ISRAEL’S GROUDBREAKING TECHNOLOGY: CAN YOU PROFIT?
As originally appeared in The Jerusalem Post on February 14th, 2020.
“In Israel, a land lacking in natural resources, we learned to appreciate our greatest national advantage: our minds. Through creativity and innovation, we transformed barren deserts into flourishing fields and pioneered new frontiers in science and technology.” –Shimon Peres
I am writing this after attending what has become “the” hi-tech event of the year in Jerusalem, the OurCrowd Global Investors Summit. Over 23,000 people registered for the event at Binyanei Ha’uma to hear about cutting edge Israeli ingenuity, for the insane networking opportunities, and my favorite part, to drink lots of coffee and eat danishes!
There were presentations dealing with plant-based food, cybersecurity, sports tech, artificial intelligence, and many other sectors. What I thought was really interesting was a speakers corner, ala Hyde Park, where every few minutes another startup did a quick presentation of their business. Who isn’t inspired when hearing about a company that may have found a way to shrink tumors, and another that’s on the path to helping cure Alzheimer’s?
Israel is changing the world for the better. As I was walking around I kept overhearing people, including many foreigners, who kept saying how they were blown away at all the innovation they were seeing. Without question that future is being paved in a major way by Israeli visionaries. A big round of applause goes to Jon Medved and the whole OurCrowd team for putting on the event. Who would have dreamed a few years ago that this would become the biggest tech conference in the Middle East, and the biggest crowdsourcing event in the world? For full disclosure, I actually worked for Jon two decades ago. I can attest that he is truly a visionary.
How to get exposure?
I have written and given many talks about the Israeli economy and Israeli ingenuity, and inevitably when I open up the talk to questions, someone asks, “This is crazy. How can we invest?” Up until OurCrowd started there was a huge barrier for most individuals to invest in Israeli start-ups. It was virtually impossible for regular investors to gain access to Start-up Nation. Assuming you could find a company that was raising money- Where would you look?-, you would need to write a check for hundreds of thousands of dollars to invest. Startup investing was pretty much only for institutional investors, or very hi net-worth individuals. 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 $2-400,000 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
As I have written numerous times, Israel has more companies trading on major U.S. exchanges than any other country in the world ex-China. While tens of billions of dollars are flowing into Israel 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 Mellanox, Clicksoftware, to name just a few, were 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 publicly 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.
