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Investment Trust Law, 1994 were amended to allow for certain forms of crowdfunding.
An offer of securities shall not be considered a public offering if it satisfies several
conditions: Firstly, it must have certain restrictions both on the amounts the company
may receive and the amounts a single investor may place; Secondly, it must be handled
by an online crowdfunding platform that will report to, and be supervised by, the Israel
Securities Authority, and be subject to certain rules regarding fair conduct; Thirdly, the
investment terms must include certain conditions, including with regard to investment
minimums and conflicts of interest with the offering company.
While innovative internet platforms bring in the crowd, a December 2015 amendment
to the Israel Economic Policy Law (the ‘Angels Law’) will make it easier for investors
to satisfy tax-deduction requirements under the law. Previously, only individuals were
eligible, while under the amended law, partnerships are eligible as well. In addition,
the amended law allows investors to know when they invest if their investments are
deductible; Under theprevious law,on theother hand,the target companywas required
to meet certain conditions following the date of investment. And notably, investors
were previously exposed if the company failed to meet the required conditions; Under
the amended law, however, the company itself may be more easily penalized.
Transaction deal terms have also been adjusting to investors’ increased demand to
enter the Israeli high-tech market. Our studies have shown that senior liquidation
preferences appeared during the first half of 2016 in only 70%of Israeli venture capital
backed transactions, while investors were given participation rights in the event of
liquidation in only 40% of transactions. Significantly, both statistics are five-year lows.
The Israeli high-tech ecosystem continues to solidify and adapt, despite recent
bumps in the global high-tech ecosystem. The IT and enterprise software sector
raised US$1.3 billion overall, representing a 76% annual increase over 2014, while the
internet sector was able to nearly match this amount as well. The challenge moving
forward for the Israeli high-tech community is to use recent successes as a model for
building a more sophisticated, efficient market. Surely, the start-up nation should feel
confident it will meet this challenge as well.
In accordance with these market trends, Israeli lawmakers are making it easier
and more worthwhile for professional and semi-professional investors to put
their money in Israel.