NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, March 11, 2019

OurCrowd, a global investment platform and Israel’s leading venture investor, has announced it is partnering with Social Finance Israel, the Israeli impact advisory leader, to launch an Impact Fund focused on venture-backed businesses solving some of the world’s greatest challenges. The fund will invest in companies with demonstrated alignment to the UN’s 17 Sustainable Development Goals.

Impact investing is a rapidly growing market in Israel. Though still in its early stages; it doubled from $130M in 2016 to $260M in 2018 and will continue to grow as OurCrowd’s new Impact Fund provides new opportunity for investors.

Further growth appears imminent with $1.6B raised by Israeli companies in “impact related” sectors (sectors aligned to the UN Sustainable Development Goals, e.g. cleantech, health, ag-tech, etc.) across 234 deals in 2018, according to IVC Research Center. However, findings from a jointly-issued OurCrowd/Social Finance Israel report indicate a strong chasm between the standards of practice often required by impact investors and impact-related startups, with just over 10% saying they measure the social or environmental impact the company generate.

As OurCrowd’s impact partner, Social Finance Israel worked with the investment platform to develop a robust impact assessment model, enabling OurCrowd to assess companies according to three dimensions: alignment to the UN Sustainable Development Goals, impact practice and intentionality, and impact risk. Only companies that meet a certain threshold will be considered for investment. All companies will also be evaluated by OurCrowd for their ability to deliver investment return and profit.

According to OurCrowd Founder and CEO Jon Medved, “We believe that it is possible to make money and do good at the same time. That is the best form of impact investing.”

Once companies are selected into the fund, Social Finance Israel and OurCrowd will work with companies to establish appropriate impact KPIs and an impact reporting framework. This accountability follows a recent OurCrowd/Social Finance Israel survey of entrepreneurs, which revealed a wide gap in management and practice: while 84% of entrepreneur respondents indicate their business has a social or environmental impact, only 13% are measuring or tracking their impact. Both firms will also provide guidance on partnerships and business development opportunities that companies can integrate in order to deepen and hone their impact.

The Impact Fund will provide diversified exposure to impact-driven businesses like OurCrowd portfolio companies, provided they meet a set of impact practices and criteria outlined in Social Finance Israel’s deal assessment tool, startups such as:

• UPnRIDE: all-terrain electric wheelchair that enables standing
• JUMP: smart bike-sharing platform (acquired by Uber)
• Zebra Medical Vision: algorithm-based assistance for radiologists
• Edgybees: AR software for rescue drone applications
• CropX: app-oriented sensors for irrigation and fertilization

Social Finance Israel, led by CEO Yaron Neudorfer, is chaired by Sir Ronald Cohen, Co-Founder of the global private equity firm Apax Partners, and “father” of impact investing. “Impact – and more importantly impact measurement – does not impair profit. It actually drives it,” said Sir Ronald. “We are thrilled to see Israel’s largest venture investor and a global player take a leadership approach on impact investing and we encourage others to consider how to use their market power as a force for good.”

“Bringing combined expertise in economics, finance, social sciences, public policy, and philanthropy, Social Finance Israel is the market leader in developing the impact investment market in Israel,” said Social Finance Israel CEO, Yaron Neudorfer. “We see OurCrowd’s decision to establish an impact fund as proof that investors and companies are thinking about the impact they have on people’s lives and the environment. We are proud to support this initiative with the tools and expertise that market players like OurCrowd and others can use to follow through with their intentions.”

“OurCrowd has a long history of making impact driven investments and a wealth of expertise in fund creation,” said OurCrowd Co-Head of Funds, Richard Norman. “Today we are proud to bring these two hallmarks of OurCrowd together and offer investors a dedicated, diversified vehicle of VC-backed businesses striving to tackle some of the world’s greatest challenges. Our partnership with Social Finance Israel enables the fund to take a rigorous approach to impact assessment coupled with a thoughtful post-investment strategy for each company. Add to this the fund’s innovative, impact-linked, incentive structure and we have the makings of a truly unique entity.”

Photo courtesy of Pixabay.