by Xinhua writer Wang Bowen
JERUSALEM, Nov. 18 (Xinhua) -- The Israeli Parliament Tuesday further eased fixed-income debt crowdfunding regulations for startups and small businesses, local media reported.
The move is seen by many as an incentive to the sprouting startups and small businesses in this so-called "Silicon Valley in the Middle East."
In March, the Israeli parliament's finance committee announced that, as of January 2018, private companies would be allowed to issue bonds or raise fixed-income debt from the public by crowdfunding platforms, which could enable small and early-stage companies not yet listed on stock exchanges to be financed by a wider range of investors than before. The investment cap will be decided based on the investors' annual income.
Until now, companies interested in raising money through crowdfunding have to do so individually. Although they are not demanded to release a prospectus like public offerings do, they are required to disclose its identity and certain legal details.
The new resolution on Tuesday decided that anonymous diversified investment portfolios are available on equity crowdfunding platforms. However, investors are required to choose the investment sum and risk degree.
Investors with an annual income of 100,000 USD are allowed to invest as much as 3,000 USD in a single company, for a total investment sum being around 6,000 USD. With the same annual income, investors who prefer a diversified crowdfunding portfolio with an investment cap of five percent in each company will be able to invest up to 14,000 USD all together. Investors who prefer diversified portfolios with a one percent cap for each company will end up investing up to 70,000 USD in total.
Based on these new regulations, the crowdfunding ceiling for an individual company or project would be a little bit more than 1 million USD, with certain conditions as high as 1.7 million USD.
Since more early-stage companies died than survived according to statistics, both types of crowdfunding are considered risky. A diversified portfolio might seem less risky than a single investment at first sight; however, risks are increased for the fact that the companies in the portfolio are not required to disclose any information to the investors.
Currently, private companies are allowed by Israeli legalization to raise fund from the following sources, including institutional investors, venture funds, angels and banks. In addition, they can also raise capital from a group of no more than 35 accredited investors.
IVC Research Center Ltd., a tech-focused Israel-based research company, released a report in September, saying that a total of 145 Israel-linked tech companies got financed through equity crowdfunding platforms, in the last five years.
In the first half of 2017, Israel-related startups raised a total of 173 million USD through equity crowdfunding, which is equivalent to 73 percent of the overall volume raised through crowdfunding in the entire year of 2016.
Today, only accredited investors are entitled to taking part in equity crowdfunding platforms in Israel.
The top four most active crowdfunding platforms in Israel are OurCrowd, iAngels Crowd, ExitValley, and Pipelbiz, with their respective share of the deals being 58 percent, 30 percent, six percent and five percent, according to IVC.
IVC also noted that, in the past five years, 68 percent of the companies crowdfunded in Israel were seed and early-stage companies.
