In a pair of recent moves, the Israel Securities Authority has created a framework to make it easier for startup companies to raise capital through crowdfunding.
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In one move, the authority published an official opinion that regularizes private investment in startups by way of investors’ clubs, while also proposing an amendment to the Securities Law setting standards for the kind of investors qualified to invest in companies that don’t publish prospectuses, as is ordinarily required for public offerings.
The authority is looking for way to encourage more investors to put money into high-tech startups. Crowdfunding or crowd investing, which raises money from a large numbers of investors, often over the Internet, has become an increasingly popular conduit, but risks running afoul of securities law.
According to the authority’s opinion, a company can offer shares to qualified investors but need not verify whether they meet the standard until the investment is being made. The authority will grant authorization for crowdfunding platforms that remains in force for a year, enabling it to conduct more than one investment round.
The authority also eased criteria for who can be designated a qualified investor.