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Not Just Another Face in the Crowd: OurCrowd’s Equity Crowdfunding Success

Crowdfunding is “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”1 One of the most recognizable names in crowdfunding is Kickstarter. Kickstarter allows any person to create an account and donate any amount of money to a project they enjoy or believe in.2 In return, investors contribute specific amounts of money in return for gifts or other incentives, rather than equity in the company or product.3 The investor knows the amount required to receive one of these gifts prior to investing. These gifts range from custom products to tickets to a show.4

Israeli entrepreneur Jon Medved has taken this crowdfunding model and applied it to the booming Israeli tech sector.5 OurCrowd, Medved’s company, matches serious investors, who are members of OurCrowd, with startups that OurCrowd hand selects.6 This service creates a platform for small startups with great potential to find investors that may not have normally invested capital in them. Through OurCrowd Medved is able to internationalize the funding of these tech firms and allow investors to get in on the ground level of startups with high earning potential. OurCrowd has been a very large success since its inception. In the past year alone OurCrowd had raised more than $22 million dollars for 27 Israeli startup companies.7

What is significant about OurCrowd is that companies cannot just put themselves on the website like they can on Kickstarter.8 After receiving an initial application, Medved and his team comb through the companies’ financials and other important points of interest in order to vet them fully before they become listed.9 Only after the due diligence is performed do the companies then sign term-sheets with OurCrowd.10 Next, OurCrowd’s management team leads the investment with its own money.11 OurCrowd functions much like a venture capital firm would by helping in the management of the companies it has invester in along with other significant aspects of the business.12 This helps assure investors that the company, and therefore their investment, are in safe hands.

Just as not every business can place itself on OurCrowd’s website, not just anyone can invest in these businesses.13 Investors must become accredited, which requires them to have a certain level of wealth before they may invest with OurCrowd (in Canada that level of wealth is a net worth of $1 million dollars or greater).14 The minimum investment that each investor must make is $10,000.15 OurCrowd maintains this high minimum investment requirement not only for exclusivity purposes but also to protect the companies it invests in. Imagine the administrative work that would be required if anyone could pour $100 dollars into an OurCrowd company and then expect equity in the future.16 It would be a nightmare trying to divide equity into such small sections.

OurCrowd is trying to isolate the so-called “angel investors” and create a community that will benefit everyone involved.17 Angel investors are individuals who invest large amounts of capital in startups.18 The term derives from the original investors who used to back Broadway musicals.19 These angel investors, prior to the emergence of OurCrowd and other similar venture capital crowdfunding websites, would usually join angel investor groups to gain access to the best venture capital opportunities.20 These groups required a lot of personal involvement and were very time consuming for individual investors.21 The benefit of OurCrowd is that the best deals are hand selected for the investors, and they are simply required to sign on to the website where they then have access to a large amount of information for each listed startup.

In 2012, the Jumpstart Our Business Startups Act (“JOBS Act”) created a cutout for this type of venture capital crowdfunding.22 Currently, only accredited investors, like those on OurCrowd, may utilize these services. However, in 2014 a new provision of the JOBS Act kicks in, allowing anyone access to equity crowd funding.23 While Medved has stated that OurCrowd will still only allow accredited investors and therefore maintain its exclusive status, many companies will look forward to capitalizing on this new market. The fear of this system is that non-accredited investors will be duped by bad investments.24 The JOBS Act attempts to rectify this by putting in safeguards like maximum investment amounts for certain income brackets.25 However, many people fear this type of equity crowdfunding may hurt the investors who lack savvy. Regardless of whether it is a positive development, OurCrowd will not be changing its stance and companies worldwide are positioning themselves for this boom.

  1. Tanya Prive, What is Crowdfunding and How Does it Benefit the Economy, Forbes (Nov. 27, 2012, 10:50AM),

  2. What is Kickstarter?,, (last visited Oct. 4, 2013). 

  3. Id

  4. Id

  5. OurCrowd is Crowdfunding the Venture Capital Deal, CBC News (Sept. 30, 2013, 5:57PM),

  6. Id

  7. Id

  8. Id.; see also Kickstarter supra note 2. 

  9. How it Works,, (last visited Oct. 4, 2013). 

  10. Id

  11. Id

  12. CBC News, supra note 5. 

  13. Id

  14. Id

  15., supra note 9. 

  16. Id

  17. Id

  18. Tanya Prive, Angel Investors: How the Rich Invest, Forbes, (Mar. 12, 2013, 9:27AM). 

  19. Id

  20. Id

  21. Id

  22. Victor Luckerson, The Crowdfunding Economy is About to Pop, Time, (Sept. 24, 2013). 

  23. Id

  24. Id

  25. Id