OurCrowd review: Invest in promising startups
Moneywise.com / Moneywise.com
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We adhere to strict standards of editorial integrity to help you make decisions with confidence. Please be aware that some (or all) products and services linked in this article are from our sponsors.
If you've ever seen hit shows like Shark Tank, you might think that you need to be a multi-millionaire to invest in promising startups. Traditionally, this has somewhat been the case, and getting access to venture capital (VC) deals has required immense capital and connections.
But with companies like OurCrowd, accredited investors can invest in promising startups from around the world starting with $10,000. And the best part is that you're investing alongside OurCrowd at the same terms and with the same vested interest.
But VC investing is risky and not right for every investor. That's why this OurCrowd review is covering how this platform works, what the pros and cons are, and how to decide if it's right for you.
Pros and cons
Pros
- Invest in promising startups and startup funds
- New deals get added every month
- Comprehensive documentation to help you with due diligence
- Equity-based investments, not debt-based
- Transparent fee structure
Cons
- Only available to accredited investors
- $10,000 investing minimum
- No secondary marketplace to sell shares
What is OurCrowd?
OurCrowd is a global venture capital style investing platform that lets accredited investors buy-in to promising startups.
The company was founded in 2013 and operates out of Jerusalem, Israel. Since its inception, OurCrowd has grown to over 192,000 investors across 195 countries and has invested in over 320 countries.
Pitchbook says that OurCrowd has been the most active VC in Israel (by deal count) since 2017. And in October 2021, SoftBank announced that it had taken a $25 million stake in OurCrowd through its Vision Fund 2.
The main difference between OurCrowd and many VC-style investing platforms is that OurCrowd has skin in the game. This means it invests in the companies it lists and also takes a more active role in helping these companies grow. This can include anything from providing mentorship as a board member to recruiting industry advisors or helping with future fundraising rounds.
Who is OurCrowd for?
If you're an accredited investor who wants to dabble in startup investing, OurCrowd is one of your best options. Between its rigorous vetting process and the fact that it has a vested interest with its members, the platform lets you invest in quality startups. This isn't just a marketplace where any startup can seek funding; only top tier companies make the cut.
That said, you should consider your risk tolerance before signing up. Startup investing is one of the riskiest types of investing there is, and returns aren't guaranteed.
What does OurCrowd offer?
On OurCrowd, you get access to emerging startups from around the world at the same VC terms OurCrowd invests with. And with numerous investing options, it's a comprehensive platform for startup investing.
Multiple investing opportunities
The OurCrowd platform has over a dozen available investment opportunities at any given time. Most of these are individual deals that let you invest in promising startups from around the world and start at a $10,000 minimum. And what's nice about OurCrowd is that startups come from a variety of sectors, including tech, healthcare, food, and blockchain technology.
Here are a few examples of companies on OurCrowd at the time of writing:
- CoreMap: Provides technology that maps heart arrhythmias to help treat atrial fibrillation and other conditions.
- EduNav: A SaaS product that aims to improve student experience and reduce dropout rates.
- Lightico: An enterprise software solution that helps companies onboard customers more seamlessly.
- Taranis: AI-driven SaaS that targets companies in agriculture.
- Tovala: A Wi-Fi enabled smart oven startup.
OurCrowd also provides plenty of information to help with due diligence. You get an investor's presentation, deal summary, valuation and funding targets, and OurCrowd's rationality for also investing in a startup. You can also dig into info about the executive team, company financials, and risk factors.
Occasionally, you have to sign an NDA to view complete deal terms since startups share sensitive information. Overall, there's a lot of information to sift through when you consider investments.
Note that investment opportunities generally have a $10,000 investing minimum but can require higher amounts. Deals also explain how liquidation preferences and dilution work, as well as any OfferUp fees.
OurCrowd funds
The main way to invest through OfferUp is to invest in individual startups. But the platform also has several funds if you want to diversify your portfolio with multiple companies.
At the time of writing, there are three OfferCrowd funds you can invest in:
- OurCrowd Cybersecurity Fund: Invests in 15 to 20 cybersecurity-related companies; $50,000 minimum investment.
- OurCrowd Continuity Fund III: Invests in 12 to 20 of the most promising companies OurCrowd's team identifies; $50,000 minimum.
- Proof III: A Pro Rata Opportunity Fund that invests in unfilled pro-rata rights of small-cap VCs that don't have the capital to invest in more funding rounds for their investments; requires being a qualified purchaser, which means having at least $5 million in investments.
Funds have plenty of information to help with due diligence just like individual deals. Fund terms are usually 10 years but can be extended.
Thorough vetting process
Every month, OurCrowd's team communicates with over 100 startups to find new opportunities. It uses a five-step vetting process to determine the deals that make it to the platform:
- 1.
Initial contact: OurCrowd considers 150 to 200 companies per month for deals.
- 2.
Meetings: Startups with potential have a pitch meeting with OurCrowd.
- 3.
Due diligence: Additional meetings happen so OurCrowd can complete its due diligence.
- 4.
Investing committee: A final presentation occurs for OurCrowd's senior investing committee.
- 5.
Fundraising: Term sheets are signed and closing typically happens 45 to 60 days from launch.
According to its website, OurCrowd only accepts 1-2% of companies to list on its platform. This means you get access to the cream of the crop, at least in OurCrowd's opinion.
Equity-based investing
There are numerous startup-based investing platforms out there. For example, Mainvest lets you invest in small businesses across America, and you only need $100 to start.
However, Mainvest and many similar platforms are a form of debt-investing; you help fund a small business and receive interest payments in return. But when all is said and done, you don't have any equity in the companies you're investing in.
But with OurCrowd, you invest in startups alongside VC companies at the same terms. This means you get equity in startups, which matters if one ends up exiting or raising additional capital at even higher valuations down the line.
Global availability
Investors from around the world can join OurCrowd with the exception of a few countries like Cuba, Iran, and North Korea.
Self-directed IRA investing
You can invest with an individual investing account or through a self-directed IRA with OurCrowd. Rocket Dollar is one of OurCrowd's preferred partners for self-directed IRA investing, and the flexibility to invest in startups through a tax-advantaged account is a plus.
What are OurCrowd's drawbacks?
The main downsides to OurCrowd relate to its accreditation requirements and also the risks of startup investing in general.
Accreditation requirement
You have to be an accredited investor to invest with OurCrowd. There are two main ways to achieve accreditation:
- Have a net worth of at least $1 million.
- Earned an annual income of $200,000 (or $300,000 with a spouse) for the last two years and have a similar income expectation for the current year.
This requirement is in place to help protect beginner investors from investing in riskier alternative asset classes like startups without much experience. But it also means that OurCrowd won't be an option if you're an investor with an average net worth or income.
OurCrowd minimum investment
Many individual deals on OurCrowd have a $10,000 investing minimum and funds start at $50,000 at the time of writing. Between the accreditation requirement and minimum funding amount, this means OurCrowd isn't a viable solution for investing small amounts of money.
Liquidity and risk
As OurCrowd explains in its risk statements, VC-style investing isn't a liquid investment. And there isn't a secondary marketplace where you can sell your shares if you want to exit. This means investing with OurCrowd is a long-term investment.
It's also higher-risk than investing in assets like stocks or ETFs since private companies can easily go bankrupt and fall short of lofty valuation targets for a number of reasons.
OurCrowd fees and pricing
To make money, OurCrowd charges certain management fees for its individual deals and funds.
The fee structure is transparent, and you get a breakdown of the fees when you look through deal terms. And the fact OurCrowd caps management fees for individual deals is a plus.
However, the fees are higher than what you'll find with many alternative investing platforms or options like robo-advisors. But you're paying for the vetting process, deal structuring, and opportunity to invest alongside VCs.
How to contact OurCrowd
You can contact OurCrowd by emailing support@ourcrowd.com or by using the website's contact page to submit a form. Deals also have a “Have A Question?” button you can click to leave a question for the support team.
How to open an account
You sign up for OurCrowd by providing your name, country of residence, phone number, and email. As mentioned, you must be an accredited investor. For U.S. customers, you must prove your accreditation status when you try to make your first investment. This requires having an accreditation letter signed by a professional like a registered broker-dealer, investment adviser, licensed attorney, or CPA. You also verify your identity since OurCrowd follows know your customer (KYC) requirements.
Best alternatives
Between its individual startup deals and funds, OurCrowd provides numerous ways to invest like a VC. However, it's one of many VC-style investing platforms out there. And depending on your capital and investing style, certain alternatives might be better choices.
AngelList Venture
Best for: Startup investment selection.
With over 15,000 funds and individual deals, AngelList is a leading platform for VC-style investing. According to its website, that platform has seen 190 unicorns, which refers to a startup company with a valuation of at least $1 billion.
Like OurCrowd, you need to be an accredited investor to invest through AngelList. Annual management fees and carrying fees are typically 2% and 20% for funds, just like OurCrowd. But AngelList also has syndicate deals where you pay potential setup fees.
The main advantage of AngelList over OurCrowd is that there are more investment opportunities. Investing minimums can also be as low as $1,000, and the fact you can invest in funds is also a perk.
Mainvest
Best for: Non-accredited investors.
If you want to invest in small U.S. businesses with only $100, Mainvest is for you. This platform lets you invest in a range of businesses that need capital to keep growing. Typically, Mainvest offers cafes, breweries, restaurants, and food trucks as investment opportunities, but there are other business types as well.
The main difference between Mainvest and OurCrowd is that Mainvest is debt investing. Businesses pay back your loan at an agreed-upon rate, and Mainvest targets 10-25% returns. And the fact you can invest with only $100 makes it very beginner-friendly.
The downside is that you're not getting equity in businesses. Additionally, these are small businesses, not flashy tech startups, so the potential returns and market cap of the companies involved are smaller. But for non-accredited investors, Mainvest is an exciting way to mix up their portfolio.
SeedInvest
Best for: Passive startup investing.
Another popular OurCrowd alternative is SeedInvest, a startup crowdfunding website. You don't have to be an accredited investor for all offerings on SeedInvest, but some deals are only available to accredited investors. At the time of writing, there's seven available deals.
The most unique aspect of SeedInvest is that you can use its auto-investing feature to invest in several startups passively. There's a $1,000 minimum that immediately splits into five $200 chunks so you get exposure to five startups. Individual deals can have a $1,000 minimum as well.
As for fees, there's a 2% transaction fee for investors that's capped at $300. But you don't pay annual management fees since SeedInvest makes money by charging startups for helping them raise capital.
The downside to this model is that SeedInvest is incentivized to let more companies list on the platform, so doing your own due diligence is even more important. However, it's one of the most popular OurCrowd competitors because of its lack of fees.
Bottom line
Investing in startups isn't for every investor. But if you want to dabble in VC investing, OurCrowd is one of your best options. This is largely because of its thorough vetting process and the fact that it invests in companies alongside you, so your interests are aligned.
Just note that startup investing is just one type of alternative asset you can consider. These days, you can invest in assets from artwork to farmland, so there are plenty of ways to diversify your portfolio. But whatever you choose, always do your due diligence and never invest money you can't afford to lose.
