Role of alternative finance
Israel has become known as the Startup Nation, spawning 700 to 800 startups each year – perhaps the second most active entrepreneurial scene in the world after the US. When you look at a per-capita level, the creation of an innovation-based economy is impressive. The high level of successful entrepreneurs is due to a combination of a highly educated population, amenable tax laws and a country that clearly takes a global approach in fostering its creative ecosystem.
Transaction Value in the "Crowdfunding" segment amounts to mUSD 47.2 in 2016.
Transaction Value is expected to show an annual growth rate (CAGR 2016-2020) of 64.42% resulting in the total amount of mUSD 345.4 in 2020.
The existence of 5 national platforms is reported. The most important ones include OurCRowd, Viewly and ExitValley.
The exact number of R&I related platforms is unclear, however OurCrowd hosted many interesting R&I projects which have gone on to achieve international success.
There are equity crowdfunding platforms called OurCrowd, iAngels, and PipelBiz.
Israel is also home to one of the most successful investment crowdfunding platforms in the world; OurCrowd, founded by peripatetic entrepreneur Jon Medved. The funding portal has been recognised for its best in class operations. Hundreds of new Israeli technologies, inventions, and initiatives are launching into the market.
|Reward and donation-based crowdfunding||
In Israel there is a large rewards and donation-based crowdfunding market.
Israel has a huge lending crowdfunding market.
|Is there a specific national regulation in place applying to crowdfunding?||
However, a new law will be published soon.
Once the new law is in force, it will rank with England and the US as one of the most progressive to enhance the crowdfunding industry.
The applicable regulations that will determine the parameters of the exemption have yet to be published, and only time will tell how lenient the Securities Authority will be. However, the current expectation is that investments of up to NIS 10,000 (i.e. approximately USD 2,500 at the time of writing) per investor for each investment, and NIS 20,000 per investor in the aggregate per annum (i.e. approximately USD 5,000 at the time of writing) will be exempt. In addition, the relevant company will be limited in the aggregate amount it can raise through crowdfunding per annum, and the expectation is that the cap will be several million NIS. In the interest of protecting the public, the regulations will require that at least one accredited investor participates in the crowdfunding and that such crowdfunding is executed through an internet portal regulated by the Securities Authority.
In addition, and following laws already adopted in the United States and England, the new law also provides for the establishment of high-tech funds. These funds are to be traded on a new index on the Tel Aviv Stock Exchange (TASE). The idea is that the public and institutional investors can now invest in funds, which in turn invest in a wide variety of Israeli high-tech companies; reducing the investors’ exposure when compared to investing in lone ventures. This new model provides a welcome alternative for high risk high-tech companies seeking financing and/or looking to be traded on TASE.
Moreover, the Securities Authority are seeking legislative approval regarding new regulations to provide additional concessions to high-tech companies. Such concessions include the right to submit annual reports and prospectuses in English (as supposed to Hebrew) and to prepare financial reports according to the principals of US GAAP (rather than IFRS). These proposed changes will save Israeli high-tech companies significant expenditures when registering on TASE, and allow them to attract investments from US investors, without having to turn to the NASDAQ.
Law for the Encouragement of Investment in High-Tech Companies.This amends the existing Securities Law and the Joint Investment Trust Law. The new law provides an exemption for small companies (not just in the field of high-tech) from the need to issue a prospectus when crowdfunding and raising small amounts of financing from various investors.
At the beginning of 2016, the section of the law that dictates the structure of selling shares to the public was amended to make it easier to raise capital.
|Matching funds initiatives|
Israel is a great real-world example that shows the positive results when governments reduce marginal tax rates on productive activity.
|Crowdfunding guidelines for entrepreneurs / investors|
|Guidelines for researchers on crowdfunding for R&I|
DESCRIPTION: ExitValley is an equity-based crowdfunding platform. ExitValley has created a new reality where Israeli entrepreneurs can easily incorporate and raise money to facilitate their activity, whilst allowing everybody to invest in these companies in consideration for shares and thereby become part of the success. They identified the problem in the Israeli market that is the significant shortage in the supply of investment capital for Israeli companies in their early stages. The platform placed itself as a solution for this specific market need.
PROJECT NAME: powerBand
DESCRIPTION: PowerBand is a new and innovative training device. The product is advertised as " An agronomic smart design as well as advanced materials, created this unique device that improves the way we shape, strengthen and heal our body". The success of PowerBand lies in the high quality design used and in the decision to enter the market of fitness bands, that is quickly expanding.
AMOUNT RAISED: € 114,400 out of € 3,000
Global investment crowdfunding platform OurCrowd is ranked number 2 in the Geektime Investors Index that ranks investors in the red-hot tech sector of Israel for the first half of 2016. This is a pretty incredible accomplishment, as OurCrowd is competing with all of the big names in venture capital.
Israel is not just a hotspot of entrepreneurial activity, it is a center of Fintech innovation having launched multiple companies targeting the financial sector. The Floor, Israel’s first Fintech Hub, was launched in 2015 and quickly caught the eye of Chinese Venture Capital firm the Pando Group, as it committed $2 million to the incubator earlier this year. Whilst the Floor was generating headlines, what it did not have was a permanent residence. As of this week, the Floor has announced it has leased 800 square meters at the Tel Aviv Stock Exchange.