Archive for the ‘Israel’ Category

An SEC Rule Change Opens a New Era for Crowdfunding

A recent rule change will allow entrepreneurs seeking investors to reach a much broader audience.


Potential investors will soon begin seeing opportunities pop up in their Facebook news feeds and in their email inboxes thanks to a major rule change from the Securities and Exchange Commission. In September, the agency removed the decades-old ban on public solicitation for private investments. This means private investments can now be marketed to the general public, which will allow entrepreneurs to reach a much broader audience than securities law used to allow.

The nascent crowdfunding market, which uses the Internet to pool small investments from many investors, stands to benefit significantly from this rule change. Right now, crowdfunding sites like Kickstarter and Indiegogo are not subject to securities laws because they allow people to give money to support projects and individual initiatives, not invest in them. In the roughly four years they’ve been in existence, these two sites have raised close to $1 billion in contributions for thousands of projects.

Startups and businesses have taken notice. They have begun to use similar online crowdfunding platforms—but to gather investments. And thanks in part to the SEC’s new rule, the equity crowdfunding market is poised for rapid growth over the next decade. Deloitte expects all forms of crowdfunding to hit $3 billion globally this year and to grow at a compound annual growth rate of 100% over the near term. Equity crowdfunding is expected to perform even better, with a compound annual growth rate of 114%, according to the crowdfunding advisory firm Massolution.

To be sure, the SEC’s change to Rule 506 doesn’t allow just anyone to invest. Only “accredited” investors—with a net worth of more than $1 million, or who earn at least $200,000 a year—can continue to participate in equity crowdfunding. The new rules require proof, whereas self-attestment sufficed previously. Many hope that the SEC will issue additional regulations that would let smaller investors get in on the action.

Meanwhile, accredited investors are responding. Equity crowdfunders for accredited investors—including FundersClub, Angelist, CircleUp and my company, OurCrowd—are bringing in tens of millions of dollars for private investments through online platforms. And now that the SEC has removed restrictions on the companies’ public advertising, sites will at last be able to speak directly to customers.

The resources that might be tapped are staggering. The Royal Bank of Canada estimates that more than $45 trillion of capital sits in the pockets of high-net-worth individuals world-wide. Roughly $10 trillion is held by about five million U.S. households, according to the private-equity firm Carlyle estimates. Without public solicitation or Web-based crowdfunding portals, there was no way to reach beyond a small percentage of investors.

This money wants to move. According to April’s Northern Trust survey of high-net-worth investors, more than half of them are actively seeking new investments. And 30% are more inclined to consider alternative investments than they were five years ago.

A new class of angel investors, affluent individuals who invest personal funds in companies, is another byproduct of the burgeoning crowdfunding movement. These angel investors are no longer just former startup founders. They’re a younger, broader class of Internet-savvy investors ready to evaluate and pick deals online.

Managing these new angels will require “venture education.” Some crowdfunders post numerous deals and rely on the wisdom of the crowd to weed out the bad ones. Other platforms offer limited options to maintain credibility with potential investors. This presents some challenges for sound portfolio management. Should angels invest in multiple private deals to spread out risk and retain enough capital to cover losses? Those running crowdfunding platforms will need to give advice and support to angels to help them avoid taking big losses on one or two opportunities.

Professional investors know that they must provide value to companies beyond the capital they invest. Inexperienced angel investors may be less aware of that obligation. The equity crowdfunding portals will need to facilitate investor involvement. Investors have to find ways to sit on boards and become mentors to help companies handle growth, hire the right people and make good strategic decisions.

The crowdfunding model allows investing to move beyond Silicon Valley and Wall Street to Main Street. The next generation of angels is likely to include successful doctors, lawyers, contractors and real-estate professionals who want their share of the next Apple or Microsoft. The real question is if government regulation can continue to keep up with this rapid innovation.

Mr. Medved is the CEO of OurCrowd, an equity-based crowdfunding platform based in Israel.
A version of this article appeared October 9, 2013, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: An SEC Rule Change Opens a New Era for Crowdfunding.

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Purple Nation

January 8, 2013

Hagel Must Address ‘Jewish Lobby’ Comment

By Lanny J. Davis





I believe a president — Republican or Democrat — almost always deserves to have the Cabinet that he wishes, with the bar very, very high to oppose his choice. Thus, there should be heavy presumption that President Obama’s reported nominee for secretary of Defense, former Nebraska Republican Sen. Chuck Hagel, should be confirmed by the Senate.

Whether senators agree or disagree with Hagel’s past positions — on the Iraq war (for the authorizing resolution, then turned against the war), declaring the Iranian Revolutionary Guard a “terrorist organization” (against), engaging with Iran in negotiations more aggressively (for), engaging with Hamas in seeking a peace agreement in the Middle East (for) — these positions are known to the president, and he still has decided to nominate Hagel for the post.

In any event, President Obama’s policies will be carried out by the new Secretary Hagel, not former Sen. Hagel.

But: Hagel owes it to all Americans, not just to American Jews, to do more than apologize for use of the expression “Jewish lobby” in communicating his concern about its power.

He must understand, first, that there is a difference between Jews who support Israel and the “Israel lobby.”

To suggest that there is a “Jewish lobby” is not only inaccurate, it is highly offensive to the American Jewish community.

First, as to the inaccuracy of the expression, here are a few indisputable facts:

Fact: There are many, many non-Jews who support Israel.

Fact: Most Americans, Jews and non-Jews (polls consistently show over 70 percent nationwide) support Israel because they see it as being in the U.S.’s national-security interests to do so — and because Israel is a democracy like ours, committed to the legal protection of civil rights, gay rights and human rights, including the rights of the more than 1 million Palestinian Israeli citizens.

Fact: Some of the strongest supporters of Israel are among evangelical and conservative Christians.

Fact: There are many Jewish Americans, including this writer, who are sometimes critical of the Israeli government’s policies and who strongly support a two-state solution, consistent with Israeli security interests.

As to why so many American Jews are highly offended by Hagel’s use of the expression “Jewish lobby,” if he doesn’t understand its historical association with virulent anti-Semitism and the scurrilous libel of “dual loyalty” used by anti-Semites against Jews, then I would ask him the following question:

Have you ever used the expression the “Catholic lobby” when describing pro-life lobbyists? If you did, would you understand why Catholics would be offended by that expression — because many Catholics are pro-choice and would be offended for you to invoke an expression describing their religion rather than their views on the abortion issue? Do you recall how offended John F. Kennedy was at the notion that he would have dual loyalty as president — to America and to the pope — a charge JFK vigorously denied and considered to be emblematic of anti-Catholic bigotry?

So if Hagel is confirmed as Defense secretary — and as of now, I believe he should be — I hope he does more than make an apology on the use of the “Jewish lobby” expression (as he already has regarding his anti-gays-in-the-military comments in past years). He needs to show that he understands, first, why he is factually wrong to describe a “Jewish lobby”; second, he needs to show greater sensitivity to the American Jewish community because he understands that expression evokes anti-Semitism through the ages.

On policy, he should explain why he opposed describing the Iranian Revolutionary Guard as a terrorist organization even though it is a matter of record that they have financed terrorist operations against civilians in Israel; and why he favors Israel’s negotiating with Hamas, despite Hamas’s refusal to renounce terrorism and the right of Israel to exist as a Jewish state.

I believe Hagel is a decent man, with an outstanding record of integrity as U.S. senator and military service as a patriot. He should address his use of the “Jewish lobby” expression directly and candidly — not only to reassure American Jews but also to clear up doubts that could hinder his effectiveness as secretary of Defense.


Davis, the principal in the Washington law firm of Lanny J. Davis & Associates, which specializes in legal crisis management, served as President Clinton’s special counsel (1996-98) and as a member of President George W. Bush’s Privacy and Civil Liberties Oversight Board (2006-07). He currently serves as special counsel to Dilworth Paxson and is a partner with former Republican National Committee Chairman Michael Steele in Purple Nation Solutions, a public affairs-strategic communications company. He is the author of the forthcoming book Crisis Tales – Five Rules for Handling Scandal in Business, Politics and Life, to be published by Simon & Schuster. He can be followed on Twitter @LannyDavis.

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