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Jon Medved: Getting investors in on the ground floor

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Jon Medved, founder and CEO of OurCrowd

Jon Medved was slated to be the keynote speaker at Israel Innovation Day at the Toronto Stock Exchange on May 23, but a last-minute family emergency in Jerusalem precluded his participation. Medved is the founder and CEO of OurCrowd, an equity crowdfunding vehicle, in which investors pool their resources to acquire a stake in high-tech startups, many of which are based in Israel. He spoke to The CJN from Jerusalem.

Tell me about your planned trip to Toronto. What was your goal?

We are quite committed to building a strong presence in Canada. That’s why we’ve set up an office in Toronto and we’re licensed to operate in Canada. We firmly believe that the relationship between Canada and Israel on the political level is wonderful. But on the business level, there’s work to be done.

Canada is not punching at its weight class in terms of investment in Israel. Surprisingly, other countries are beating you guys to the punch. In my opinion, we have a lot of work to do, both on the Israeli side and on the Canadian side, to make sure that the business relationship, especially as it relates to investment in tech, is as vibrant as our political, religious and personal ties.

What do you think is holding back Canadian investment in Israel? Is it security issues?

I think people are just not as familiar with it. Remember, in Canada, the big stuff has typically been resources and property. Canada doesn’t invest as much money in technology as Israel does. In the last year, there was about US$6.5 billion ($8.7 billion) invested in Israeli tech startups. In Canada, it’s a fraction of that. That’s despite the fact that Canada is a very wealthy country and a much bigger country than we are.

What we need to do is to make sure that people understand that the next big wave of money to be made will be in technology investments.

Tell me how and why you founded OurCrowd and what niche in the market were you trying to fill.

We founded OurCrowd about six years ago. The idea was to allow people to invest in Israeli startups the way they would buy a stock on the stock exchange.

It sounds easy to say, but it’s not easy to do, because these are typically much earlier stage companies than those that get listed in Toronto or in New York. Someone has to manage the process. Someone has to do the due diligence, select them, provide board seat guidance at the company and add value to the company. That’s what we do at OurCrowd. We have managed in the last six years to amass about $1 billion in commitments from investors from all over the world and what we do is we invest this money according to best venture capital practices.

We’re not just putting up a bunch of random companies for people to look at. We’re selecting them very carefully. About two per cent of the opportunities that we investigate get on our platform. Then we raise millions of dollars for each company in the form of a single company venture capital fund.

OurCrowd gives you the ability to both choose an individual company and  build your own portfolio, or also to invest in funds. We have 18 different funds  that give you a ready-made portfolio, or an assembled-by-professionals portfolio, which gives you diversification of anywhere from 15 to 25 companies and, in one case, 50 different companies.

An individual can actually choose the company that he would like to invest in. If he is interested in cannabis, he gets to invest in a cannabis company. If he’s interested in health care, he can invest in a health-care company.

So is the idea then to open this type of investment to a broader range of investors, to democratize the process?

Absolutely.

It’s not just high net worth investors who can put their money into this, is it?

It is still high net worth investors. According to securities laws in Canada, the United States and in other countries, you have to be a qualified or sophisticated or an accredited investor and there are criteria that we follow in which you have to have a minimum annual income, or a set amount of assets.

To make the minimum $10,000 investment, you have to have a certain profile.

What are the benefits and the risks that Canadians investors should consider when putting money into OurCrowd?

Everybody is reading about companies like Uber or Beyond Meat that are going public in New York, and you have wonderful companies in the cannabis area going public in Canada. People say, “This is great, but wouldn’t it be great to get in earlier?”

In other words, not Uber at $40 or $45 a share. What about the guys who got in for cents for a share? People get in early to these things. And that’s what we’re doing.

Today, companies wait so long before they go public. In other words, they became worth billions of dollars, whereas in the old days, 20 years ago, companies like Microsoft and Apple went public at less than a billion dollars of valuation. You could actually invest in the stock market and ride these things a long time.  What we’re offering is the ability to get involved earlier, before they’re public. And that’s a big need in today’s market, especially for those who want to invest in Startup Nation.

And you can’t just pick up your phone and call Canaccord or CIBC and say, “Buy me an Israeli startup.” It doesn’t work that way.

They can give you a publicly listed company, but they can’t give you a startup. We can.

Is Israel still living up to its reputation as Startup Nation?

It’s more vibrant than ever. Last year, $6.5 billion was invested in Israeli startups. That’s up in the last five years from a little over $2 billion. It’s a dramatic growth. We’ve just been named the world’s most innovative country by the people who put together the World Economic Forum in Davos.

It’s becoming rather remarkable. We have an annual conference we call the OurCrowd Summit and it attracts investors from all over the world. This year, we had over 18,000 people register for the summit. Thousands of people showed up in Jerusalem from every part of the world. What we’re seeing is that today, it’s no longer just America, Canada or Australia, but it’s England, it’s all over Latin America. We had a delegation of 50 people from Mexico, over 50 from Colombia. People were coming from Africa, from all over Asia.

They all want to invest in Israel?

They all want to invest in Israel. Today, the world is hungry for innovation. People understand that the traditional businesses are not going to make it without integrating innovative concepts and technologies.

It doesn’t matter if you’re a bank, a transportation company or you’re a farmer or you’re a doctor. Everybody’s business is being upended by this incredible technology transformation.

When you talk about what’s happening with artificial intelligence (AI), with what’s happening with robotics, with what’s happening with big data, with the cloud, the change is just beginning. Therefore, people are looking for help from the change agents. And the change agents are very interested in Israel. We are neck-and-neck with Silicon Valley. I just saw data about the 10 fastest-growing companies in terms of revenue and five of the 10 were founded by Israelis – in Silicon Valley!

In Israel today, we have roughly 10 per cent of the world’s unicorns, companies that are worth $1 billion that are not yet publicly traded. We’re closing in on that number. It’s remarkable what’s going on in the country.

You mentioned investors coming to Israel from all over the world. Are they not put off by the politics of it, by the BDS movement?

BDS is a non-event. This is an event in Roger Waters’ deranged mind. In other words, there is no effect of BDS on the tech market at all. There are now over 450 multinational corporations that have set up design and research and development centres in Israel. Not one of them has pulled out because of BDS.

I had one of the three largest hedge fund managers in the world over at my house for dinner, together with a famous member of parliament. And the member of parliament asked the hedge fund manager, who is really legendary and everybody knows him, “What do you think of this BDS stuff?”

And the hedge fund manager looked across the table and said, “What’s BDS?”

“You know, boycott, divestment and sanctions.”

He said, “I don’t know what the hell you’re talking about.”

He had never heard the acronym. This is something that Jews are sensitive to and worried about, for good reason, especially because it affects people on college campuses, but right now in business, it’s not about a boycott, it’s a “buy-cott.” People want to be engaged with Israel. Israel’s technology is world class.

READ: ISRAELI START-UP DEVELOPS FIRST MEDICAL MARIJUANA INHALER

 

What proportion of your investments are in Israel versus other countries?

Seventy per cent are in Israel. Thirty per cent are around the world. We’re very proud of the fact that we’re doing this from Israel. We’re building a worldwide network of not only investors, but of entrepreneurs and companies. It’s really cool that a company like Beyond Meat, which has the most outstanding IPO on Wall Street, includes an Israeli investor. That a company like Uber that goes public, they bought one of our companies called JUMP, which is an American company, but which we invested in as an Israeli investor, and we’re participating.

So individuals can come to our site, they can choose to invest in Israeli companies, they can choose to invest in American companies. We have a Chinese unicorn, which is called Klook, which is a leading travel company in the world. OurCrowd is invested alongside Goldman Sachs and Sequoia Capital, the guys who backed Google and Apple. That’s cool that we’re doing it in a very blue-and-white fashion from Israel, but doing it by building a worldwide network of investors to invest not just in Israel, but global investors who will invest in companies all over the world, who are innovating on a platform, which is headquartered in Jerusalem.

When you increase your presence in Canada, are you looking for Jewish investors or a broader range of investors?

A much broader range. We’re far beyond focusing on the Jewish community. I’m Jewish. Israel is a Jewish nation. We’re definitely committed to building ties with the Jewish world, but this is no longer a Jews-only thing – far from it.

There’s more money coming into our platform from non-Jews today than is coming in from Jews.

We have a lot of money flowing from Asia and most people there are not Jewish.

It’s cool. When you go to the summit, you’ll see a complete rainbow of colours and faces and languages. It’s almost biblical. This is what Israel is supposed to be about. It’s not supposed to be an insular country constantly under attack and constantly defending itself. We’re supposed to be changing the world for the better. In Hebrew, we call ourselves a light to the nations. This is an extraordinary moment in Israel’s history, when we are indeed a light unto the nations, where people are coming to us and saying, “Show us the way.”

You see this is happening with world leaders who are meeting with their Israeli counterparts. They don’t want to talk politics. They want to talk about innovation, whether it’s German Chancellor Angela Merkel, or Narendra Modi from India, or Jair Bolsonaro from Brazil. When they come here and you listen to the press conferences and announcements, it seems as though these are tech missions, because the whole nature of the discussion has changed to technology and what Israel can do for the nations of the world.

What are the sectors in Israel that excite you the most?

We’re extremely excited about mobility, because in Israel, the biggest exit recently was a company called Mobileye. It was bought by Intel for $15 billion and it leads the world in collision avoidance systems.

Today, there are 500 startups in Israel invested in mobility and we have invested in dozens of them.

We have a fund we invest in called Maniv, which is a mobility portfolio.

We have a fund called Qure, which is a digital health portfolio.

We’re very keen on digital health. As the world realizes your mobile device is perhaps your most important medical device, Israel will be a world leader. We’ve been digitizing our images for decades, literally, and these medical records and this big data is now meeting Israeli medical expertise in software and artificial intelligence, to unlock a whole range of very interesting digital health things.

I understand that OurCrowd is involved in investments in the cannabis area.

We have a cannabis fund and several cannabis companies.

Israel has dozens of very exciting and dynamic cannabis startups. They’re focused on medical, on delivery, on quality control and a whole host of issues. I’ve noticed there’s a lot of interest by Israeli companies in accessing Canadian capital markets for cannabis, because you guys lead the world in that. I think you’ll see a huge number of partnerships.

What other areas interest OurCrowd?

The biggest area is artificial intelligence. AI is just extraordinarily important. Israel today is duking it out with China for the number 2 spot in terms of artificial intelligence startups.

According to Forbes, less than a year ago, China had 380 startups and Israel had 360. Those are numbers that are already old. I think they’ve gone up considerably in the last several months.

We have AI startups that deal with automated interpretation of medical images in a company named Zebra. We have a company called Consumer Physics that is using this for revolutionizing the agriculture market. We have a company called Climacell, which is using AI and big data to change weather prediction in a fundamental way.

There is a ton of AI in the automotive area. Even in sports. It’s quite remarkable.

You’ve mentioned automotive. Does that refer to self-driving cars?

We have a company we’re funding called Ride Vision, which is using AI and censor technology and computer vision on motorcycles. What Mobileye does for the car, this does for the two-wheelers.

According to the data we have, motorcycle riders are 28 times more likely to be engaged in a fatality than a car driver, so they need this stuff desperately.

One other area where I’ve heard that Israel is a leader is in nano-technology, particularly as it applies to the medical field. Is that an area you’re looking at?

In the medical area, we have a company called Insightec that is using focused ultrasound to mitigate the effects of Parkinson’s tremors. It’s an incision-less surgery that uses an MRI-guided focused ultrasound.

We have a company called AlphaTAU, which is in clinical trials now for a new radiation therapy, using alpha particles to blow the living daylights out of solid cancerous tumours.

We have a company named MeMed Diagnostics, which is coming up with an almost instantaneous test for whether what you’re sick with is a viral or bacterial infection, using big data and machine learning.

We have companies like MedAware, which is using machine learning to prevent prescription errors.

A nano technology example is a company called HIL Applied Medical, which is using nano targets that are laser excited, to create proton beams. That’s a mouthful. It turns out there is a therapy called proton beam therapy. Typically, you have to generate these proton beams with huge accelerators that take up a city block and have thick walls and costs hundreds of millions of dollars. This company, on a desktop, is creating nano targets that are excited by a high-power desktop laser, and these nano targets create the proton beams.

 

This interview has been edited and condensed for style and clarity.

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