For decades Israel’s high-tech start-up scene has been considered one of the most exciting and impressive in the world, on par with Silicon Valley, and producing game-changing technologies that continue to push the innovative envelope. Israel ranks #2 for venture capital availability, and is ranked #3 in the world for innovation[1]. With over 3,500 start-ups (mostly in hi-tech), there are more start-up companies in Israel than in any country in the world per capita, and only second to the U.S. in absolute terms[2].

In a statement, Israeli Prime Minister Benjamin Netanyahu said that “Israel is a nation that sanctifies innovation. We’ve achieved great heights, but we cannot stop now; we want to continue climbing.” [3]

In Israel, the publicly traded market of stocks and bonds, aka the Tel Aviv Stock Exchange (or TASE), is completed separated from privately owned companies, including start-ups in their initial stages of funding. This has limited the ability for investors around the world to gain exposure to Israeli start-ups rapid growth and frequent exit successes, and at the same time prevents the flow of much needed capital into the developing start-ups. As a result, many young Israeli start-ups end up being purchased by foreign companies causing the technology, manpower, jobs and overall economic value generated from Israeli high-tech start-ups to leave the Israel market.

However, change is in the wind as Israel’s financial decision makers are formulating means to make these Israel tech start-ups investable by large and small investors alike.

The Israel Securities Authority (ISA) is in the final stages of approving new financial instruments that will benefit both investors and start-ups alike, allowing investors to gain exposure to Israeli high-tech start-ups on the one hand, and start-ups to raise more capital on the other, serving as an incentive to keep Israeli tech in Israel. One of these instruments are closed-end mutual funds that will be fully traded on the TASE and open to all investors, both institutional and private.

These hybrid funds will invest part of their assets in Israeli private start-ups pre-IPO, and part of their assets in publicly traded Israeli tech firms already traded on the TASE. This will provide wide access to the excited world of Israeli innovation, while reducing the risks and high barriers of entry currently experienced by non-accredited and smaller investors. It also offers regulatory oversight and transparencies to these start-ups, as is standard with Israeli publicly traded companies.

The ISA plans to roll out four closed-end high-tech mutual funds with a minimum of 400 million NIS per fund (approximately $115 million) towards the end of 2017 and into 2018. The TASE states that “these funds will be entitled to invest up to 30% of the capital raised in non-traded financial assets, which may be adjusted to 50% in the future should investors be granted government guarantees to mitigate investor risk. At least 5% of the sum raised will be invested by the fund manager. The funds will be able to operate as fixed-term funds limited to a life span of 15 years.”[4]

Additionally, the State of Israel will offer loss protection for the investments in private growth companies up to 20% of the investment and will also guarantee debt raising of up to 25% of the funds size. This governmental backing signals their commitment to both the start-ups and to investors, giving a strong tailwind to the move.

Besides offering exposure to both public and private companies and gaining significant government incentives for investment, these funds will be fully liquid and transparent as with all the securities traded on the TASE.

The TASE is currently undergoing very positive structural and strategic upgrades which it estimates will “enhance competition in the capital market and attract new members from Israel and abroad. It is expected to benefit investors by rendering TASE more prominent and accessible to the public”[5].

Currently, investing in Israeli stocks and bonds through the TASE is the most secure and accessible way to invest in Israel, and with these upgrades coming, it will be all the more so.

[1] World Economic Forum, 2017-2018 Edition

[2] Israel21c.org

[3] nocamels.com

[4] tase.co.il

[5] tase.co.il

The post Israeli High-Tech Start-Ups Investable Through Tel Aviv Stock Exchange appeared first on Wise Money Israel.

In our previous articles, we discussed why you should invest in Israel. There are many reason for investing in Israel, among them currency diversification, geographical diversification, and the desire to support the Land and people of Israel. Other reasons include participating in the prosperity Israel is experiencing since its rebirth, and enjoying the fruit of a strong and robust economy that weathers the sometimes-stormy global financial climate.

So how can this be accomplished practically? There are three main ways to invest in Israel financially:

1. Investing in Israel’s capital market via Israeli stocks, bonds and mutual funds. This is done by opening an investment account with one of the established Israeli brokerage firms that are members of the Tel Aviv Stock Exchange (TASE). Accounts may be opened remotely through the mail and can be overseen through a secure English online portal, just like a bank account. Citizens of all countries may invest in an Israeli brokerage account as individuals (single or joint), as an organization (for-profit and non-profit) and through U.S. retirement funds with a minimum entry limit of 20,000 Israeli Shekels (approximately $5,000 USD). Some additional information to know about investing in the Israeli capital market:
   1. The TASE provides a wide array of asset types (securities), ranging from Israeli stocks offering dividend payments, to secure Israeli government bonds, through inflation-protected corporate bonds paying fixed quarterly interest payments, to ETFs tracking market indices. These assets are spread over all the major business sectors offered in other markets around the world, including: technology, real estate, industry and manufacturing, communication, biomedical, agrotechnology, insurance, finance and banking, commerce and services etc. Of particular interest is the new oil/gas exploration sector, given Israel’s recent large-scale discoveries of these commodities, and of course the world-renown Israeli high tech sector that has supplied the world with many groundbreaking technologies.
   2. Individual stock and bonds capital gains, as well as bond interest payments, are not taxed in Israel for non-Israeli investors. The Israeli capital market has shown impressive returns over recent years:
      During the economic recovery year of 2009, the Tel Aviv 35 stock index returned 75% to investors, vs. the S&P 500 yield of 24%. Israel’s stock market has outperformed other developed markets by far since the year 2000 showing 184% total return for the Tel Aviv 35 compared to 63% total return for the S&P 500 (as of May 16, 2017). On the bond side, Israeli corporate bonds have yields over 6% average annual return with relatively low volatility since 2009.

2. Investing in Israeli Start-Up companies. This is done by purchasing equity in early stage start-ups as an angel investor or through a venture capital firm that is connected with various private companies and raise capital for them through a VC fund. Some additional information to know about investing in Israeli start-up companies:
   1. Investing as an angel investor or through a VC requires a relatively large investment principle, typically ranging between $150,000 to $2,000,000 USD but typically represents no more than 10% of the investors total investment portfolio. VC investing is usually done by “Accredited Investors”: individuals with a net worth of at least $1,000,000, excluding the value of the investor’s primary residence, or demonstrate an annual income of $200,000 or $300,000 for joint income for the last two years with the expectation for the same or higher income in the future.
   2. Since seed investments in start-ups and VC funds are of a much higher risk nature, investors should be prepared and able to potentially lose all of the principle investment. Start-ups have a success rate of 1 in 10, meaning that there is 90% chance that the start-up will fail and the principle will be lost. For this reason investors usually invest in dozens of start-ups simultaneously with the hopes that one of them will success and provide a good ROI (return on investment) to cover the losses gained from the other failed investments.
3. Investing in Israeli Real Estate. This can be done in two ways: first, by directly purchasing physical real estate such as an apartment, house, building, office etc. Second, by purchasing stocks and/or bonds of real estate companies or Real Estate Investment Trusts (REITs) on the Tel Aviv Stock Exchange. This second method is less direct, i.e. you do not actually own the property but do enjoy the dividends and cashflow from the companies that build, sell and rent out the real estate. These dividends are legally tied to over 90% of the profits of the REIT. Some additional information to know about investing in Israeli real estate:
   1. The Israeli real estate market has seen good growth in since 2007 with prices of many assets rising close to and even over 100% since then, giving an approximate annual return of 7% (varying, significantly even, from asset to asset). Since the end of 2016 the rise in house prices has slowed significantly, with recent data indicating a very possible change in trend to housing prices as they begin to drop, though it is still too early to tell. There is a certain level of uncertainty currently in the real estate market, however some analysts are already determining that investors are beginning to sell their real estate assets.
   2. Investing in REITs and real estate companies put somewhat of a hedge between the investor and the assets, for the better. On the one hand it employs the REIT management and real estate company’s expertise in the market, eliminating the need to for the client to make those decisions and spend all that effort themselves. On the other hand, it is easy for the client to control their level on investment in the real estate market by purchasing or selling more stocks or bonds with the click of a button, without the need for finding a buyer for their physical property and not having to deal with the bureaucracy, taxation, legal work, fees etc. that go with selling (and purchasing) actual property. These advantages allows the investor to change weighting in their portfolio to other market sectors and asset classes swiftly and with minimal hassle, time and money consumption. This flexibility can be key in turbulent market times.

Investing in Israel is a great way to diversify your portfolio, support the Israeli economy and participate in the success of the nation. Before you decide how to do that, you should consider the information above and how that applies to your specific personal and financial situation.

Stefan Silver serves as the Director of Business Development & Operations at Wise Money Israel (WMI), the first licensed Investment Portfolio Management firm in Israel that works completely in English to serve local and international clients. WMI works with hundreds of individuals and organizations from around the globe to invest in Israel’s leading companies and technologies through Israel’s capital market – the Tel Aviv Stock Exchange (TASE).

Stefan holds a B.A.in Economics and Management, and an MBA from Haifa University. Born in Auckland, New Zealand, Stefan immigrated to Israel in 1992 and served for four years in the IDF’s Combat Engineering Corp, including combat experience on the front lines of the Second Lebanon war. He is currently a Captain in the IDF Reserves.

LinkedIn: Stefan Silver

Sources:
Forbes, Investopedia

The post Israel Investment Possibilities Explained appeared first on Wise Money Israel.

An enormous number of inventions and innovations have come out of Israel in recent decades, more than from many larger, established nations combined. Israel is shining its light on the nations of the world.

Why are there are so many Israeli inventions? Some hints to this mystery might come from the fact that its population seems to be very creative and entrepreneurial.

Innovation involves change for the betterment of mankind, keen observation, thinking outside the box, systematic investigation and serendipity.

Israel has world-leading innovative companies in the fields of technology, transportation, information and communication, food and agriculture, medicine, surveillance and satellites, water, renewable and alternative energy, and security.

Today we’ll focus on a two areas of Israeli innovation - information technology and self-driving cars, and highlight the companies leading these innovations.

Lightning fast Internet speeds

There’s a new game-changing technology called G.Fast which is capable of providing incredibly fast internet over the wires you already have in your home.

Earlier this month, Israeli semiconductor company Sckipio announced a new G.Fast solution that can deliver both upload and download speeds of 750 megabits per second. That's 50 times faster than the broadband many have in their homes today.

But even that speed will be slow in comparison to the next generation of chips that could come within another year. These will provide double that speed for both upload and download (1.5 gigabits per second), Sckipio said. That's faster than anything Google Fiber offers today.

Previous demonstrations of G.Fast have shown the technology to be capable of 750 megabit download speeds, but upload speeds were significantly slower than that.
Equal upload and download speeds are becoming more important, as new technologies require increasingly fast upload bandwidth. Uploading 4K videos, using virtual reality or playing video games all require super-fast upload speeds to function properly. For example, uploading a 30 second 4K GoPro video would normally take five hours using today’s broadband technology, but using G.Fast, it would take only a few minutes.

Sckipio says the G.Fast technology will debut in the United States in 2016. It won't be available everywhere immediately, but Sckipio said a single phone company could roll it out to the entire country in just four years.

Phone companies are excited about G.Fast, because it allows them do deliver super-fast speeds without having to dig up holes in your yard to do it. Or, if you live in an apartment building, they can use the existing infrastructure to deliver fast speeds without having to rewire the entire building.

Multi-dwelling units like apartments are a particularly attractive target for phone companies. Many of those apartments are currently served by DSL Internet over phone lines. But that old technology is dreadfully inefficient: DSL can lose up to 90% of its speed by the time it gets to your modem. G.Fast loses just 5% to 10% during the same trip.

It also solves a problem of deploying fiberoptic cables everywhere, which was previously the only way to get super-fast internet speeds to customers. Bringing fiber to homes is expensive and time consuming (and sometimes requires a company to dig up your yard). Bringing fiber from the street to just to one home can cost $100,000, according to Sckipio.

By comparison, the boxes on the street that need to be installed to power G.Fast cost about $70,000. And the cost of bringing that to your home is $0, since it connects to the phone lines already installed in your house or apartment.

Founded in 2012, the Ramat Gan, Israel-based company with 50 employees develops award-winning standards-compliant G.fast modems, which offer better performance over existing copper wires by dynamically allocating the bandwidth in each direction in real time (Dynamic Bandwidth Allocation, DBA).

Self-Driving Cars

The race is on to get the world's first self-driving car on the road, and the world's biggest car brands - BMW, Tesla and Audi - have all turned to Mobileye, a cutting-edge Israeli start-up.

13 major car companies are all using the technology developed by Israel startup company Mobileye. The company started as a tiny startup, and boasts the biggest IPO in Israeli history (valued at $5.3 billion).

The native Israeli firm, which makes computer vision software and cameras that help cars avoid accidents, offers systems that include a windshield-mounted camera that takes pictures of what is in front of the driver. The images are processed and, in real time, a small device on the dashboard gives the driver audio-visual warnings.

The tiny camera is designed to prevent death and accidents by interpreting a scene in real time. The camera has its eye on the road when driver’s eyes may not be. The software application links to the steering system, and sounds an alert when the driver does something that may lead to a collision. It identifies cyclists and pedestrians, and sounds an alarm before a collision happens. It can also see speed limit signs and whether the driver is veering out of his lane, the first sign of driver fatigue.

The system allows the driver to make a mistake, but brings their attention quickly back to the job at hand. Australia is currently performing a trial of the system using its government vehicles. The technology can be retrofitted easy to any vehicle.

Now the firm is re-engineering the system to allow the driver to take their hands off the wheel. The key innovations are in the microchips Mobileye develops, and in the algorithms the system uses. “In addition to preventing collisions, the system must sense the road in great detail, including lane markings, curbs, barriers, obstructions, recognize a large vocabulary of traffic signs and red lights, determine cars distances, and be fault-tolerant to a degree unparalleled by today’s driver assistance systems,” says company Co-founder, CTO and Chairman, Professor Amnon Shashua.

One day this technology will likely allow us to take our hands off the wheel, and let a sophisticated computer system that never tires or makes driving mistakes, assist us to arrive safely at our destination.

How can I participate?

Some innovative Israeli companies are investable only via venture capital firms offering tens of millions of dollars to viable startups. But other Israeli innovations are developed by Israeli companies already listed on the Tel Aviv Stock Exchange. Israelis and non-Israelis alike - irrespective of residency and citizenship - may open a shekel-based investment account at Israel’s largest brokerage firms, and invest in these publicly traded companies directly in the Israeli shekel. Individuals, companies, organizations and U.S. retirement accounts may open accounts, enabling them to invest in Israeli stocks, bonds and mutual funds.

Sources: MarketWired, CNN, 9news, Mobileye

The post Israeli Innovation – Changing the World appeared first on Wise Money Israel.