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Israel’s OurCrowd has just pulled in $25 million in Series B funding, on top of the $5.5 million Series A it took in February 2013. According to the company, this is the biggest round yet for an equity crowdfunding outfit anywhere — only a million more than AngelList’s $24 million haul last September, but the point stands.
Equity crowdfunding puts a different spin on the concept than that provided by the high-profile likes of Kickstarter. Instead of getting a perk, such as a discounted first shot at the startup’s product, the investor gets an actual stake and future returns on the cash they put in.
In common with certain European rivals such as Seedrs and Companisto, 14-month-old OurCrowd does what it does in a way that makes future investment in its startups more attractive to venture capitalists — VCs aren’t too keen on funding a company that has hundreds of individual shareholders to deal with.
In OurCrowd’s case, this means a kind of hybrid VC-crowdfunding model whereby investors are aggregated into newly created limited partnerships that are specific to the invested-in startup, giving investors preemption and anti-dilution rights and so on. OurCrowd manages these partnerships (which take board seats in the startups) as a general partner. It also throws its own money into each pot, alongside traditional VC funds such as Accel, Battery, Microsoft and Index Ventures, and it receives management fees and carried interest.
In case you hadn’t picked this up by now, we’re not talking pocket change. Whereas someone investing through Companisto, for example, can put in sums as low as €5 ($7), OurCrowd’s minimum is $10,000. This is highly curated stuff — according to CEO Jon Medved (pictured above), OurCrowd has thus far completed 36 deals, half of which raised over $1 million.
“We’re focused on million-dollar-plus rounds. The largest single round was over $3 million,” he told me. “Typically we’re Series A, Series B and even Series C investors…For every 100 deals we examine and investigate, we choose two.”
So far, around 80 percent of OurCrowd’s deals have been in Israel, but Medved said 4 of the last 10 were from outside the country. The platform isn’t being picky about regional expansion now — it’s in the process of opening up a second U.S. office, and it recently held its first investor event in Germany. “We do the old-fashioned thing of bringing investors together to meet companies,” he noted. With a minimum outlay of $10,000, that sounds sensible.
Medved said this $25 million Series B round had dozens of investors “we know through our platform,” though the money wasn’t raised through OurCrowd itself (unlike Seedrs’s recent fundraiser). Most of the investors are undisclosed, apart from Geoff Levy, the former head of Investec Bank Australia, and Andrew Heyer, the CEO of Mistral Equity partners, which recently led a $10 million follow-on round for OurCrowd-invested Abe’s Market.