A new Israeli investment platform named Exit Valley is trying to make startup investments more accessible to the general public, while offering companies another source for raising money.
The idea, which is similar in substance to websites like Kickstarter and Indiegogo, is based on crowdfunding - raising capital from the masses. While investing money on a website like Kickstarter is equivalent to a donation for which the investor receives the company's product or some other benefit, in Exit Valley's case, the investor receives shares in the company, just like in the model for the venture capital industry.
Ostensibly, anyone can invest, but there are regulatory restrictions that highlight the difference between accredited investors, those with several million shekels in cash, deposits, or securities, and who have made several dozen deals in recent months, and other investors.
An exit in every home? Not so fast
The law allows a company to raise money from a maximum of 35 non-accredited investors, together with an unlimited number of accredited investors, so Exit Valley's promise to bring an exit to every home in Israel is still subject to legal restrictions.
Another problem with Exit Valley's method, in contrast with the other existing solutions in the market, is the fact that there is no group uniting the investments, so that every investor is on his own.
How does the Exit Valley platform work? The entrepreneurs begin a campaign with a time limit (up to 75 days), in which they define the amount of money that they wish to raise in return for allocating a given number of shares in their company, while providing comprehensive information about the company's business.
The investors decide whether to invest their money through a bank transfer or credit card, with the money being deposited in a trusteeship account. For Exit Valley, the minimum amount for investing in ventures is NIS 1,000, but every entrepreneur can define what the minimum investment will be for him.
If the campaign reaches the defined target for raising money, the deal goes through; otherwise, the money is returned from the trusteeship account to the investors.
The entrepreneurs have to pay Exit Valley $500 in order to put their campaign on the air, with this amount being deducted, if they manage to raise the target amount, as part of the 7% commission that they are obliged to pay Exit Valley if the financing round is successful.
After the money is raised, Exit Valley says, the entrepreneur will be obligated to fulfill a predetermined corporate regime, and to be in regular contact with the investors through publication of a performance report.
They are hard to reach
The entrepreneurs behind Exit Valley are chairman and IncrediMail (now Perion Network Ltd. (Nasdaq:PERI: TASE:PERI)) cofounder Yaron Adler, business adviser Oded Federbusch, CEO and former Tamir Fishman investment house Options Group options manager Yaniv Shiryon, COO Nir Meital, CMO Shahar Shraga, and CTO Yoel Ettedgi. Exit Valley's activity joins at least two platforms for mass investments in startups already operating in Israel with considerable success.
One is veteran investor Jon Medved's OurCrowd, which Shiryon says is different from his company's model. "They're very successful, but it's a venture capital fund for all intents and purposes. As an entrepreneur, you have to convince Jon's team that it's worthwhile for them to invest in you - that process is the hard part. The people investing in the fund are wealthy, and are mainly accredited investors."
Another platform is Mor Assia and Shelly Hod-Moyal's iAngels, which accommodates investments in startups, based on investments by leading angel investors.
"In this case, you have to persuade angels to invest, out of all the many companies they see and get requests from. I don't dispute that they have experience, but they are hard to reach, and even they don't always know where to invest, so a launch will not be based solely on them," Shiryon adds.
The company launched its platform last week, with the first financing campaign floated being by the company itself, which put the idea of the platform up for raising money from the audience of surfers. The company managed to raise $350,000, and put another campaign on the air at the beginning of the week, this time by a company named CodiPark, which is seeking to raise $200,000 within a month for 8% of the company's shares. According to its particulars, CodiPark's value before the round is estimated at $2.3 million, and it is accepting a minimum investment of $5,000. The startup, reported by "Globes" two years ago, has developed an application that makes it possible to pay for the use of parking lots without the usual payment machines.
The idea, which is reminiscent of what Pango has already installed at a series of parking lots in Israel, and which is now slated for a US launch, makes it possible to scan the barcode appearing on the parking certificate received in the parking lot by using a cellphone, and to pay from it directly. In this way, the driver saves the time spent looking for the machine, dealing with small change, keeping receipts, etc.
Published by Globes [online], Israel business news - www.globes-online.com - on February 24, 2015
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