by Geri Stengel
Angel #investors are beating out venture capitalists when it comes to Israeli tech companies. Between January 2011 and July 2014, nearly half of the most profitable investor exits were funded exclusively by angels, according to iAngels, an equity crowdfunding platform. Although angels invested smaller amounts of money than VCs, they reaped the high rewards that VCs crave: 10 to 30 times returns. They also did it in three years or less which is far faster than the five to seven years for U.S. companies reported by CB Insights, a data company that tracks #investments in private companies.
“Israel is a small country with only 8 million people,” said Mor Assia, cofounder of iAngels. “It has the highest density of startups per capita in the world.” In 2014, it generated nearly $15 billion in exits through mergers and acquisitions and public offerings, nearly double 2013, according to a PwC report. That’s an all-time record year for the Israeli hi-tech industry.
With such extraordinary returns, you’d think Israeli tech companies would have no trouble raising money from angels. However, angels tend to invest locally, where it is easier for them to source deals. With so few Israeli angels, entrepreneurs in Israel have a tough time, compared to other tech hubs such as Silicon Valley and New York City. Two women, Assia and Shelly Hod Moyal, wanted to change that.
Assia and Hod Moyal recognized this as an opportunity to connect investors worldwide with Israeli companies. Their analysis of company valuations found that Silicon Valley had the highest valuations followed by New York City. Israeli companies lagged behind, making them an undervalued investment opportunity.
Assia and Hod Moyal met and began working together in New York City. Their company is now based in Tel Aviv. Their backgrounds encompass both tech knowledge and financial savvy. Assia was part of Israel’s prestigious military intelligence Unit 8200 (it has birthed many of Israel’s tech entrepreneurs) and a graduate from Technion – Israel Institute of Technology. She also worked at SAP, IBM, and Amdocs. Hod-Moyal is a former investment banker at Goldman Sachs, research analyst at Avenue Capital, and financial adviser at UBS.
When Assia and Hod-Moyal analyzed the Israeli tech community, they realized that they knew many of the entrepreneurs. They also knew many of the angels and VCs in Israel who invest in theses companies. Connecting Israeli investors and entrepreneurs to the larger world is a unique value proposition.
Together, they launched iAngels, which curates tech investments in which respected and high performing Israeli investors have invested at least $100,000 and offers investors worldwide the opportunity to invest with the same terms. Follow-on investors can invest as little as $5,000. iAngels has raised $2.5 million for itself.
Foreign investors bring a different value to companies than Israeli investors, they can open doors to customers, vendors and employees in their country. Foreign investors should know that they are held to the angel investing standards within their country not Israel.
Few individual companies will make the spectacular returns mentioned at the beginning of the article. But a combination of companies can pay big dividends. A best practice for investing in private companies is to take a portfolio approach. “To be successful at angel investing, statistically, you need to invest in 20 companies in a wide array of sectors and over a period of time,” said Hod-Moyal.
How can you tap new investment opportunities to maximize your returns?
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