An Israeli entrepreneur is taking venture capital deals for tech startups online in a new twist on crowdfunding.
Jon Medved has raised about $22 million in total for 27 Israeli technology companies in the past year through a website called OurCrowd.com.
Crowdfunding, a means of raising capital through investors over the internet, a form of fund-raising more associated with indie ventures in the arts through Kickstarter or Indiegogo.
Unlike those sites, OurCrowd won’t take money from just anybody.
“You have to have a minimum net worth," Medved said in an interview with CBC’s Lang & O’Leary Exchange. "In Canada it’s about $1 million, so the assumption is, if you have those kind of means, you’re not going to be taken advantage of.“
The tech companies who apply for capital through the website are subject to diligence by OurCrowd, with a team looking into the venture, its personnel and the skill set of the company.
“You can’t just come to our site and put your own company up, you have to apply to OurCrowd. We then check you out, we check your company, we call your customers, we look into your background and then we make a decision if we are going to invest,” he said.
Like any venture capital firm, the OurCrowd team is also involved in an ongoing progress with the company, lending management expertise and making contacts. Medved said they put their own money into every deal.
“The accredited investors who come to OurCrowd can then make a decision on which types of companies they would actually like to put money into. The minimum investment is $10,000,” he said.
What they’re getting has been curated, and the terms of return set by OurCrowd, which charges two per cent of each investment per year for three years and also takes a cut of any big achievement made by its start-ups.
There is huge demand for capital in Israel’s tech sector, says Medved, who co-founded mobile-video app maker Vringo and was an early investor in Shopping.com before it was sold to eBay for $620 million.
OurCrowd is a way of taking the task of raising capital for small start-ups global, he said.
“It’s about entire world linking via worldwide web so that great start-ups and great technology opportunities can find investors and supporters anywhere in the globe,” Medved said.
Regulators have been wary of opening up this kind of risky venture capital to small investors, he added, which is one reason why the bar for entry is so high.