The Changing Relationship between Investors and Investments

March 2015

The changing investment ecosystem:The evolution of the advisor-investor relationship and the trends to watch

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How we used to invest: Change is not new in our industry

Brokerage, Commission-Trading, & Asymmetry of Information

Enter Schwab T h e p l ay i ng f i e l d i s l eve l l e d i n 2 0 0 0 : Re g u l at i o n Fa i r D i s c l o s ure ( Re g F D )

Does Regulation Fair Disclosure affect analysts’ forecast

performance?

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Booz & Co Global Wealth Management Outlook 2014/15

Global HNWI wealth is growing, as is their demand for digital in wealth relationship

Source: Capgemini, RBC Wealth Management and Scorpio Partnership Global HNW Insights Survey 2014.5

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Big Banks are trying to react

Citi to Launch Banking App for Apple WatchBusiness Wire March 10, 2015

Report: Digital and Mobile Solutions for Financial Advisors 2015

Fending off the robos: New technologies reinventing the client/advisor relationship

Report: Mobile Apps for Wealth Management 2014

Wealth Managers Need Better Apps to Tap into Mobile High-Net-Worth Generation

Financials services industry is ripe for disruption

According to the yearly Edelman Trust

Barometer study…

Finance is the least trusted of

all industries7

Regulatory Developments: New rules Create Opportunities to Meet Changing Investor Demand

Expanding the audience with ”crowd building,” an evolving are of the law

Pre Jobs Act 2012• No general solicitation or general advertising of unregistered securities allowed• Exemption—certain private offerings only to accredited investors

• Self-accreditation was sufficient

• Jobs Act 2012—Title 2• Congress’ attempt to stimulate jobs in the US economy by

broadening investment in private companies• Mandate for the SEC to issue operative regulations• First set of rules including 506(c) Exemption Sept 2013

• Jobs Act 2012—Title 3: Crowdfunding• Creates new registration exemption to take advantage of

Internet’s capacity for mass communication & social interaction• The new exemption will not become effective until the new SEC

rules have been adopted• Jobs Act 2015 Title 4

• March 25, 2015: SEC adopted final rules to implement the expansion of Regulation A (Reg A+), which includes non-accredited investor provisions

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Regulatory Developments: New rules Create Opportunities to Meet Changing Investor Demand

Rule 506(c) provides

General solicitation and general advertising allowed• All US residents now able to see &

attend meetings with actively funding companies (whether accredited or not)

• Web site to contain limited information on funding companies for US users only

• Only accredited investors can actually purchase

• Definition of accredited investor remains the same

Self Accreditation no longer enough—need to implement verification procedure

• New Rule requires each US investor to provide certification letter

• Issued by registered broker-dealer, RIA, licensed attorney or CPA

• Needs to be renewed periodically

• Confirm it is still accurate at the time of each investment

Relates to US residents only

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Bad Actor

Bad actor Provision• Issuers can only use Rule 506

offerings if no “bad actors” associated with them

• SEC issued clear guidelines: get bad guys off the street more investor protections

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HNWI want more than Transaction & Information via digital media with their Wealth Managers

Source: Capgemini, RBC Wealth Mangement and Scorpio Partnership Global HNW Insights Survey 2014.

The Most Important Interactions on Social Media:• Trending investment news shared by advisor• Educational articles and research advisor has

shared• Instant access to research, whitepapers and

pertinent videos

52%57% 56%

46%40% 43%

51% 53% 52%

25%19% 20%

0%

20%

40%

60%

In-Person/Phone

Internet E-mail Mobile SocialMedia

Video

Inform

59% 58% 58%46%

36% 41%

58%49% 56%

26%20% 24%

0%

20%

40%

60%

80%

In-Person/Phone

Internet E-mail Mobile SocialMedia

Video

Engage

54%65%

54%46%

34% 35%

49%61%

45%

22%12% 14%

0%

20%

40%

60%

80%

In-Person/Phone

Internet E-mail Mobile SocialMedia

Video

TransactUnder 40

40+

FinTech is exploding: 248 companies with $3.4B

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For the people, by the people:Moving from passive investing to participatory investing via crowdfunding

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Crowdfunding: Competitive Landscape There has been a proliferation of platforms

13Source: A Trillion Dollar Market By the People, For the People How Marketplace Lending Will Remake Banking As We Know It BY CHARLES MOLDOW GENERAL PARTNER, FOUNDATION CAPITA

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While passive investing in ETFs is growing, active investing via crowdfunding is exploding

Source: H. Terry, D. Schwartz, T. Sun “The Future of Finance Part 3: The Socialization of Finance,” Goldman Sachs. March 13, 2015.i

$1.5

$2.7

$5.1

$10.0

$-

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

2011 2012 2013 2014

Crowdfunding has exploded to $10bn in 2014, nearly doubling every year

Aggregate Amount of FundingThrough Crowdfunding ($bn)

The World Bank October estimates global crowdfunding to grow to $95B by 2025

ETFs have a 10 year CAGR of 27.1%

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# ETFs/ ETPs

Assets (US$bn)

Global ETF and ETP Growth

ETF/ETP Assets # ETFs/ETPs

Investors are finding new access points to asset classes

In 2014,

Lending Club

surpassed

$4 billion in total

peer to peer

loan underwritings

(4x 2012’s numbers)

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Fund outflows increase as investors seek alpha elsewhere

• Mutual fund underperformance in contrast to lengthy bull market has been a significant driver of fund outflows

• Investors continue to miss out on returns by waiting for highly visible private companies to go public

• To meet and exceed investors’ expectations, RIAs need to offer investment opportunities that reflect the “New Alpha”

How Many Mutual Funds Routinely Rout the Market? Zero

http://www.nytimes.com/2015/03/15/your-money/how-many-mutual-funds-routinely-rout-the-market-zero.html

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Selection & due diligence matters even more in illiquid products

Source: Morningstar, Lipper Tass, Preqin.Note: Dispersion of fund performance, average calendar year 2002-2011. Past performance is not indicative of future results. Should the study have been conductedover a different time period, the results may have been different. There can be no assurance that an allocation to illiquid investments would yield higher real returns.

Top Decile

2nd Quartile

MEDIAN

3rd Quartile

Bottom Decile

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Long-OnlyFixed Income

Long-OnlyEquities

HedgeFunds

PrivateEquity

Re

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(%

)Manager Dispersion Increases asIlliquidity Grows

Asset Class Drivers

• Capital Markets Environment

• Pace of Innovation

• Venture capital flows

Manager Specific Drivers

• Ability to identify emerging innovations

• Access to attractive deals

• Ability to create value through active involvement in portfolio company

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Breaking Down Venture Capital Risk and Return

Wisdom of the crowd:How individual investors as a collective are driving the future of investment

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Of the $4T opportunity created by the socialization of finance, Crowdfunding represents $1.2T immediately addressable opportunity with $57bn opportunity in the VC/Angel space

Crowdfunding: An increasingly large opportunity for investors

Source: H. Terry, D. Schwartz, T. Sun “The Future of Finance Part 3: The Socialization of Finance,” Goldman Sachs. March 13, 2015.i

$666 $140 $72 $68

$33 $24 $166

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

Bankcard Loans

Home Equity Loans

Consumer Finance Loans

Retail Loans Venture Capital

Angel Investors

Other Loans

Addressable Opportunity for Crowdfunding: $1.2T Trillion

Where is Wall Street? Investors are crowdsourcing more accurate financial estimates

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• Crowdfunding is growing rapidly

• Crowdfunding is truly global

Investors are responding by participating in democratic investment platforms

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As crowdfunding grows, platforms become differentiated by levels of due diligence, investment management and investor constituency

Equity Crowd Funding: OurCrowd, AngelList, CircleUp lead the pack

Investment Management

Diligence

Unaccredited Investors

IndicatedUpstream Move

Accredited Investors

Israel Case Study: “Move over, Silicon Valley…”

As seen in the Economist last year – ranking the world’s 20 top startup ecosystems,

Israel is #2

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Israel is one of the world’s top marketplaces for innovation

In the last decade,

these companies all bought

at least one Israeli

start-up.

The OurCrowd Model

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Creating a new class of investment: Crowdsourced Equity Capital Investing

OurCrowd’s platform combines four models of Crowdsourcing

Equity Crowd Funding at the core of OurCrowd’s model

Creating content & communities of investors, experts & alumni

Utilize voting/polling of experts as part of due diligence

Harnessing the wisdom of crowds and expert groups

Funding

Voting

Wisdom

Creating

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Why OurCrowd

Clients want unique opportunities, diversified across sector and stage,

delivered through a process they can trust,

which produces performance at a fair cost,

all wrapped in a world class networking/client experience

Entrepreneurs want efficient and fair access to capital,

a process they can trust, enabled through a system

that raises their profile and leverages their marketing efforts,

while supporting their growth and development

Democratizing Wealth Creation and Access to Capital

Foundation/Brand

• Founded in “Start-up Nation,” Israel, home to one of the world’s most prolific start-up communities

• Management Team brings broad experience and global perspective

Strong Network to Generate Deal Flow

• Access to a global network of investors, entrepreneurs and advisors brings access to diversity of opportunities

• Synergistic co-investing with an extensive network of Top-tier funds (VCs) & institutional investors

Partnership Model

• Business Model partners OurCrowd with investors & entrepreneurs

• Multi channel investor platform

Crowd Engagement

• Opportunity to build customized communities of investor groups

• Innovative use of the crowd and power of expert groups (refinement under development)

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Key Differentiators

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We do not invest alone—and increasingly our partners want to access crowd capital & insights

OurCrowd: Partnering With Leading Institutions

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We’ve invested in 62 companies with ~30 follow on rounds

OurCrowd’s portfolio