Saiba como impulsionar a inovação através do investimento em startups - Jonathan Newfield (OurCrowd)

Johny, held several positions in financing and investments in South África, India, USA and Israel and today, Johny is a director of strategic partnerships in OurCrowd. So, Johny, tell us: What is OurCrowd and how it differs from traditional venture capital funds? Well, I think first let’s just define what, you know, venture capital is, and then, we can go into the differences between OurCrowd and what’s typically you find in the market. So, you know, venture capital is really about providing the startup capital required for businesses to grow.

04:10 - Typically, it’s associated with technology startups, although that can be, you know, quite a wide range from medical technologies to financial technologies, etc. And it’s really about providing the entrepreneurs with the capital, it will facilitate their growth prior to them, you know, starting off prior to them having even revenues in their businesses. So, really allowing them to, you know, get the capital that they need to build their business models, acquire, you know, a team, and then start kind of working on the initial stages of the project and then going through that, with the entrepreneur, through the various stages of growth, you know, until they can do an exit or become profitable, or archaeo, etc.

So, that’s venture capita,l think what is typically found in the market is that: there were two main players in the space. One with venture capital funds and others, were certain kind of tech companies that had their own in-house, venture capital units.

05:06 - They’re called CBC’s (Corporate Venture Capital Units), and that’s pretty much what was most common in the market. So, if you wanted to play in the space, you really had to go to a venture capital fund, in order to, kind of invest in the top tier startups.

05:21 - And I think where OurCrowd is different is, it’s really opened up the world to be able to access these types of investments. Now, I want to just, emphasize that, you know, there’s venture capital in this venture capital. There’s venture capital where, you know, any guy who’s got an idea is trying to raise capital, and you know, some of those are going to be great successes, but the large majority of them are not going to be. And, you know, you’ll find, from time to time you,  you know, business and people approaching high net worth individuals, or families, or friends to try raise capital for their businesses and that’s fine, and you know, it’s a high-risk, high return type approach.

But there’s the other venture capital where we like to play, is really looking at more the top tier venture capital opportunities, where the venture capital firms are playing.

06:10 - Those are the players that are in the ecosystems, understand the investments, are looking at hundreds of deals, before they select one or two to do, which is something that the average investor, even a high net worth individual, who’s, you know, very well accustomed to investing in liquid assets and other other types of opportunities, doesn’t necessarily have access to that level of ecosystem and number of deals, and expertise in the particular technology.

So, OurCrowd fits in because, we kind of do all that leg work for the investor. We are a venture capital firm, like any other, we have an investment team, we source deals, we’re looking at over 250 deals per month of which, we kind of deep dive into 20 or 30, and then probably select to invest in two or three. I mean, in any deal that we invest, we put our own capital in. That’s just like any other venture capital firm, but I think the nuance of OurCrowd, is that, alongside us we allow other investors to come in and invest on the same terms as we do.

So that means, that the average investor can come in alongside us, through our vehicle, into these top tier opportunities, global opportunities, for disruptive technologies, and like the investors are coming in at the same terms as all the other VCs, into the same deals. And that, I think is a very very unique offering, and something that prior to OurCrowd didn’t really exist in the market. So what you actually, are bringing some, what was common, like investing in a listed companies that you could buy some stocks of these companies, so now, you’re bringing these concepts to non-listed companies, your startups that actually could put some of your money in different companies.

This is the way it works? Exactly! And I think this has become more and more the trend, and it’s not only us that’s realized this. I think if you look at all the kind of family offices, you know, other institutional investors, everyone’s starting to kind of look at this private capital market a lot more seriously. And, you know, the reason for it is twofold: One is obviously, we know that technology is, is driving a lot of value in the market at the moment.

I mean, if you look at all the, if you look at the year 2000 and what the top kind of market cap companies were in the listed space, and you look at 2020, you’ll see that there’s been a great, there’s been a change, between kind of the old oil companies and oil barons and other, you know, bricks and mortar type businesses, to technology companies, the Apple, the Tesla’s, the Googles, etc. So everyone understands that technology has been a huge value drive over the last two decades.

So you need to play in that space. But the second aspect is that with the kind of boost in the number of kind of venture capital firms, and the cap, and private equity firms and the capital that they have under management, it means that these companies are able to stay private longer. And that means that the kind of upside, or the value capture is happening while these mark while these companies are still private. So, if you end up waiting until the company IPO’s, you kind of missed a lot, a long portion of the value accrual to the shareholders.

09:22 - And so I think more and more investors are realizing that they need, if they want to play technology, in addition to having their kind of exposure on the listed markets, they also need to have a certain allocation into those companies while they’re still private.

09:35 - And I think that’s really, you know, an important investment theme that’s coming out in the market at the moment. So I mentioned that OurCrowd in a certain way is democratizing the investment in startups and giving the opportunity to every single investor. So, the focus of OurCowd, your investors are mainly private investors? Or you also have corporates, family offices and so on? So, yeah! So we’ve got a wide range of different types of investors, and I think just to start off.

10:03 - OurCrowd itself, can only really work with accredited investors now, that’s a kind of a definition that varies between jurisdiction to jurisdiction, but in essence it means that you’re, an experienced investor and you have a certain amount of kind of net asset value. Certain amount of capital to deploy because, as I mentioned before, venture capital is a higher risk, kind of perceived to be a high risk asset class and therefore, you know, we’re not targeting kind of the general retail investor.

So it’s got to be an accredited investor, but that leads to a very wide kind of range of types of investors. We have high net worth individuals, professionals could be lawyers, doctors or businessmen. We have ultra high net worth individuals, we might have set up the single family office to manage their affairs. We deal with multi-family, offer multi-family officers that manage the wealth of, you know, a number of families under their banner, and you know, look to us to kind of access that venture capital space.

10:57 - We work with institutional investors, so with banks and other financial institutions. Again to provide this type of asset class to their clients. And then in addition to that, we work with large multinational corporations, that don’t necessarily have the expertise at or time to kind of focus in on the new emerging technologies, but they’d like to understand what’s going, on they’d like to make investments from a strategic point of view. So that they kind of aware what’s coming into the market and then, going on the ride with us.

So it’s a wide range of accredited investors, from the private individual to the large multinational corporation. And I think that what is unique is that through our cloud, they all coming in at the same terms into the same deal. So I think it’s quite a unique proposition. And for me, as a startup: What is the advantage or disadvantage to being invested by OurCrowd, compared to a traditional venture capital fund or a corporate venture capital fund? Well I think what the various financial crises have pointed out to us, is that you do not want to have, what the two risks you don’t want? You don’t want concentration risk and you don’t want correlation risk.

Meaning if all your shareholders are identical and you face it a certain problem in your business, or challenge and if you’ve got the same exact type of investor, then they’re all going to react in a very similar fashion. So to concentration risk: If you’ve got one big investor who kind of controls 90 of your company, then you’re going to be dictated to by that player.

12:34 - And so I think it’s very important for an entrepreneur to have various investors in their business. So you know, from their own shares that or their own capital that they may have poured, into their business and along with a few angels that maybe helped them start off, and then a number of venture capital firms or corporates strategic investors in their business. I think what OurCrowd is, as i mentioned OurCrowd is kind of a venture capital fund that’s got the platform built on top of it.

Which means that it kind of behaves in a slightly different manner to the typical venture capital firm. First of all, we create a lot of transparency between our investor and the company. So if we’ve got say, a number I’ll give you an example. Let’s say we’ve got a medical technology company and a number of our investors happen to be doctors or professors of medicine in the United States. Obviously what can happen is, just by those investors being having a closer understanding of what’s actually going on in that company, they can assist that company, because if they invest in that company, it means they believe in that company, and if they believe in that company, it means that they’ll want it to succeed, and therefore utilize their networks.

And so there’s a huge amount of embedded value in the network that OurCrowd can facilitate and create. We’ve got over 100 000 accredited investors on our platform and we work with hundreds of multinational corporations. So the entire network has got this embedded value built in it. And I think that’s a big advantage to the startup, to the founders or the owners of the startup, because it means that OuCrowd, you know, behaves slightly differently and extra value can be extracted out of that relationship.

So I think really that that embedded value is one of the key causes of our success, I mean you know, we’ve grown in a quite a competitive market here in Israel. We’re now a global firm, but we were born in Israel, in a very competitive space and we now the most active VC in Israel at the moment. I think one of the reasons is because of this increased transparency and kind of direct links, that we can create between our various partners around the world, our investors, our companies and the multinationals that we work with, that can kind of help the businesses grow and also in follow-on rounds etc, behave in a slightly different manner, than the typical VC might behave, and it’s always good as I say, to have different types of investors in your business.

You mentioned the incredible number 100. 000 investors.

14:56 - Where investors are coming from? So we’ve got a totally global platform, I think, we’ve got over 180 countries represented in terms of our investors. So from literally all over the four corners of the of the globe. We have people coming onto our platform and investing alongside us. In terms of the deals that we do, I’d say the majority of them are Israel, say 50 percent Israel, then I’d say 50 percentf the rest of the world, with a large majority of that being in the United States, but we’re looking at deals all over, and I think that’s not a fixed ratio, that’s growing and moving and that percentage will evolve over time.

But from our investor base it’s a totally global play, and anyone from anywhere in the world can really come in and have a look at our platform, and for no charge see what’s going on, understand what’s happening in the space and then execute on the companies that they feel kind of speak to them. So Johny, can you please share with our audience some of mind-blowing companies that you have invested? Yes! I think I’ll bring up two interesting ones and, you know, just in the interest of time, because I’m not sure how much time we have.

One is in the  cybersecurity space and it’s really, you know, a company that’s now in many of the major banks in the world, in fact American Express Ventures is an investor in this company. And there’s a company called BioCatch, and what they have used it’s called “behavioral biometrics”. And if you can imagine that these days, one of the biggest risks that you have as a person on the internet, is you do your online banking. Your whole life is really on your computer and you can get hacked, all these phishing attacks, etc.

So BioCatch realized that beyond just the password there are other ways of identifying, who this individual is that’s on the other side of the internet. So what they developed is this behavioral biometric system that measures a different kinds of vectors and factors of how you use your technology. So for example, in your cell phone, it could be how you hold your phone, is it in your right hand is it in your left hand? Do you hold it up or down? When you type on it what’s the speed that you type, etc and the same on your computer.

17:20 - So then, when you type, when a hacker let’s say: “Get your password”, and start trying to access your bank account, this system will flag to the bank, that there’s an anomaly going on.

17:31 - The password is Johny Newfield, but the way he’s typed it doesn’t seem that it’s the Johnny Newfield, and this will create kind of an alert system internally in the bank, and obviously, it will prevent a lot of false kind of entries into various bank accounts. And having myself being a victim of one of these phishing attacks, it’s good to know that the banks are kind of putting these systems in place, so that,  you know, this type of stuff doesn’t happen.

Because it’s really becoming one of the biggest problems in the world, and you know, it’s a multi-multi-billion dollar market that they’re tackling and it’s just amazing to think that. How a company can really identify you just by the way you kind of utilize your take your internet technology. So it’s an incredible company! Wow! Another company I wanted to highlight, is a company that’s called Inside -Tech, which is a medical technology company. And this company uses ultrasound, in order to kind of address various conditions.

The first condition that they worked on was Parkinson’s, and by using this exact system, it looks like you’re going into like an MRI, and with it totally non-invasive meaning, there’s no incisions or anything into the brain. They direct this ultrasound into various parts of your brain, and this kind of reduces the effect of the Parkinson’s on the individual, such that, you know, when they come out of this treatment, these individuals can hold their hands straight again, and it’s actually unbelievable to see.

I’m not sure if you were at the, at our last summit prior to, you know, the culver taking over the world. We actually had a presentation, where one of the patients kind of spoke about how this thing has really changed his life. And this company is already a unicorn, it’s growing just from this Alzheimer’s, you know, use case but there are other use cases that they’re looking at. And I think you can expect many more of these kinds of, almost miraculous, type of medical technologies coming out, where things that you saw in Star Trek or now, actually you know, in real life.

19:38 - Yeah! I did have the opportunity to see this patient, and I’m still in tears until today, and just seeing the amazing things that it happened to her, it was absolutely amazing! Thanks for reminding me this moment, because they’re very very special! That’s looking incredible when you see them! But I mean, there are hundreds of companies, each company that you see is really tackling kind of, a global problem, and as I said, I mean technology is really paving the way to the future, and I think since covert, many of the sectors have actually got this huge tailwind because it just demonstrated to the entire world, that technology is the way to kind of, overcome these types of hiccups and you saw how the technology stocks required, and the use cases, for things like telemedicine and you know other remote learning, remote work.

All these kinds of ideas that were promoted for many many years, coverage has proved that you know, this is really the way forward, and accelerated many of the sector, you know, probably a number of years, if not decades, fast forward to them. So, you see a lot of movement in the market at the moment. Thanks a lot Johny! And Johnny, we got some questions from our audience prior to this interview, and one of them is: What are the risks involving the investment in startups for me, as a private investor? Okay.

So, I mean, there are a number of risks. First of all, if you’re going into a company, that’s kind of not yet profitable, which is usually the case.

21:07 - In these startups, it means that, you know, you’re backing a business where they living with the capital they raise, in order to kind of run their business operations. So, you know, should they not succeed to kind of either get revenues, or land the next round? Your capital’s at risk, you know, you could lose all your money, so then, that’s a very important risk that you need to be familiar with. And therefore, this isn’t the kind of investment that you put all your money in.

This is, you know, an allocation that you have, you looked at your kind of investable assets and you decide what is a prudent amount, to kind of, look at the venture space and then you can start deploying into the appropriately for you. Again, I think it’s very important to not bet on one horse. So, an investor going into the space, should kind of pick a few, either a fund where your investments are diversified, and on OurCrowd we offer a number of funds, as well as, the kind of individual deals  or you select a portfolio of deals, and build up over time, holding that kind of mutual requirement.

So, mild you would be, it’s probably better to have 10 deals of 10 000, than it is to have one deal of 100, if you’re playing in this space. And then, OurCrowd, we do offer entry points that are a lot lower than the venture capital funds in general, like usually it’s hundreds of thousands of dollars, if not millions to kind of, get into these venture capital funds. With us, the intra ticket is a lot lower, so it makes it more accessible for individuals, to kind of build that type of portfolio.

The other risks are obviously the fact that, you don’t know what’s around the corner the number of. You’re playing in a startup space and they’re going to be competitors from all over the world, that are looking at what’s going on. And you, as an individual, don’t necessarily know what’s in the market. So you might get shown a deal, that’s very very appealing to you, but you don’t know that there are another 100 companies doing exactly the same thing in a similar stage.

And that’s why I’m saying, if you’re coming through a platform like OurCrowd, where we’ve got a team that’s kind of looking at these deals, where we are looking at 200 deals. And when we pick the deal that we’re going in, and we probably looked at 50 or 100 other such companies in the same sector. You’re not gonna, you know, we’re going to make that mistake less often than someone who’s, kind of just doing it after seeing one or two deals, in a particular sector.

So it’s very important, to like, understand the sector and understand the technology. And if you don’t, you need to kind of, leverage of someone else’s expertise, I think that’s very important. And another question that you got was say: “What how should I start? And how should I pick an investment that’s suited to my profile? To my type of person? Okay. So I mean, that’s that really depends on who the person is right? But I think that one of the benefits of like a platform such as OurCrowd, is that you can come on with no upfront fee.

We only charge a fee on deploying, once you’ve deployed your capital.

24:11 - Which means that you can come on, open an account, look at deals as they are appearing on our platform. Most deals you can just look at, you can go into our due diligence reports, you can watch webinars and you can really, kind of build up a set a sense, before you even pull the trigger on any particular deal, of what’s going on in the market. Once you’re ready to invest, and then I think it’s also good to, kind of participate in the webinars with the companies, to participate in the various events that OurCrowd puts on or others type of kind of venture capital events, that you might have access to.

To again, get more familiar with the ecosystem and the players. And then it’s really about looking at, what is your allocation of capital that you’d like to make. Divide it amongst a certain number of investments that you’d like to make, and then prudently, look at companies that speak to you, it possibly might be in a sector that you have a specific affinity to. You might have  know a bit about AgTech or have a business, a family business that’s involved in logistics or something like that So then, you kind of start the entry point in a sector that’s closer to home But even so, I think it’s really about just digesting the ecosystem a bit and then starting to play with smaller tickets and then kind of building up over time And I think that OurCrowd allows you to do that, in a very transparent way, and that’s the way I think I would start, you know?  No, that’s great! That’s great! Great knowledge, great sharing, great tips! So, Johny, I’d like to thank you so much for being with us today, sharing your experience, your knowledge, telling us about user ecosystem, startups ecosystem, OurCrowd! Thank you, so much! It’s a great pleasure! And thank you guys for hosting me, and we look forward to seeing you guys on the platform and at our various events! Yeah! No doubt! And meeting you, everywhere we need a coffee next week, Johnny!  Okay! Good, good! In-person, no doubt! See you, Johny! Thanks a lot!.