In Israel with OurCrowd: notes from a high-tech investment hotbed
Observations from the OurCrowd Summit – how crowdfunding is creating opportunities for high-tech entrepreneurs and investors.
As a private banker, I work with Australians who are sophisticated investors and have historically favoured portfolios heavy on local property, shares and cash. For those prepared to consider opportunities further afield, however, the global technology start-up sector can provide opportunities for diversified returns.
But how does an Australian go about that? How do they go about participating in the global technology investment space?
Asking these questions ourselves over the last few years led the team at NAB Private to OurCrowd.
Established in 2013, it’s an equity crowd funding platform that provides opportunities for high net worth individuals to invest in technology start-ups. Each year it selects between 30 and 60 companies from a pool of some 3,000 hopefuls and conducts a due diligence exercise on each before they’re introduced to potential backers via the platform.
OurCrowd and NAB Private signed a partnership just six months ago, and as part of that I just led a delegation of clients to the OurCrowd Global Investor Summit. Held in Israel in February each year, the summit brings investors from around the world together with emerging entrepreneurs whose vision and innovation are changing the ways we live, work and play.
Here are my five take-outs from the event.
1. From unease comes opportunity
While Australia has enjoyed a start-up buzz in recent years – fuelled in part by the global success of companies such as Atlassian, Canva and Appster – the frenzy is at a whole new level in Israel. Surviving and thriving against a backdrop of political unease has helped create the most vibrant global technology start-up scene anywhere outside Silicon Valley.
The phenomenon goes further than the fact that Israel’s military-focused environment has spawned an array of developments – particularly in the surveillance and monitoring space – that have enormous potential in the civilian world. What’s just as striking is the camaraderie and closeness that compulsory national service creates among the young. Buddies from the army striking up a successful partnership together is a very common success story in Israel; young engineers and IT professionals learning their craft in the military, and creating companies together, rather than transitioning to traditional employment.
2. Democratising investment
Applying the crowd funding principle, whereby projects or ventures are collectively funded by a large number of parties each contributing a relatively small sum, to the business of obtaining backing for technology ventures, has ‘democratised’ the process for entrepreneurs and private investors alike.
A decade or two ago, Silicon Valley was home to a closed universe of venture capital funds that would invest in new enterprises in the millions – or not at all.
Crowd funding however allows private investors to put as little as $10,000 into technology companies, on the same terms and at the same valuations as major venture capital funds and the smartest technology investors in the world. Australians are already active on the OurCrowd platform and it has become a new way for those whose portfolios have historically comprised Australian cash, property and equities only to access more diversified returns.
3. Med tech on the rise
Israeli companies are leading the pack with the development of systems and services powered by artificial intelligence (AI), particularly in the healthcare sphere. One of the fascinating ventures from the OurCrowd stable showcased at this year’s summit was Zebra Medical Vision. It’s a start-up that uses AI to detect abnormalities on MRI and CT scans; smart technology addressing the fact that demand for scanning and diagnostic services globally vastly outstrips the capacity of radiologists to deliver. It’s an exciting area with huge potential for growth.
4. Not just toys – drones are big business
They can be purchased for little more than a few dollars, but the plethora of ‘recreational’ drones currently on the market have little in common with the military-grade technology emanating from Israeli start-ups like Airobotics, another of the emerging ventures backed by OurCrowd.
Drones are serious equipment and are being deployed for a range of serious uses in the commercial and government spheres – from cinematography to surveying mine sites and monitoring remote stretches of coastline – and applications will continue to emerge as the technology matures.
5. Education and opportunity
Investing in IT start-ups is undeniably a speculative business, with conventional wisdom suggesting that up to 90 per cent of new ventures fail. While this is an opportunity for sophisticated investors who are self-directed, they can take comfort in the fact that OurCrowd has done extensive due diligence.
NAB Private clients are able to invest alongside the most sophisticated tech investors in the world, on the same terms, at the same valuations. There are options to ‘splice and dice’ exposure to the sector, with options to invest in individual ventures and in specialised funds focusing on the artificial intelligence, med tech and automated vehicle spheres.
The OurCrowd platform can be an education process for those interested in understanding the global start-up space. It offers a way to dip your toe into the market and learn from people who are absolute experts in the field, and is very different from what we see in the Australian start-up scene, where essentially angel investors are on their own.