Take this opportunity to meet OurCrowd’s new president, Anthony DeChellis, who brings to the discussion his extensive experience in the private banking and institutional finance world. Anthony previously served as CEO of Private Banking Americas at Credit Suisse, headed Private Wealth Management at UBS, and held a range of leadership positions at Merrill Lynch, including Manager of the European Private Banking Business.
2. The changing investment ecosystem:
The evolution of the advisor-investor relationship and the trends to watch
2
3. How we used to invest:
Change is not new in our industry
Brokerage, Commission-Trading, &
Asymmetry of Information
Enter Schwab The playing field is
levelled in 2000:
Regulation Fair
Disclosure (Reg FD)
Does Regulation Fair
Disclosure affect
analysts’ forecast
performance?
3
4. 4
Booz & Co Global Wealth Management Outlook
2014/15
5. Global HNWI wealth is growing, as is their demand for
digital in wealth relationship
Source: Capgemini, RBC Wealth Management and Scorpio Partnership Global HNW Insights Survey 2014.5
6. 6
Big Banks are trying to react
Citi to
Launch
Banking App
for Apple
Watch
Business Wire
March 10, 2015
Report: Digital and Mobile Solutions for Financial
Advisors 2015
Fending off the robos: New technologies
reinventing the client/advisor relationship
Report: Mobile Apps for Wealth
Management 2014
Wealth Managers Need Better
Apps to Tap into Mobile High-
Net-Worth Generation
7. Financials services industry is ripe for disruption
According to the yearly
Edelman Trust
Barometer study…
Finance is the
least trusted of
all industries
7
8. Regulatory Developments: New rules
Create Opportunities to Meet Changing Investor Demand
Expanding the audience with ”crowd building,” an evolving are of the law
Pre Jobs Act 2012
• No general solicitation or general advertising of unregistered securities allowed
• Exemption—certain private offerings only to accredited investors
• Self-accreditation was sufficient
• Jobs Act 2012—Title 2
• Congress’ attempt to stimulate jobs in the US economy by
broadening investment in private companies
• Mandate for the SEC to issue operative regulations
• First set of rules including 506(c) Exemption Sept 2013
• Jobs Act 2012—Title 3: Crowdfunding
• Creates new registration exemption to take advantage of
Internet’s capacity for mass communication & social interaction
• The new exemption will not become effective until the new SEC
rules have been adopted
• Jobs Act 2015 Title 4
• March 25, 2015: SEC adopted final rules to implement the
expansion of Regulation A (Reg A+), which includes non-
accredited investor provisions
8
9. Regulatory Developments: New rules
Create Opportunities to Meet Changing Investor Demand
Rule 506(c) provides
General solicitation and general advertising allowed
• All US residents now able to see &
attend meetings with actively
funding companies (whether
accredited or not)
• Web site to contain limited
information on funding companies
for US users only
• Only accredited investors can
actually purchase
• Definition of accredited investor
remains the same
Self Accreditation no longer enough—need to
implement verification procedure
• New Rule requires each US investor
to provide certification letter
• Issued by registered broker-
dealer, RIA, licensed attorney or
CPA
• Needs to be renewed
periodically
• Confirm it is still accurate at the
time of each investment
Relates to US residents only
9
Bad
Actor
Bad actor Provision
• Issuers can only use Rule 506
offerings if no “bad actors”
associated with them
• SEC issued clear guidelines: get
bad guys off the street more
investor protections
10. 10
HNWI want more than Transaction & Information
via digital media with their Wealth Managers
Source: Capgemini, RBC Wealth Mangement and Scorpio Partnership Global HNW Insights Survey 2014.
The Most Important Interactions on Social Media:
• Trending investment news shared by advisor
• Educational articles and research advisor has
shared
• Instant access to research, whitepapers and
pertinent videos
52%
57% 56%
46%
40% 43%
51% 53% 52%
25%
19% 20%
0%
20%
40%
60%
In-Person
/Phone
Internet E-mail Mobile Social
Media
Video
Inform
59% 58% 58%
46%
36% 41%
58%
49% 56%
26%
20% 24%
0%
20%
40%
60%
80%
In-Person
/Phone
Internet E-mail Mobile Social
Media
Video
Engage
54%
65%
54%
46%
34% 35%
49%
61%
45%
22%
12% 14%
0%
20%
40%
60%
80%
In-Person
/Phone
Internet E-mail Mobile Social
Media
Video
Transact
Under 40
40+
12. For the people, by the people:
Moving from passive investing to participatory investing via crowdfunding
12
13. Crowdfunding: Competitive Landscape
There has been a proliferation of platforms
13
Source: A Trillion Dollar Market By the People, For the People How Marketplace Lending Will Remake Banking As We Know It BY CHARLES MOLDOW GENERAL PARTNER, FOUNDATION CAPITA
14. 14
While passive investing in ETFs is growing,
active investing via crowdfunding is exploding
Source: H. Terry, D. Schwartz, T. Sun “The Future of Finance Part 3: The Socialization of
Finance,” Goldman Sachs. March 13, 2015.i
$1.5
$2.7
$5.1
$10.0
$-
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
2011 2012 2013 2014
Crowdfunding has exploded to $10bn in
2014, nearly doubling every year
Aggregate Amount of Funding
Through Crowdfunding ($bn)
The World Bank October estimates global
crowdfunding to grow to $95B by 2025
ETFs have a 10 year CAGR of 27.1%
0
1000
2000
3000
4000
5000
6000
0
500
1000
1500
2000
2500
3000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sep-14
# ETFs/ ETPs
Assets
(US$bn)
Global ETF and ETP Growth
ETF/ETP Assets # ETFs/ETPs
15. Investors are finding new access points to asset classes
In 2014,
Lending Club
surpassed
$4 billion in total
peer to peer
loan underwritings
(4x 2012’s numbers)
15
16. 16
Fund outflows increase as investors seek alpha
elsewhere
• Mutual fund underperformance in
contrast to lengthy bull market has been
a significant driver of fund outflows
• Investors continue to miss out on returns
by waiting for highly visible private
companies to go public
• To meet and exceed investors’
expectations, RIAs need to offer
investment opportunities that reflect the
“New Alpha”
How Many Mutual Funds Routinely Rout
the Market? Zero
http://www.nytimes.com/2015/03/15/your-money/how-many-mutual-funds-routinely-rout-the-market-zero.html
17. 17
Selection & due diligence matters even more
in illiquid products
Source: Morningstar, Lipper Tass, Preqin.
Note: Dispersion of fund performance, average calendar year 2002-2011. Past performance is not indicative of future results. Should the study have been conducted
over a different time period, the results may have been different. There can be no assurance that an allocation to illiquid investments would yield higher real returns.
Top Decile
2nd Quartile
MEDIAN
3rd Quartile
Bottom Decile
50
40
30
20
10
0
-10
-20
-30
Long-Only
Fixed Income
Long-Only
Equities
Hedge
Funds
Private
Equity
ReturnDifferentialVersusMedian(%)
Manager Dispersion Increases as
Illiquidity Grows
18. Asset Class Drivers
• Capital Markets Environment
• Pace of Innovation
• Venture capital flows
Manager Specific Drivers
• Ability to identify emerging
innovations
• Access to attractive deals
• Ability to create value through
active involvement in portfolio
company
18
Breaking Down Venture Capital Risk and Return
19. Wisdom of the crowd:
How individual investors as a collective are driving the future of investment
19
20. 20
Of the $4T opportunity created by the socialization of finance, Crowdfunding represents
$1.2T immediately addressable opportunity with $57bn opportunity in the VC/Angel space
Crowdfunding:
An increasingly large opportunity for investors
Source: H. Terry, D. Schwartz, T. Sun “The Future of Finance Part 3: The Socialization of Finance,” Goldman Sachs. March 13, 2015.i
$666
$140 $72 $68
$33 $24
$166
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
Bankcard
Loans
Home Equity
Loans
Consumer
Finance Loans
Retail Loans Venture
Capital
Angel
Investors
Other Loans
Addressable Opportunity for Crowdfunding:
$1.2T Trillion
21. Where is Wall Street?
Investors are crowdsourcing more accurate financial estimates
21
22. • Crowdfunding is growing
rapidly
• Crowdfunding is truly global
Investors are responding by participating in
democratic investment platforms
23. 23
As crowdfunding grows, platforms become differentiated by levels of due diligence, investment
management and investor constituency
Equity Crowd Funding:
OurCrowd, AngelList, CircleUp lead the pack
Investment
Management
Diligence
Unaccredited
Investors
Indicated
Upstream Move
Accredited
Investors
24. Israel Case Study: “Move over, Silicon Valley…”
As seen in the Economist last year – ranking the world’s 20 top startup ecosystems,
Israel is #2
24
25. 25
Israel is one of the world’s top marketplaces for
innovation
In the last
decade,
these
companies
all bought
at least one
Israeli
start-up.
27. 27
Creating a new class of investment:
Crowdsourced Equity Capital Investing
OurCrowd’s platform combines four models of Crowdsourcing
Equity Crowd Funding at the
core of OurCrowd’s model
Creating content &
communities of investors,
experts & alumni
Utilize voting/polling of experts
as part of due diligence
Harnessing the wisdom of
crowds and expert groups
Funding
Voting
Wisdom
Creating
28. 28
Why OurCrowd
Clients want unique opportunities, diversified across sector and stage,
delivered through a process they can trust,
which produces performance at a fair cost,
all wrapped in a world class networking/client experience
Entrepreneurs want efficient and fair access to capital,
a process they can trust, enabled through a system
that raises their profile and leverages their marketing efforts,
while supporting their growth and development
Democratizing Wealth Creation and Access to Capital
29. Foundation/Brand
• Founded in “Start-up Nation,” Israel, home to one of the world’s most prolific start-up communities
• Management Team brings broad experience and global perspective
Strong Network to Generate Deal Flow
• Access to a global network of investors, entrepreneurs and advisors brings access to diversity of opportunities
• Synergistic co-investing with an extensive network of Top-tier funds (VCs) & institutional investors
Partnership Model
• Business Model partners OurCrowd with investors & entrepreneurs
• Multi channel investor platform
Crowd Engagement
• Opportunity to build customized communities of investor groups
• Innovative use of the crowd and power of expert groups (refinement under development)
29
Key Differentiators
30. 30
We do not invest alone—and increasingly our partners want to access crowd capital & insights
OurCrowd: Partnering With Leading Institutions
31. 31
We’ve invested in 62 companies with ~30 follow on rounds
OurCrowd’s portfolio
Editor's Notes
After 30 years of working in large wall street institutions I decided I wanted to do something more entrepreneurial and that was part of reshaping how investors access financial services
When I started in the business you could make a living off of just providing some information and access
Change is not new to our industry.
We survived but did have to adjust even so market share was taken by new market entrants
Information edge, trading edge—identifying opportunity earlier—way before going public. Regulation leveled the playing field further by taking away some of the information advantage—Europe only made insider trading illegal in the last 20 years!
It’s a natural progression and we’ve adapted—pushed or by leading we’ve adapted.
So where are things going now?
With greater access to timely information while seeking alpha
Clients are becoming increasingly self-directed
And the competitive landscape is growing with digital entrants
The good news is wealth is growing but we need to pay attention to the needs of our clients and their children
Increasingly clients are looking to new channels—and desire for digital interaction goes across all ages and wealth bans around the world
With FS being the least trusted of all industries globally, there is opportunity to meet to changing needs of clients—but what might enable that change?
What about the timing of new entrants that are more transparent and engage clients
How is change possible: the regulatory developments are supporting the changing needs of investors
Jay: Note that the first version of JOBS Title III did not succeed. There is much talk now about the congress drafting an entirely new Title III framework. Stay tuned for details. May not be economically feasible.
RegA+ under title 4 just came out. Some positive elements and hurdles within it. More to come on this in the coming weeks.
We need to support client’s needs to be informed, engaged and transact digiually
Given all of this, it’s not surprising that fintech is exploding
How people consume financial services is changing and per the WSJ—don’t know top competitor in 10 years
Passive Investing Trends
Investors moving to ETFs indices (the ultimate passive investment)
A staggering 86% of active large-cap fund managers failed to beat their benchmarks in the last year, according to an S&P Dow Jones Indices scorecard http://money.cnn.com/2015/03/12/investing/investing-active-versus-passive-funds/
Active Investing
The market with more volatility is the kind of environment that has traditionally been the best for active managers to shine.
Crowdfunding has the potential to increase entrepreneurship by expanding the pool of investors from whom funds can be raised beyond the traditional circle of owners, relatives and venture capitalists.
This is no longer a theory. Hockey Sticks actually happen
People are open to new ideas (NYT)
Let’s talk a little about the timing of this trend and the emerging pattern of people being willing to invest their own money directly
It’s just harder, not impossible, to generate alpha in the public market
Does everyone running in to alternatives, particularly PE or VC solve the problem? Not easily, there is a problem to solve for
Generating alpha is tough and getting tougher
Efficient market theory
Talent, enabled by powerful tools
Insider trading
Unfair trade practices
High speed trading could get information faster so you have to act on it
You have to get ideas earlier on, be great long term trend spotting, manage risk better
But not so easy
Dispersion of 10 year returns
A lot of people are breathing a sign of relief—expertise still matters yes but let’s talk about performance drivers in the future
Dispersion should narrow over time as PE markets become more efficient
Problmes that need to be solved for before the crowd can invest and achieve great results
What affects the vintage year for VC funds
There are risks, but will it be riskier
I had two questions: investors and entrepreneurs
People are increasingly going to look for alternative asset classes but we all know it’s a risky game that also requires the ability to lock up money for long periods
Estimize
…Crowds are just investing wildly(?), they are learning how to work together to make better decisions
People are increasingly taking matters into their own hands, and it’s happening globally
The US & Europe lead but it’s happening everywhere
Foreign exchanges of non public equity under development
Offerings are still developing and it’s important to understand the difference
Not all platforms have the same strategy
But it’s no secret
Some buying as many as a dozen companies
4 key themes in crowd sourcing—we combine all four
Will have unmatched intellectual capital
The big idea that attracted me and many others
Danna: Our “crowd” frees us from being limited to the capabilities and expertise of our team. Our model is unique in leveraging the power of our crowd to maximize its potential to better serve our investors and entrepreneurs. This enables us to provide unprecedented diversity of opportunities, as will be reflected in the variety of channels, as well as unprecedented support to our companies post investment.
(I haven’t yet figured out how to fully articulate this thought, but to me, the above is a key concept of our model with as yet untapped potential. If we format this, it could quite possibly be the foundation for how to leverage the crowd to enable anything, just like we designed a platform to fund great ideas. Enabling great initiatives/innovation, etc. Like I said – haven’t yet figured out how to fully articulate this…)
Also - It sounds a bit kitschy but I can’t escape using “connectors” when describing the value add of our network. It is quite possible the biggest and most active part right now.
Evelyn: We need to define our differentiators vis-à-vis our real competitors better. We are not competing with other crowdfunding platforms on deals – we are competing with other funds.
Zach: Slide 8) I think as a reader that there are TOO many differentiators on this slide. With so many differentiators, you are essentially saying we are VERY different from what is out there. Maybe, you're just a different animal and you've lost the context and value of surrounding yourself in an existing field. Some of these things are understandable as stand-alone bullets. I'd like to see this more visually. Also, other companies you had in the previous slide do some of these things.
Shai: 1) Differentiation (Slide 8): The items on this list are, IMHO, either:
- generic and easy to claim
- not sustainable when we start really scaling and addressing a more variant audience
- not sustainable when its starts getting competitive for real
- we don’t really have them
Our main differentiator today is our brand (and Jon’s personal brand) and the whole Israel/start-up nation thing which are impactful to a certain audience and scale but not necessarily for our next step. You could also say our early entry and current size are adv but those could easily go stale. I think we need a deep discussion and process to distill what we want OurCrowd to be for our customers - why should they choose us….
2) …which leads me to: There is very little discussion on the key strategic question IMO which is “as a potential customer, why should I put my money into ourcrowd?”. And going backwards from there “what do we need to do to address our potential customer’s pains/needs“ and going backwards from there "what are current/future customer pain/needs enthuse markets”….
3) …which leads me to: I’m assuming that the quality of “product” we can supply (i.e deal flow and indirectly returns we provide) to customers is an important consideration in a customer choosing us. Very little discussion in the prez on how do we continue to secure “top deal flow” and what are the threats and opportunities there.
Elan--Page 8 (titled key differentiators) – Does not mention that our model is based on carefully curated and diligenced deals that go through our professional investment team. You do have that in other places, but if this is the key differentiator slide, I think it should be there. This a key difference for us vs. many other platforms
Gadi: Slide 8 is very good.
Elan: Page 8 (titled key differentiators) – Does not mention that our model is based on carefully curated and diligenced deals that go through our professional investment team. You do have that in other places, but if this is the key differentiator slide, I think it should be there. This a key difference for us vs. many other platforms
Give a wider range of investors opportunity to invest at the same terms
What kind of opportunities? The first IPO funded through our crowd 3X in 1 year