ALL JAZZED UP ON ISRAELI HI-TECH: NOW WHAT?
As originally appeared in The Jerusalem Post on March 8th, 2019.
Money was never a big motivation for me, except as a way to keep score. The real excitement is playing the game.
–Donald Trump
Ever receive a super cool gift, start using it and then realize that there has to be more to do with it than just the initial usage? I am writing this after attending what has become “THE” hi-tech event of the year in Jerusalem, the OurCrowd Global Investor Summit. 18,000 people converged on Binyanei Ha’uma to hear about cutting edge Israeli ingenuity, to network, and least I forget, for some real good food!
Panels dealing with cybersecurity, digital health, artificial intelligence and many other sectors had many in the crowd really getting excited about the local tech industry. It wasn’t just company heads pontificating about their specific company, rather it was industry experts, and many who are company leaders sharing their vision of the future. Without question that future is being paved in a major way by Israeli visionaries. Kudos to Jon Medved, who has been at the forefront of the Israeli tech revolution for decades, for putting on this amazing event. As someone who worked for him nearly 20 years ago, I can attest that he is truly a visionary.
Now what?
As someone who has lectured many times on the Israeli economy and Israeli ingenuity, inevitably when I open up the talk to questions, someone asks, “this all sounds amazing. How can we invest?” Up until OurCrowd started there was a huge barrier for most individuals to invest in Israeli start-ups. Assuming you could find a company that was raising money, you would need to write a check for many hundreds of thousands of dollars to invest. Startup investing was pretty much only for institutional investors. Then OurCrowd opened and basically democratized hi-tech investing, by creating a platform of many companies raising money and lowering the minimum investment required to a very low amount. This was revolutionary and certainly allowed many private investors access to all that was being developed in Israel.
Still for many investing in private companies was too risky. Why? Conventional asset allocation models allow for up to 10% of net worth to be invested in private companies. This means for someone with $3-400,000 if they had the appetite for these types of investments they could invest around $30,000. Not much diversification, especially in an industry where the majority of the companies will end up treading water at the best, or closing down in the worst case. Then there is the issue that when investing in private companies, your money is basically locked up until either they are acquired or go public.
Public markets
Israel has more companies trading on major U.S. exchanges than any other country in the world ex-China. And while billions of dollars are flowing into Israel looking for startups, the secret is that global multinationals are also spending billions buying slightly more mature companies. Not a month goes by without some publicly traded Israeli company getting acquired. Keep in mind that the huge acquisitions recently of Mobileye, Soda Stream and Orbotech, to name just a few, where all made by global companies buying Israeli publicly traded companies.
For investors who don’t have either the wherewithal or the time horizon being locked up with no chance to sell, carving out a piece of their portfolio to invest in Israeli companies that are publically traded may be a good solution.
Not all Israeli companies are created equal and investors should do in-depth research before investing. As some of these companies are not very large, the smallest piece of news can send their stocks either soaring or tumbling. It’s therefore important to speak with your investment adviser to see how, if at all, investing in up-and-coming Israeli companies fits into your overall investment portfolio.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
