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Developments in Startup Funding – Beyond VC Jon Medved 1.

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1 Developments in Startup Funding – Beyond VC Jon Medved 1

2 Israeli High Tech Investment A great decade gets even better Source: IVC Quarterly Survey, Q3 2013, IVC Research Surveys 2010-2012 2013 highest in a decade Israeli VC share at 24%; at an all-time low

3 Trends: Israeli M&A $ Billions # of Deals M&A of Israeli firms

4 Trends: Israeli M&A Average M&A size increasing “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 Suliman PwC High-Tech Partner “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 Suliman PwC High-Tech Partner Source: PWC Israeli Exit Report 2012 “…the average deal size has grown nearly 3½ times, from $32 million in 2008.” Wall Street Journal Israeli 2012 Tech Exits Top $5.5B Jan 7 th, 2013 Millions of $

5 “[the crunch]… will result in over 1000 seeded startups being orphaned…” CB Insights Blog December 19, 2012 “Companies we never really got to know are simply starting to fade away…” Pando Daily November 2012 # global startup financings – CB Insights 2013 Seed deal explosion The role of angel investment – angels vs “crunch” Series A funding

6 “[the crunch]… will result in over 1000 seeded startups being orphaned…” CB Insights Blog December 19, 2012 “Companies we never really got to know are simply starting to fade away…” Pando Daily November 2012 # global startup financings – CB Insights 2013 Seed deal explosion The role of angel investment – angels vs “crunch” Series A funding

7 Massolution: Crowdfunding portals will raise $5.1 billion in 2013 – nearly double the amount raised in 2011 Consumer Lending Rewards-based Donations Venture Capital 7 Market Disruption: Crowdsourcing in Finance Source: Deloitte TMT Predictions 2013 “Let's get together: crowdfunding portals bring in the bucks” “Venture capital-type crowdfunding is the wild card for 2013. It could raise more than a billion dollars …” Source: Massolution Crowdfunding Industry Overview 2013

8 8 Crowdfunding as the new seed round Israelis master the art of crowdfunding Pressy: the standardization of crowdfunding your startup $700K raised on Kickstarter – November 2013 Israeli 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 9 Crowdfunding as the new seed round Donation-based crowdfunding’s impact Pebble: the big splash Kickstarter: $10.3M / May 2012 E-Paper Watch with deep smartphone integration Proved the ability for a great idea that major brands ignore to get off the ground via online donation crowdfunding Donation crowdfunding is a way to pre-sell and to prove the existence of a market

10 10 Crowdfunding as the new seed round Donation-based crowdfunding’s impact Ouya & Star Citizen Ouya: $9M on Kickstarter August 2012 Star Citizen: $38M ongoing on multiple channels The 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 11 Crowdfunding as the new seed round Donation-based crowdfunding’s impact A campaign from an angel’s perspective: Team that knows how to market itself MVP or better has already launched Product in the hands of consumers Initial user-base is likely a “tribal” one – highly dedicated to the “cause” of the product and happy to give feedback. Seed

12 12 Crowdfunding as the new seed round Donation-based crowdfunding’s impact Andreesen, KPCB, GE back crowdfunded NY Startup Quirky November 2013 Internet of things company first gets mass appeal via several high profile campaigns Now the deals are de-risked, venture capital steps in Andreesen, Spark, Matrix Partners back Oculus Rift with $75M Series B… then Facebook acquires the company for $2B December 2013 … March 2014 After raising $2.4M from Kickstarter, Oculus Rift gets the attention of major investors Naturally, this plays into the rise of equity crowdfunding platforms

13 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 14 Crowdfunding from the general public coming to a town near you… How does Title III crowdfunding factor into things? Challenges as a startup Cost of raising is impractical – one estimate puts a $100K raise at almost $30K legal fees and other costs Restrictions on round size, who you can let in, and time frame can prevent effective follow-ons with bigger investors. Direct investment – nightmare cap tables Challenges as an investor Direct investment means no manager, disorganized control of the investment What happens when your company hits the limitations of the Title III funding and can’t raise an additional round? What about board representation?

15 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 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 deals

17 17 Updates from the VC-Crowdfunding world A maturing industry is winning over major players Virgin America Partnership February 2014 Sharing hot consumer brands with Virgin Airline’s amenities procurement team GE Ventures – OurCrowd Partnership November 2013 Exclusive dealflow sharing agreement allowing GE Ventures allocation in crowdfunding rounds

18 18 “The Crowdfunding Economy is About to Pop” 24 September 2013

19 Global leader in equity crowdfunding, just one year after founding Raised $40M for 36 companies 18 companies with over $1m raised Truly Global Reach: 5 of last 10 companies funded are from outside Israel First follow-on deal funded in 4 hours, 12 follow-on deals total Largest equity crowdfunded deal - $3.5M for a round on our site Approaching 4000 Accredited investors, over 400 active, many high profile/strategic Average active investor committed to over $100K on site Experienced investment team - 150 years combined VC experience 19 OurCrowd Overview

20 Investment amount 2013: $26.4M Investment amount Q1 2014: >$13M New accredited investors for March 2013 : 400 Accredited Investors now from 53 countries Biggest deal so far, Biocatch: $3.5M indicated (raised in 3 weeks) 20 OurCrowd: Moving Up and Fast

21 Angel InvestingAngel InvestingVenture CapitalVenture Capital 21 Legal issues/termsheets handled by firm Exposure to top dealflow Professional due diligence Preemptive/other rights Independence, self-selection Low fees No large upfront commitment Relative speed and ease Large Commitment Hefty management fees Carried interest fees No control, no choice Very limited dealflow Term sheet negotiations Limited due diligence capabilities No protection, no rights OurCrowd offers the professionalism and experience of a venture fund, plus the flexibility and choice of angel investing

22 22 OurCrowd’s Investment Model

23 OurCrowd’s Leadership Team 23 Jon Medved Co-Founder & CEO  Washington Post: "one of Israel’s leading high tech venture capitalists”  12 exits >$100M  Co-founder, CEO of VRNG  Founder & GP Israel Seed Partners, $260M AOM Elan Zivotofsky General Partner Investments  15yrs experience in Israeli investing  Managing Partner at Prelude Israel  Former Head of Technology Banking, Lehman Brothers Israel  Top-ranked Israeli tech research analyst for Goldman Sachs Steven Blumgart Co-Founder & Chairman  Co-director of Glencore's aluminum division  Senior executive, management committee at Glencore 1998-2012 Pini Lozowick General Partner  General Partner at Alta Berkeley  Among first employees at Broadcom, Dir. Marketing  Chairman of Provigent  Founder and GM of Verisense  5 exits; total value $3B Geoff Levy Chair of Advisory Committee  Extensive experience in law, banking and investing  Non-Executive Chairman of Monash Private Capital, Specialty Fashion Group and Cromwell Property Group  Non-Executive Deputy Chairman of Investec Bank (Australia) Limited Gadi Mazor General Partner & CTO  Serial entrepreneur in mobile/wireless  US Senate Advisory Board  RIM entrepreneur of the year 2013  Ex-8200

24 24 Mentor Program Eli Campo - GM Israel @ LivePerson (NASDAQ LPSN) - SVP @ Shopping.com/Ebay Israel Raanan Gewirtzman - CEO Broadlight (sold to Broadcom $200M) 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 27th Some recently joined mentors Dov Rubin - Co-founder of NDS (sold to Cisco, $5B) - CEO Itamar Medical Ron Moritz - GM @Microsoft - SVP CTO @Symantec - SVP Chief Security Strategist @CA Mike Berman - President Cardiology @ Boston Scientific - Serial entrepreneur in medical device space Warren Adelman - CEO GoDaddy - VP at McAfee - VP at Bigfoot International

25 New recent mentor additions: Applango: Hannan Carmeli (Former President and Co-CEO ClickSoftware,Nasdaq traded enterprise software company), joined as OC director Crosswise: Josh Wexler (Head of Buyer Cloud for Rubicon Project, leading provider of advertising automation solutions), joined as OC director Boatbound: Victor Mizrachi (Formerly chief scientist at Ciena), joining as OC director 25 OurCrowd’s Mentors & Advisors

26 OurCrowd’s Portfolio

27 27 Serial Entrepreneurs/Strong Backgrounds Bob Rosenschein Founded Answers.com ($127M exit), Accent Software ($400M on NASDAQ) Dr. Amit Goffer & Larry Jasinski Founded Odin Medical Technologies (acquired by Medtronic) CEO Soteira (acquired by Globus), Cortek (acquired by Alphatec) Jeff Pulver & Jacob Ner-David VoIP pioneer, founded Vonage, VOX, FWD, investor in Twitter and Foursquare Founded Delta Three ($1.8B NASDAQ), founded Nomadiq Benny Landa & Aviv Ratzman Indigo, major global force in digital printing; HP acquisition ~$800M

28 28 Serial Entrepreneurs/Strong Backgrounds Richard Demb Founded GC Zone, Founded Popcorn Indiana (acquired by Goldman Sachs) Eitan Bauch & Avi Yehuda Collectively sold startups to Intel, F5, Salesforce.com Zvi Schrieber Founded TradeUM ($500M exit), Unicorn (acquired by IBM), Lightec (acquired by GE)

29 29 Not just capital – we’re creating opportunities “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 Pulver Co-Founder, Zula “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 Pulver Co-Founder, Zula

30 30 Co-investing with leading angel investors Gigi Levy 888 Amdocs Moshe Lichtman Microsoft Rami Lipman Microsoft Israel Benny Landa Indigo Yigal Jacoby Allot Communications Ajay Shah Silverlake Sumeru Shah Capital Partners Gideon Ben Zvi Briefcam Tzachi Sultan Clal Underwriting Mort Meyerson Dell EDS

31 31 Announcing Strategic Co-Investment Agreement with General Electric Ventures 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.” GE will co-invest with OurCrowd in select early stage companies in the areas of energy, healthcare, software and advanced manufacturing Investing on the same terms as our members/investors. First time major corporation has made such a commitment to an equity crowdfunding platform Huge validation for OurCrowd.

32 32 Portfolio Reserve: A New Way to Build an OurCrowd Portfolio Funded accounts to invest across OurCrowd with opt-out functionality Making it easy to build a real portfolio, one set of docs, auto-invest, but maintaining discretion Automatically starting deals with $400K spoken for – powerful tool to build immediate demand for rounds Launch: Sep. 2013 Minimum commitment: $100K Total Value: $5M Allocation per deal: $400K Already have had re-fills from satisfied investors

33 33 Press Coverage in 2013 “The 5 Most Important New Companies You Need to Know” Forbes Online | April 2nd “An Israeli company trying to change the way startups are funded” CNN Business 360 | April 30th “Medved's latest mission is to blow up the exclusivity around tech fundraising” Bloomberg BusinessWeek | August 1st "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.” “Crowdfunding for real investors” thestreet.com | November

34 34 Press Coverage in 2014

35 Summary Meeting a demand for a better online way to invest in startups Platform works—Raised record sums for 36 companies online Industry-leading performance to date – worldwide leadership Strong Israeli base, global investor reach into 53 countries 50% of last ten new deals originate from outside Israel Recruited industry-leading team Strong and impressive initial portfolio 16 companies have completed additional funding rounds after initial funding Have provided real value-add for our startups Achieving strong traction in a gigantic market 35


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