LendingRewards-basedDonationsVenture Capital“Venture capital-type crowdfunding is the wild card for It could raise more than a billion dollars …”Source: Massolution Crowdfunding Industry Overview 2013Source: Deloitte TMT Predictions 2013 “Let's get together: crowdfunding portals bring in the bucks”
8 Israelis master the art of crowdfunding Crowdfunding as the new seed roundPressy: the standardization of crowdfunding your startup$700K raised on Kickstarter – November 2013Israeli team that realized there is a rhyme and reason to getting funding on Kickstarter – even more so than going person to person to angels. Getting off the ground is a systematic process that can be “hacked”. Everything from the product focus to the customer pitch had been optimized so that they passed half a million dollars within the first day.
9 Donation-based crowdfunding’s impact Crowdfunding as the new seed roundPebble: the big splashKickstarter: $10.3M / May 2012E-Paper Watch with deep smartphone integrationProved the ability for a great idea that major brands ignore to get off the ground via online donation crowdfundingDonation crowdfunding is a way to pre-sell and to prove the existence of a market
10 Donation-based crowdfunding’s impact Crowdfunding as the new seed roundOuya & Star CitizenOuya: $9M on Kickstarter August 2012Star Citizen: $38M ongoing on multiple channelsThe multi-billion dollar video game industry is being turned on its head by the ability for small players to win the faith of video gaming audiences and fund development with pre-sales of their products. This has changed the hardware and software side of things.
11 Donation-based crowdfunding’s impact Crowdfunding as the new seed roundA campaign froman angel’s perspective:Team that knows how to market itselfMVP or better has already launchedProduct in the hands of consumersInitial user-base is likely a “tribal” one – highly dedicated to the “cause” of the product and happy to give feedback.Seed
12 Donation-based crowdfunding’s impact Crowdfunding as the new seed roundAndreesen, Spark, Matrix Partners back Oculus Rift with $75M Series B… then Facebook acquires the company for $2BDecember 2013 … March 2014After raising $2.4M from Kickstarter, Oculus Rift gets the attention of major investorsAndreesen, KPCB, GE back crowdfunded NY Startup QuirkyNovember 2013Internet of things company first gets mass appeal via several high profile campaignsNow the deals are de-risked, venture capital steps inNaturally, this plays into the rise of equity crowdfunding platforms
13 Crowdfunding from the general public coming to a town near you… How does Title III crowdfunding factor into things?Do these trends mean that the JOBS Act and Title III crowdfunding are about to unlock a major investment class?
14 Crowdfunding from the general public coming to a town near you… How does Title III crowdfunding factor into things?Challenges as a startupCost of raising is impractical – one estimate puts a $100K raise at almost $30K legal fees and other costsRestrictions on round size, who you can let in, and time frame can prevent effective follow-ons with bigger investors.Direct investment – nightmare cap tablesChallenges as an investorDirect investment means no manager, disorganized control of the investmentWhat happens when your company hits the limitations of the Title III funding and can’t raise an additional round?What about board representation?
15 Crowdfunding from the general public coming to a town near you… How does Title III crowdfunding factor into things?Does the future of this type of raise indicate a path to a “mini” IPO for companies?Will lobbyists trying to fix Title III JOBS Act fundraising before it is “dead on arrival” (TechCrunch, Feb ‘14) succeed in keeping the administrative costs of raising under Title III reasonable for entrepreneurs?Plus… focus on Title III misses the enormous and largely untapped accredited investor opportunity.
16 The Accredited Investor Opportunity 8 million accredited households in the US are eligible to invest in private securities, have the sophistication to be solicited for these types of investments.Given potential updates to the accredited definition, this investor class may soon expand its ranks. Meanwhile, only a handful of these households have ever invested in private companies. Smart firms are taking note…Carlyle lowered its minimum commitment to $50,000 – Time Magazine says they’re allowing “everyone to be a Mitt Romney” by participating in PE dealsCarlyle lowered its minimum commitment to $50,000 – Time Magazine says they’re allowing “everyone to be a Mitt Romney” by participating in PE deals
17 Updates from the VC-Crowdfunding world A maturing industry is winning over major playersVirgin America PartnershipFebruary 2014Sharing hot consumer brands with Virgin Airline’s amenities procurement teamGE Ventures – OurCrowd PartnershipNovember 2013Exclusive dealflow sharing agreement allowing GE Ventures allocation in crowdfunding rounds
18 “The Crowdfunding Economy is About to Pop” 24 September 2013
19 OurCrowd OverviewGlobal leader in equity crowdfunding, just one year after foundingRaised $40M for 36 companies18 companies with over $1m raisedTruly Global Reach: 5 of last 10 companies funded are from outside IsraelFirst follow-on deal funded in 4 hours, 12 follow-on deals totalLargest equity crowdfunded deal - $3.5M for a round on our siteApproaching 4000 Accredited investors, over 400 active, many high profile/strategicAverage active investor committed to over $100K on siteExperienced investment team years combined VC experience$20M, 7 deals over $1M : More than Indiegogo, #2 worldwide after KickstarterFollow-on deal for portfolio company: 100% of eligible investors exercised preemptive rightsPortfolio companies: Several in process for follow-on rounds at higher valuations, even some early acquisition talks
20 OurCrowd: Moving Up and Fast Investment amount 2013: $26.4MInvestment amount Q1 2014: >$13MNew accredited investors for March 2013 : 400Accredited Investors now from 53 countriesBiggest deal so far, Biocatch: $3.5M indicated (raised in 3 weeks)$20M, 7 deals over $1M : More than Indiegogo, #2 worldwide after KickstarterFollow-on deal for portfolio company: 100% of eligible investors exercised preemptive rightsPortfolio companies: Several in process for follow-on rounds at higher valuations, even some early acquisition talks
21 Angel Investing Venture Capital OurCrowd offers the professionalism and experience of a venture fund, plus the flexibility and choice of angel investingLegal issues/termsheets handled by firmExposure to top dealflowProfessional due diligencePreemptive/other rightsIndependence, self-selectionLow feesNo large upfront commitmentRelative speed and easeAngel InvestingVenture CapitalLarge CommitmentHefty management feesCarried interest feesNo control, no choiceVery limited dealflowTerm sheet negotiationsLimited due diligence capabilitiesNo protection, no rights
23 OurCrowd’s Leadership Team Jon Medved Co-Founder & CEOWashington Post: "one of Israel’s leading high tech venture capitalists”12 exits >$100MCo-founder, CEO of VRNGFounder & GP Israel Seed Partners, $260M AOMSteven Blumgart Co-Founder & ChairmanCo-director of Glencore's aluminum divisionSenior executive, management committee at GlencoreElan Zivotofsky General Partner Investments15yrs experience in Israeli investingManaging Partner at Prelude IsraelFormer Head of Technology Banking, Lehman Brothers IsraelTop-ranked Israeli tech research analyst for Goldman SachsPini Lozowick General PartnerGeneral Partner at Alta BerkeleyAmong first employees at Broadcom, Dir. MarketingChairman of ProvigentFounder and GM of Verisense5 exits; total value $3BGeoff Levy Chair of Advisory CommitteeExtensive experience in law, banking and investingNon-Executive Chairman of Monash Private Capital, Specialty Fashion Group and Cromwell Property GroupNon-Executive Deputy Chairman of Investec Bank (Australia) LimitedGadi Mazor General Partner & CTOSerial entrepreneur in mobile/wirelessUS Senate Advisory BoardRIM entrepreneur of the year 2013Ex-8200
24 Mentor Program Some recently joined mentors Eli Campo Dov Rubin ProfileRoleRole in companiesRelationship- seasoned entrepreneurs- experience with board seats- active role in diligence- pre-funding review of companies- directors in OC companies- also availability for consultation- biannual mentor-company event started June 27thSome recently joined mentorsEli Campo- GM LivePerson (NASDAQ LPSN)- Shopping.com/Ebay IsraelDov Rubin- Co-founder of NDS (sold to Cisco, $5B)- CEO Itamar MedicalMike Berman- President Boston Scientific- Serial entrepreneur in medical device spaceRaanan Gewirtzman- CEO Broadlight (sold to Broadcom $200M)Ron Moritz-- SVP- SVP Chief SecurityWarren Adelman- CEO GoDaddy- VP at McAfee- VP at Bigfoot International
25 OurCrowd’s Mentors & Advisors New recent mentor additions:Applango: Hannan Carmeli (Former President and Co-CEO ClickSoftware,Nasdaq traded enterprise software company), joined as OC directorCrosswise: Josh Wexler (Head of Buyer Cloud for Rubicon Project, leading provider of advertising automation solutions), joined as OC directorBoatbound: Victor Mizrachi (Formerly chief scientist at Ciena), joining as OC director
27 Serial Entrepreneurs/Strong Backgrounds Dr. Amit Goffer & Larry JasinskiFounded Odin Medical Technologies (acquired by Medtronic)CEO Soteira (acquired by Globus), Cortek (acquired by Alphatec)Bob RosenscheinFounded Answers.com ($127M exit), Accent Software ($400M on NASDAQ)Jeff Pulver & Jacob Ner-DavidVoIP pioneer, founded Vonage, VOX, FWD, investor in Twitter and FoursquareFounded Delta Three ($1.8B NASDAQ), founded NomadiqBenny Landa & Aviv RatzmanIndigo, major global force in digital printing; HP acquisition ~$800M
28 Serial Entrepreneurs/Strong Backgrounds Eitan Bauch & Avi YehudaCollectively sold startups to Intel, F5, Salesforce.comZvi SchrieberFounded TradeUM ($500M exit), Unicorn (acquired by IBM), Lightec (acquired by GE)Richard DembFounded GC Zone, Founded Popcorn Indiana (acquired by Goldman Sachs)
29 Not just capital – we’re creating opportunities CustomersDistributorsPartnersOther marketsPress contactsNext round funding, venture debt, loans, equity“I am excited about the value that OurCrowd brings to early stage investors who invest in startup companies. Not only did we raise our seed round on OurCrowd in a week, but we had people from all over the world invest in Zula thanks to this platform”Jeff PulverCo-Founder, Zula
30 Co-investing with leading angel investors Gideon Ben ZviBriefcamTzachi SultanClal UnderwritingMort MeyersonDellEDSGigi Levy888AmdocsRami LipmanMicrosoft IsraelAjay ShahSilverlake SumeruShah Capital PartnersMoshe LichtmanMicrosoftBenny LandaIndigoYigal JacobyAllot Communications
31 Announcing Strategic Co-Investment Agreement with General Electric Ventures GE will co-invest with OurCrowd in select early stage companies in the areas of energy, healthcare, software and advanced manufacturingInvesting on the same terms as our members/investors.First time major corporation has made such a commitment to an equity crowdfunding platformHuge validation for OurCrowd.Sue Siegel, GE Ventures CEO :“OurCrowd has created a unique platform for dynamic early stage origination and funding. They offer a quality investment environment and the partnership will give GE increased access to early innovation.”
32 Portfolio Reserve: A New Way to Build an OurCrowd Portfolio Funded accounts to invest across OurCrowd with opt-out functionalityMaking it easy to build a real portfolio, one set of docs, auto-invest, but maintaining discretionAutomatically starting deals with $400K spoken for – powerful tool to build immediate demand for roundsLaunch: Sep. 2013Minimum commitment: $100KTotal Value: $5MAllocation per deal: $400KAlready have had re-fills from satisfied investors
33 Press Coverage in 2013 “Crowdfunding for real investors” “An Israeli company trying to change the way startups are funded” CNN Business 360 | April 30th“The 5 Most Important New Companies You Need to Know”Forbes Online | April 2nd“Crowdfunding for real investors”thestreet.com | November"The most interesting investment of the week goes to OurCrowd” WSJ | Feb 8th“The platform has been an enormous success…the ultimate win-win-win situation, brought to you by an new and improved Israel – innovative & confident.”“Medved's latest mission is to blow up the exclusivity around tech fundraising”Bloomberg BusinessWeek | August 1st
35 Summary Meeting a demand for a better online way to invest in startups Platform works—Raised record sums for 36 companies onlineIndustry-leading performance to date – worldwide leadershipStrong Israeli base, global investor reach into 53 countries50% of last ten new deals originate from outside IsraelRecruited industry-leading teamStrong and impressive initial portfolio16 companies have completed additional funding rounds after initial fundingHave provided real value-add for our startupsAchieving strong traction in a gigantic market