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Adv. Yuval Lazi
When you build out your business model, you need more than a great product or service. Innovative brilliance and new ideas matter, but they are not enough. By the time you are ready to raise capital, you should be able to outline for your potential investors a clear market strategy. What Problem Are You Addressing? For your product or service to succeed in the market, it should meet an identifiable need in the market. After all, the world business landscape is littered with failed companies that have created solutions in search of problems. Success comes through sales; for people to pay for what you provide, they must feel they need it. Investors will want to see how your product addresses a specific problem your potential customers have. What Is Your Real Market? If you declare your market to include "everyone", savvy investors will steer clear. Different people and companies have different needs, so a key offshoot of identifying the problem you address is finding the market niche you will target. You may well want to grow to a point where you have multiple target markets, but you need to find a direction in which to focus your efforts. This will serve as the foundation for later growth. What Is Your Go-to-Market Strategy? Whatever the size of your potential market, you need first to find your way in. Some companies start with a high-end strategy and then go to the masses; others look for a lower-income market to help establish a mass appeal. With a specific point of entry, you can then describe to investors a sensible strategy to use the investment they provide to develop and grow your business. What Are Your Customer Costs and Long-Term Value? Your marketing strategy should consider both the cost to acquire each customer (CAC) and long-term value (LTV) of each customer. Marketing efficiently to build a customer base gets strong initial value for your investment. But retaining those customers over time creates an LTV that prevents your company from being a mere flash in the pan. Create a strategy that does more than build quickly to develop a sustainable business model attractive to investors. Your marketing strategy helps fundraising efforts by showing investors why you will succeed. Describing your market and entry point, as well as the value your customers contribute, will help you attract the funds to help you move forward. Source: barlaw.co.il
Adv. Marie Tsion
Many employers worry about the day they might discover their employees are organizing and joining a labor union. This concern is natural, since an employer used to running its business as it deems fit, and according to its business needs, is not interested in sharing the helm with its employees’ representation. However, it is important to know that unionizing is a basic right in Israel and that employers cannot prevent their employees from unionizing. Therefore: You cannot prescribe in your employees’ personal employment contracts that they are not allowed to be represented by any employee organization. You cannot require employees to sign an undertaking to not be represented by a labor union or an employees’work council. You cannot bar a representative of a labor union from entering the employer’s premises. If preliminary labor organizing has already begun, then it is even more important to strictly abide by the following rules of conduct: Do not keep records about which employees have joined the labor union or are activists promoting unionizing. Do not announce the employer’s dissatisfaction about the formation of the organization, and refrain from making any negative remarks about the unionizing, directly or indirectly, demonstratively or subliminally. Do not threaten, discriminate against, adversely change employment terms, or fire an employee because he or she is unionizing. Do not grant benefits or promise benefits to employees in relation to their joining or not joining a labor union. Do not send personal messages (SMSs, emails, letters, etc.), initiate or hold meetings with groups of employees, or engage in personal conversations in relation to any matter pertaining to unionizing or preventing it. Employers may continue to hold meetings or conversations with their employees in relation to any other matter, provided it does not concern unionizing and provided it will not adversely influence the unionizing efforts. Do not participate in an employees’ meeting, since even an employer’s passive attendance is liable to be construed as having an inappropriate influence on the freedom to unionize. These stringent rules regarding the initial stage of unionizing were prescribed in labor court rulings in recent years, as part of the new era of unionizing in Israel, to prevent employers from being able to undermine unionizing by applying pressure and unfair coercive tactics on their employees. Once the initial stage of unionizing has been completed, and the employees are represented by a representative labor organization, the balance of powers between the employer and its employees begins to level off and the employer is no longer perceived as the strong arm in these relations. This is because the courts view labor unions as bodies that protect employees, and thus bridge any existing gaps in the balance of powers in the employment relations. Source: barlaw.co.il
Adv. Daniel Israeli
September 19, 2017 / by Daniel Israeli
ICO Whitepaper
It is nearly impossible to keep track of the developments in the cryptocurrency and ICO arena, with new digital currencies being launched and new ICOs records frequently being broken. Recently, the record was broken once again, when Filecoin’s ICO raised about USD 200 million in one hour (!), after having raised about USD 52 million from investment funds and private investors in the presale ahead of the ICO. So what is an ICO? ICO is the abbreviation of Initial Coin Offering, a term inspired by the capital market term IPO (Initial Public Offering). This is when a company recruits debt or capital by publishing a prospectus offering of its securities to the public for the first time. A prospectus is a profound legal and accounting document that furnishes information about the company, its management, its businesses, and its financial position. Once a company’s securities are held by the public, it becomes a public company. In an ICO, companies that are developing a technology or an innovative venture, which, for the most part, is based on blockchain technology, recruit capital through the issuing of digital coins. The hope is that the coins' value will appreciate when the venture succeeds and will maximize profits for the coin buyers in the ICO. To date, digital coins and ICOs are unregulated in most countries. However, the US Securities Exchange Commission (SEC), the Central Bank of Singapore (MAS), the Canadian Securities Authority (CSA), and the Israel Securities Authority (ISA) have all already announced they are considering applying in some cases the existing securities regulations also to digital coins and ICOs (such regulations include restrictions in public offerings, prospectus and reporting requirements, etc.) Despite the lack of regulation, as well as the lack of uniformity with regard to the quality of the information being disclosed, the practice is that when launching a new token or actual digital coin and an ICO, the company publishes a document on the ICO’s website that furnishes information about the venture or the technology, pertinent financial data, and information about the offering itself. This document is called a ‘Whitepaper’. It is reasonable to assume that once leading countries enact regulations for digital currencies, including a binding standard for whitepapers, this market will become more regulated. Following are some helpful tips for new ventures still in the pre-ICO stage and who want to make their whitepapers accessible to potential investors. Mode of presentation of the information When an investor considers whether it is worthwhile to participate in an ICO, he wants to know why purchasing coins in the ICO will be a golden opportunity for him and what his resulting profit will be. Unfortunately, companies tend to focus on presenting the technology or the venture in their whitepapers, and they do not attribute enough importance to presenting the financial-economic data. But such data are equally important to potential investors, especially since financial data demonstrate the venture’s potential market value. It may will add value if the whitepaper will include financial data about the company, information about the new coin (or token) to be issued, and information about the technology. Such information should be substantiated by data from reliable sources. It is also advisable and helpful to use infographics—graphs, simulations, and comparative data—that encapsulate the highlights of the ICO clearly and succinctly. Structure of an ICO An ICO whitepaper should explain how and when investors can participate in the ICO, and in which currencies the investor can purchase the company’s new token (if only through digital coins, so which digital coins; and whether it is also possible to use FIAT money. Notwithstanding the regulatory uncertainty surrounding digital currencies, nearly every developed country imposes anti-money-laundering laws and KYC (know your client) provisions. Therefore, the whitepaper should also inform investors about the identification processes they will have to undergo during the ICO and the required mode of payment. Legal aspects As stated, most countries have not yet enacted digital currencies regulations that also regulate the mode of performance of an ICO. Consequently, purchasing digital coins and participating in an ICO are still highly risky and thus are not suitable for everyone. Therefore, it is critical to ensure the whitepaper accurately presents the venture and the structure of the ICO. It is recommended that the whitepaper disclose the risk factors unique to the market in which the company operates (in addition to the risks inherent in the digital currencies arena, the lack of regulations, and the absence of any promise that the venture’s success will lead to a rise in the value of the issued coin). In light of the above, and bearing in mind today’s regulatory uncertainty, ventures considering fundraising through digital currencies should act with all due care so that they do not find themselves in violation of securities laws in countries where the ICO is being launched. The applicable law in the territories relevant to the ICO should be meticulously examined. Source: barlaw.co.il
Adv. Yuval Lazi
When you are ready to raise money to begin or expand operations for your startup, you cannot just ask and wait for money to pour in. Today's investors are savvier than ever. They need to understand the value you create, for investors and for the market your company will serve. You need to understand your business model thoroughly, but you should also prepare concise answers to the questions any smart investor will ask. 1. What Market Do You Serve? If you do not have a target market, you are not ready to do business. By the time you begin fundraising, you must know who you will serve. This means you should be able to identify your potential customers by their demographics and by their needs. In a few sentences, be ready to tell investors where their pain points lie. 2. How Do You Solve the Problem? It does no good to anyone if you can identify problems but cannot solve them. Your customers have a need, and you must demonstrate how you can fill that need. Competitors likely exist, so you must show where existing market remedies fall short and how you exceed what currently exists. 3. Why Is the Time Right? Needs do not exist in a vacuum. You must be ready to answer why your customers need a solution now, rather than last year or next year. If the pain point has existed for a long time, have your customers found acceptable workarounds? If it is new, why is it urgent? Concise answers show that you provide value critical to the market. 4. What Is Your Pricing Model? You should know that economic forces will change your pricing over time. Still, put thought into what you will charge for your product or service, both to earn business and earn a profit from your labor. 5. How Will You Use the Money? This may seem obvious, but you should have a plan for the money you seek. Know what you will purchase and why, and how the funds will allow you to reach your next milestone. If you can answer this, investors are more likely to see their own growth opportunity. Investors want to understand how you will put their money to work and deliver what your customers need. Showing what and how you deliver, and how investment will help you do so, gives them a reason to help you succeed. Source: barlaw.co.il
Adv. Inon Yogev
One of the great ironies of life on earth is that, on a planet that is approximately 75 percent covered in water, the demand for safe drinking water is higher than the supply. Fresh water makes up only about 2.5% of the total water supply, and for a continuously growing population, this creates some limits. Fortunately, technological innovations are creating solutions for a world that needs more water, and Israel is leading the way. Israeli Drip Irrigation Israel, as a small, desert nation, may seem an unlikely water leader in the world. But the limits in natural water resources it faces, combined with a national focus on fostering technological innovation, have led to a boom in developments that are helping the world. Israel leads the way in applying drip irrigation solutions to use water efficiently. This technique allows farmers to use exactly what is needed to help grow crops. And compared to flood irrigation, drip uses between 25 percent and 75 percent less water, maximizing the efficiency of an increasingly scarce resource. Companies like Netafim, the inventor of this technology, continue to find new ways to improve and expand the use of this work; Israeli companies are working with countries as diverse as Kazakhstan and the United States to efficiently irrigate in arid regions around the world. Desalination to Increase Usable Supplies With most of the world's water supply coming from salt water, conservation is not enough; desalination techniques are critical for helping increase the amount of water you can use every day. Here again, Israel's tech-savvy environment has helped turn challenges into opportunities. The world's largest desalination plant belongs to Sorek in Israel, which applies reverse osmosis to create a daily production capacity of 627,000 cubic meters of water. Israel now obtains 55 percent of its domestic water through desalination. Processes to remove salt and purify the water supply continue to evolve. For example, Israeli inventors have developed a chemical-free desalination process aimed at improving the safety of drinking water over what previous technologies have allowed. For investors, this creates a market opportunity to help improve the world and generate a fourfold or greater return while doing so. The world will continue to grow in population, and the innovative power of intelligent people working together will continue to yield solutions to better the living conditions we experience. Israel's experience and expertise in water innovation is leading the way. Source: barlaw.co.il
Adv. Ron Shuhatovich
“How did the board approve this?” Headlines like this pop up each time it is announced the Israel Securities Authority is investigating a public company’s transactions with its controlling shareholder, such as the latest allegations of deals between Bezeq and its controlling shareholder. But the real question that should be asked is, "Was the board given the right tools to perform its work?" A Board's Authorities The Companies Law elaborates extensively on the authorities of a board of directors. These authorities may be divided into supervisory authorities and business development authorities. Supervisory authorities empower the board to oversee the general manager and his actions. Some examples are the examination of the company’s financial position and the preparation of financial statements, the approval of the distribution of dividends, and the approval of transactions with related parties. Business development authorities are delegated to the board of directors in order for it to forge a strategy for the company and to guide its policies. Such authorities include defining action plans for the company, appointing and dismissing the general manager, formulating a remuneration policy, and issuing bonds and allotting securities. A Board’s Work In addition to a board of director's authorities, the Companies Law prescribes procedural rules governing the work of a board of directors, which include, inter alia, provisions regarding the chairman of the board, the convening and conducting of board meetings, voting by the board, and the procedure for approving material transactions. As stated, the Companies Law provides the board with technical operating rules, but it does not provide the board with high-quality, fundamental rules to guide it in the exercise of its power. This omission becomes even more glaring when at issue are complex matters, such as controlling shareholder transactions and the distribution of dividends. Over the years, this void has been filled by court rulings and guidelines, as well as via position statements issued by the Israel Securities Authority. Both constitute normative sources of guidance to boards of directors on fundamental issues pertaining to how the board’s work should be performed. While the instructions from the courts and the ISA are many and diverse, one material rule, which recently received official recognition by the Supreme Court, and which encompasses a number of material rules for exercising authority, overshadows the rest—the Business Judgment Rule. The Business Judgment Rule The Business Judgment Rule prescribes when the court is not to intervene in business decisions made by a board of directors. Namely, the court is not to intervene in board resolutions passed with bona fides, without any conflicts of interest, and in an informed way. According to the principles of this rule, when the board exercises its powers, it must examine and consider, inter alia, these issues: Ÿ Conflicts of interest – Does the approval of a particular transaction affect, or is highly likely to affect, the board or any of its members? The board must ascertain whether the transaction promotes solely the company’s best interests or if it benefits other interested parties in the company. Ÿ In-depth deliberation – The board must hold a fundamental and practical deliberation of the proposed resolution on the agenda. It must perform a thorough examination of the transaction, ask questions, act as devil’s advocate, propose revisions to the terms of the transaction or a competitive proceeding, and examine other alternatives. Ÿ Sufficient background material – In order to hold an in-depth deliberation, the board must make sure it has been provided with the full factual foundation as well as with all the relevant background documents and data it needs, such as valuations and economic forecasts. Ÿ Documentation – Minutes of board meetings must be recorded. The objective of the minutes is not to constitute a full transcript of what was said during the board meeting, but rather to document the key statements made and to show readers that an in-depth deliberation indeed took place. In summary, the work of a board of directors entails risks. The Companies Law prescribes procedural rules for the work of a board of directors, but only by integrating the material rules prescribed outside the Companies Law does the board possess the complete set of rules it needs to cope with the risks posed by its work. Source: barlaw.co.il
Adv. Yuval Lazi
Much of the research and development that goes into new technologies occurs in academic and research institutions and laboratories. But this does not in itself create the new products and processes that change the world. Rather, the technologies are transferred from these academic institutions to the companies that will develop marketable applications. In Israel, the middlemen for this process are special Tech Transfer Organizations (TTOs) that are incorporated by the academic research facilities in order to ‘transform’ theory into practice. As Israel continues to churn out new scientific breakthroughs, TTOs play a critical role in converting new science into continued economic growth. Bringing Science to the Market TTOs are not a new development in Israel. From the establishment of the first transfer organization in the country, Yeda Research and Development Co., the nation has depended on these organizations to bring science to the market. Today, tech transfers are a big business in Israel. Every year, TTOs in the country generate $1.5 billion in royalties and lead to the creation of 15 new companies. Indeed, their existence improves the efficiency of the market by allowing everyone else to do what they do best. A research institution benefits from being able to focus on scientific inquiry and development. In turn, TTOs can identify potential applications for the resulting science and help connect the research to companies that can best apply it to marketable inventions.  The result - an efficient economic approach that continues to foster powerful growth year after year. Engagement with TTOs The engagement with the TTOs are non-standard. The TTO does not invest in the company or sell the technology, but rather provides the license needed in order to commercialize the technology. Usually, these types of engagement require a “three way” agreement between the TTO, the startup company that will commercialize the technology and a ‘grown’ company that expects to use this technology in order to implement it into its own products or services. These complex engagement structures can in some cases result in uncertainties and disputes relating to the rights in the technology and its implementation. Barnea Co. has experience helping TTOs, commercialization companies and technology purchasers navigate the difficulties involved in the process of structuring such complex engagement and assist in managing the continued drive of the country's technology boom with the TTOs in its forefront. Source: barlaw.co.il
Adv. Yuval Lazi
Today's world holds more cybersecurity threats every day than it did the day before. Expert estimate that Israel faces 100,000 cyber-attacks every day, and 10 times that amount in wartime. Given the constant threat against businesses and the government, Israel's national focus on fostering cybersecurity technology and growth seems almost obvious. But sometimes, the needs of businesses in a global economy clash with national interests. Navigating a path that takes both into account requires a thoughtful approach from government and the private sector. Israel's Cybersecurity Needs One key difficulty of cybersecurity comes in the exponential expansion of the world's connectedness. The Internet of Things creates opportunities for consumers to connect to information in more ways every day, and Israel has taken a leadership position in its growth. But this area also creates some of the greatest security risks for information. Israel and other developed nations must constantly examine and re-examine the vulnerabilities of the information network and find ways to combat them. In addition, countries have an interest in protecting the cybersecurity techniques they develop from other countries whose interests may not fully align with their own. This is where conflicts arise; successful businesses grow and expand beyond national borders, so the exporting of cybersecurity capabilities can be simultaneously a business necessity and a national concern. Legal Landscape for Cybersecurity Business In Israel, a proposed regulation would have subjected all cyber exports in four distinct areas: intrusion software, vulnerability detection, defense technology, and advanced forensics. After careful consideration and listening to the concerns of the industry, the government pulled back and will only be supervising offensive cyber technology being exported. The industry representatives feel confident their concerns have been addressed, with a balance struck to allow defensive technology to be shared outside of the country. This represents a key moment in the examination of disparate needs between the government and the private sector. Still, the legal and regulatory ground for cybersecurity in and outside of Israel will never fully settle. Technology continues to develop, and the law will continue to respond to the new realities of the day. Working with effective counsel remains critical to managing change and staying abreast of the changes that occur daily. Source: barlaw.co.il
Adv. Gal Oren
Israel has for years led the world in technology and entrepreneurial growth and development. After building in a number of key tech areas like cyber security and biotech, the nation has turned its sights on bolstering capabilities in renewable energy. Recently, the Israeli government announced a new initiative focused on pushing development of renewable energy into the 21st century. This creates a prime opportunity, for Israel's energy companies and for investors looking to become part of this growth in the years ahead. Sources of Renewable Energy in Israel Israel receives a great deal of sun, and Tel Aviv University's Center for Renewable Energy estimates that covering merely eight percent of the Negev Desert with solar panels could supply all of Israel's energy needs. To make this work, Israel needs the benefit of technology to maximize production of electricity converted from solar sources, efficiently store solar energy, along with infrastructure changes to allow better transmission of solar power across the country. This leads to ever increasing amount of people working to develop these technologies to improve its renewable energy capabilities.  The Opportunity Emerging As of this time last year, 2.6 percent of Israel's energy was produced from renewable sources. Given the amount of solar energy available to be harvested, this creates tremendous growth opportunities in this field. In fact, the Electric Authority recently issued a the first tender out of four that are scheduled to take place this year for solar generation, and announced on March 2017 its first round winners, which committed collectively to almost 235 megawatts of electric generation within the scope of 300 megawatts allocated to this tender and overall scope of over 1,000 megawatts for all four tenders scheduled this year. Beyond creating opportunity for the companies building the facilities, this new focus on solar generation can create a boom for technology start-ups and established companies that develop mechanisms for more effectively storing and transferring solar energy. If you're ready to build or invest in this growth opportunity, the Ministry has developed a regulatory structure for which you should be prepared. Barnea Co. can help you understand and move through the system to get your company or investment working efficiently and legally. Source: barlaw.co.il
Adv. Lorber Daniel
Within a nation exceeding 8.5 million people, Israel is a world leader in technology and innovation, consistently producing an impressive number of tech startups. From drone technology and ride sharing applications, to unique online shopping platforms and breakthrough technologies in the field of life science, Israel’s tech companies cover a myriad of fields. It therefore comes as no surprise that Chinese investors are eager to delve into the countless possibilities, which stem from the advancement of Israeli tech companies. In 2015, Chinese investments in Israeli startups exceeded $500 million, unveiling a growth of more than 300 percent from 2012. Throughout 2016, significant conferences were held in order to introduce prospective Chinese investors to Israeli tech companies. In January 2016, a China-Israel Innovation Summit was held in Beijing, where hundreds of Chinese Investors attended, in order to meet various Israeli tech companies, with the potential for large investments. The Summit acts as a mediator between Chinese investors and Israeli tech companies. In light of the success of the January conference, a subsequent conference was held in September 2016 in Tel Aviv, where over 300 Israeli high-tech companies presented their ideas to 2,300 Chinese investors. In addition, in September 2016, a conference was held in Shanghai, where 100 Israeli high-tech and startup companies participated, joined by 1000 Chinese investors. Among the various investor companies, Alibaba, Baidu, Lenovo, SAIF Partners, GF Xinde and many more, joined the event. One of the conference’s partners was the ‘China-Israel Changzhou Innovation Park’, a bi-national government initiative, which has become a tech-hub for large Israeli tech companies to use as a means for penetrating the Chinese market. In recent years, Chinese investors have shown specific interest in the fields of life science, pharma, medical devices, agrotech, Fintech and e-commerce. Prominent examples of Chinese investments in these fields include, inter alia, the sale of cCam Biotherapeutics for approx. USD605 million and the acquisition by ChemChina of Adama Agriculture Solutions (and its subsequent sale to a fully owned subsidiary, Hubei Sanonda Co. Ltd.). In addition to the various Chinese investments in Israeli companies, China has reaped the benefits of Israeli companies operating in China. For example, Israeli-Chinese private equity firm Infinity Group and Neusoft Corporation have approved the establishment of a $250 million investment to back Israeli life science companies operating in China. Neusoft Corporation is China’s largest IT Corporation, holding a 50% share of the medical market in China. This fund will assist Israeli medical companies to connect with the Chinese market through the integration of cloud-based platforms, which assists Israeli life science companies with regulatory approvals and product promotion in China. Furthermore, Israeli entrepreneurs are highly sought after in China, predominantly in the fields of mobile and web technologies, gaming, cleantech, agrotech and digital health, which all go hand in hand with Israeli high-tech expertise. As with any investment in a different country, Chinese investors have had to deal with the prevalent challenges of investing in Israel’s tech companies. Aside from the language barrier, the differences between the Israeli and Chinese cultures have been a challenging stepping stone for Chinese Investors. For example, within Israeli culture, companies prefer transactions to be quick and efficient, while Chinese companies are patient with a more tolerant approach. In addition, there are numerous rules and regulations to be followed in China, while Israeli companies strive for instantaneous completion of contracts and agreements. This bridge is a test to the relationship between Chinese investors and Israeli tech companies. Regardless of the challenges facing Chinese investors in Israeli tech companies, these increasing investments and acquisitions allow for limitless possibilities in relation to research, development, marketing and expansion of the Israeli tech world. The evolving relationship between China and Israel demonstrates a promising future for Israeli companies and startups. Source: barlaw.co.il
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