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The investment world has been going through rapid change and growth. Almost every single day, you can find different offers and new investment channels, some that we never even though of a before.
A fairly new investment tool that has been attracting more and more investors, is equity crowdfunding. This type of investment gives one the opportunity to invest, in different ventures including high-tech which until recently was closed to the average investor. This alone is enough to blow the minds of manies, who have always dreamed to take part in the impressive 'festival' of exits of the local startup nation.
So, what is equity crowdfunding, how does this system work and how can you have a share in it in general and in high-tech investments in particular?
"Equity crowdfunding is done through an internet platform, enabling investors to invest in a quick, convenient way in innovative companies and initiatives and to join in the Israeli high-tech successes for even only 1,000 NIS," explains CPA Shuki Cohen Sharet, founder and chairman of the board at the equity crowdfunding platform Together. "The investor can enter a platform, review its portfolio for investment, pick any of the companies he or she may be interested in and invest money in exchange of shares. We call it 'the equity crowdfunding democratization.' Every single person can become partners in Israel's high-tech startup nation's success that has such a variety of interesting companies. Now, they are finally made accessible to the general public."
About Together's investment platform, CPA Cohen Sharet adds: "Its uniqueness is the combination of investors from the general public that know they are making a smart investment alongside experienced investors from the Israeli high-tech industry. This increases their confidence in the investment and enables us to raise significant funds for those companies that were chosen by us."
"This platform enables every single person to take a small part in a venture he or she believe have a great chance to succeed," adds Elad Shemesh, founder and CEO of Together . "The process of investment is simple and friendly to use. After picking the company the investors believe in, there is a simple registration process, all subject to the Israel Securities Authority’s regulations. "In fact, it is easier than booking a movie ticket," Shemesh states.
A variety of companies
As equity crowdfunding is an inexpensive way to raise funds and since it does not require great finances, many companies can afford taking this course. This means a change in the market that works in the benefit of the small investor.
CPA Cohen Sharet explains: "According to the Securities Law, any company that wants to recruit over 35 investors must register in the stock market. This takes time and costs quite a lot of money. This way, most companies find themselves in a problematic situation: even though they have an excellent product, they cannot offer their shares to the general public. For example, a company that wants to raise 5 million dollars at NASDAQ must allocate around 1 million Dollars for the public procedure alone. If such a company chooses to go through an equity crowdfunding platform, it will cost only around 150,000 dollars."
To log into Together’s equity crowdfunding, press here>>
As stated, the relatively low amount that is required in order to join equity crowdfunding platforms enables more and more companies to offer investments through it. The average investor benefits from this for he or she can examine the opportunity of entering various promising high-tech companies.
The result of that is the extraordinary growth the equity crowdfunding channel has been going through.
The process of choosing the company
But what about the companies' quality? How can the small investor know that these companies are indeed interesting enough to invest in?
"In economics, it is widely known that there is no risk-free chance. Smart investors know how to minimize the risk and increase the chance for success to the possible max. This is exactly the reason for the meticulous filtering process that we conduct before choosing a company to go on the air for a campaign," says CPA Cohen Sharet. "Most high-tech companies that are bound to fail are in their initial stages. Therefore, a company that wants to raise funds through us must be at the stage where most of the technological risk is already behind it, must have a product or at least be close to the stage of completion of the product and on the other hand, it must be at a stage before its big break into the market. This status enables an investor to get in for a price that is still very attractive."
"Every company that we choose has a professional, experienced and consolidated team that includes senior personnel with known experience. No less important is the product - the technology it holds and the scope of its potential market. Another fundamental parameter is the fact that the company has already raised significant funds from experienced investors on its own, which gives it a strong and stable basis," Shemesh explains.
What happens on the day after
A question that is frequently asked concerns the day after the investment. Who receives the money? How can an investor follow the investment? And when can he or she benefit from it?
First, it is important to know that an equity crowdfunding investor receives all the relevant reports and updates about every single significant event that occurs within the company/venture. At the time of investment, the money is transferred to a special trust account for each project that exists in the equity crowdfunding platform, and that is supervised by a separate leading institutional entity. Once it reaches the financial destination that was defined for that project, the total amount will be transferred to the company. The whole process is an organized procedure that is conducted according to the Israel Securities Authority orders.
Moreover, we should state that Together also invests in the venture that it offers and therefore, has a great concern and interest in the success of each and every company and project that it offered through its platform. "Since we are speaking of investments of relatively small amounts, of a few thousands of Shekels, most investors generally wait for the big "event" in order to cash in their investment: to the sale of the company, to the company's public offering or to the well-known "exit"," Shemesh explains. "These are mainly long-term investments."
Regarding those significant events that increase companies' value, Cohen Sharet says that "It is important to keep in mind that not everyone is Waze or Mobileye and that such exists of enormous amounts like in those deals do not happen to everyone, but there are almost always beautiful and good success stories in this field."
In the bottom line, equity crowdfunding companies are currently opening a new, challenging investment channel for both beginners and experienced investors. They enable the investors to set foot in a world that was closed to them for many years, and which may reward them significantly - through a smart, supervised investment - and with a low threshold regarding the required investment amounts, according to Together's personnel.
Before making an investment in a company/initiative through an equity crowdfunding platform, what should you check?
- Examine the company you want to invest in thoroughly, review its details and its executions so far.
- Check who is its personnel- are its team members professionals who have already done a thing or two in their field.
- Make sure the product is already at an advanced stage and close to its launching in the market. This ensures a higher stability of the company and a lower risk.
- Check whether there is a market for the product - is it considered as a product that is required in the market (in the eyes of the investor as well)? Does it have any competitors? Which sector of the population is it designated for?
- Check who has already invested in the company. Are they known, senior investors?
To log into Together’s equity crowdfunding, press here>>
The content provided in this article is a promotional, in collaboration with Together. This advertising does not constitute as any recommendation for the execution of any transaction or as an alternative to any tailored consultation provided by professionals.
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