OurCrowd specializes in startup companies across a variety of industries, with many offerings in particular in the technology and transportation sectors. At the time of this writing, featured offerings included AI, cyber analytics for the insurance industry, and digital packaging. There are offerings in several investment rounds, with a bigger focus on early investment and supporting fledgling startups through the phases of development.
A differentiating feature of OurCrowd is that it offers corporations the ability to sign on as collaborators, in addition to individual investors. By paying for membership, corporations have access to discovering new technologies available for investment on the platform that they might want to use in their own operations, and also the opportunity to invest alongside individual OurCrowd investors through the Venture Collaboration feature.'
Types of investments OurCrowd offers
OurCrowd offers investments across a variety of industries, but the majority of current offerings are concentrated in technology. There are three levels of investment – Startup Select as the introductory opportunity, and Funds and Portfolio Reserve as premium offerings.
Startup Select requires a minimum investment of $10,000. Investors can sign up to receive emails or log in to the platform to check on new offerings. Each offering is typically open for 45 to 60 days. The next step, OurCrowd Funds, involves investing in startup funds rather than individual deals. Investors can choose between managed and automated investment funds. The three generally available types of funds include externally managed funds in which OurCrowd invests, rule-based funds, and the two OurCrowd original funds Cognitiv (focused on seed-stage startups) and OurCrowd Qure (the first Israeli digital health fund). The majority target around 15 investments, but may target up to 50.
OurCrowd Portfolio Reserve is the premium investment account on the platform. Investors must fund their account with a minimum of $50,000 and are allowed unlimited diversification through choosing their individual investments, with the caveat that each must be allotted a minimum of $5,000. Practically speaking, if you invest the minimum you can choose up to 10 different offerings. Each time a company launches, OurCrowd sends a deal highlights notification including an in-house investment analysis and deal terms, and investors can decide whether to participate. Investors do not have to allocate their entire account balance at once. However, if you do have a funded account with an unused balance, OurCrowd will automatically allocate those funds to new investments and provide a 7-day opt-out period, so investors who want to take their time in choosing need to be mindful of checking frequently to maintain individual preference in creating a portfolio.
What do you get when investing with OurCrowd?
Investors receive an equity stake in either the individual offering(s) or fund(s) of their choice. Some of the partnership offerings are conducted through special-purpose vechicles (SPVs), with OurCrowd SPVs making investments in OurCrowd Portfolio companies.
How does OurCrowd make money?
There are a few levels of fees charged by OurCrowd. For individual offerings, the management fee is 2% annually for four years (a total of 8% over the life of the investment) and is capped until exit. The administrative fee is a one-time 4% fee to directly reimburse the SPV’s expenses and is taken from an investor’s account as expenses are incurred. Finally, there is a carried interest fee of 20% on profits up to 5x the invested principal, with profits over and above that amount subject to a 25% fee. For funds, fees run from 1.5-2.5% over the lifetime of committed principal and OurCrowd takes direct reimbursement for fund expenses without a cap.
Potential returns and cashflow
For OurCrowd Startup Select, the average life of an individual investment is 7 years. This increases to 8 to 10 years for the funds. OurCrowd states that their funds are “designed to provide distributions throughout the life of the fund, as companies have exits and capital becomes available.” OurCrowd advises investors in individual offerings to diversify to increase the chance of returns.
Breadth of offerings on OurCrowd
OurCrowd advertises an acceptance rate of 1-2% of roughly 4,000 company applicants each year, producing 2-3 new offerings per month. As of the time of this writing, approximately 15 investments were available. Another few were open for placement on a waiting list. Industries range from healthcare to food to transportation, with most of the startups focused on technological solutions to issues in these areas. For example, a couple of the current investments focus on 3-D imaging and robotics in the healthcare industry.
Regulatory framework and due diligence expectations
All offerings are made under SEC Reg D, requiring investors to be accredited. OurCrowd says they do a fair amount of due diligence and advertises the five phases of its process on their website. When investors sign on to the platform, they can access such documents as webinars with startup founders, analysis performed by the OurCrowd team, and company pitch decks. While it’s no substitute for your own due diligence, the due diligence criteria and investor materials are more than some other platforms, which function more like marketplaces and perform minimal diligence.