Blog / Technology
What Is a Non-Disclosure Agreement and Is It Really Necessary?
February 20, 2020 / by Yuval Lazi
February 20, 2020 / by Yuval Lazi
This video deals with the questions of when to sign an NDA and how much protection it really gives.
Over the last few years, smart homes have gained popularity following technological advancements in all sectors of the economy, but they are faced with multiple threats ranging from data breaches to cyberwarfare.
Looking for a Venture Capital Fund to Invest in You? Here’s How to Do It Right
January 20, 2020 / by Chen Nadir
January 20, 2020 / by Chen Nadir
Raising capital is one of the main issues that preoccupies entrepreneurs on a daily basis. Continue reading to learn how to choose the venture capital fund best suited for your project.
How Israel Became a Leader in the FoodTech Industry?
January 6, 2020 / by Daniel Lorber
January 6, 2020 / by Daniel Lorber
In Israel, over 200 startups and companies are at the forefront of innovation in the FoodTech field. Watch the video to learn more about the leading trends in the FoodTech sector .
Innovation Authority Grants – What to Know in Advance?
October 23, 2019 / by Anat Even-Chen
October 23, 2019 / by Anat Even-Chen
The Israel Innovation Authority runs a series of programs that support entrepreneurs and companies in the various business stages. It is important to recognize the limitations the receipt of such funding from the Authority imposes upon a project.
Raising financing is tricky, stressful and for many involves navigating uncharted waters. Click to read for useful information to help you sidestep certain unhealthy choices.
In 2019, Israel remains “the Start-Up Nation” and a leader of technological innovation. Thanks to its strong currency, active economy, and robust export industries, it also continues to attract noteworthy international investments.
The payment market in Israel and around the world is marching toward revolution. Still, Israel lags far behind compared to the rest of the world, and the rate of adopting innovation in the field of payment services is very slow.
The Law of Facebook Is Not the Law of Small Companies
July 4, 2019 / by Zvi Gabbay
July 4, 2019 / by Zvi Gabbay
On June, two seemingly unrelated events took place: the SEC filed suit in federal court against the company Kik Interactive and Facebook announced the expected launch of a new digital currency – the Libra. What’s the connections ?
In the past three years, an estimated $1 billion has been invested in women’s health technology, and according to Pitchbook, femtech raised $650 million in VC funding last year alone and $241 million so far this year. Still since just around 6% of all decision-makers at U.S. venture capital firms being female, it is not surprising that it is difficult to secure funding for women’s issues.
How Can the Digital Workforce Support Productivity?
April 11, 2019 / by Danny Boguslavsky
April 11, 2019 / by Danny Boguslavsky
Automation is big in the news lately. The lines between human and machine tasks are blurring, and arguments abound. Will new technology kill jobs or improve productivity?
Many startups fail to adequately safeguard their most important asset – their intellectual property. Click to read some fundamental steps that tech companies can take in order to protect their products and inventions.
Blockchain Now and Into the Future – What We Can Expect
January 9, 2019 / by Zvi Gabbay
January 9, 2019 / by Zvi Gabbay
Blockchain has a well-established presence in the ecosystem, with a variety of use cases across a broad range of sectors, including Fintech, advertising, security, telecommunications and others. Here is an overview of the latest developments regarding blockchain regulations in Israel.
What You Always Wanted to Know About Fintech Regulation, But Were Afraid to Ask…
December 31, 2018 / by Zvi Gabbay
December 31, 2018 / by Zvi Gabbay
For Fintech companies looking or hoping to work in Israel, the regulatory developments could either serve as an opportunity or as a barrier, and should be carefully considered. Click to read an overview of the Israeli Fintech regulatory situation.
While still widely identified with digital currencies, blockchain technology is also beginning to revolutionize the healthcare industry. See how pharma companies and medical institutions have begun to rely on this technology to resolve problems faster and more efficiently.
How to Negotiate with a Prospective Angel Investor
November 15, 2018 / by Yuval Lazi
November 15, 2018 / by Yuval Lazi
How you negotiate with an angel investor goes a long way in determining whether you will receive funding or not. Click to read some top tips for negotiating with a potential angel investor.
Warranty & Indemnity (W&I) Insurance – It’s All in the Name
October 25, 2018 / by Ariella Dreyfuss
October 25, 2018 / by Ariella Dreyfuss
Sellers in an M&A transaction are required to make certain statements about the company they are selling. If these statements are not true, the buyer can claim against the seller for any damages it incurs as a result of the inaccuracies. W&I insurance can cover the cost (or part of the cost) of the buyer’s damages.
Despite the many internal and external challenges unique to Israel, the country has successfully transformed itself into a powerhouse of technological innovation. Israel has become an excellent destination for international business, boasting a strong local currency, an active local economy, and robust export industries.
Asset-Backed Digital Currencies: Advantages and Challenges
July 1, 2018 / by Zvi Gabbay
July 1, 2018 / by Zvi Gabbay
The race to develop a new, unique and reliable digital currency with low volatility has prompted entrepreneurs to scale the link of blockchain technology and mainstream investments, thus creating a new wave of cryptocurrencies backed by commodities or assets.
PropTech – Transformation of the Real Estate Market
June 21, 2018 / by Danny Boguslavsky
June 21, 2018 / by Danny Boguslavsky
Major, long-established players in the real estate market have joined forces with young companies and entrepreneurs with the objective of resolving the many challenges inherent in the field of real estate transactions.
Imposing Regulations on Online Technology Giants
April 23, 2018 / by Barnea
April 23, 2018 / by Barnea
Governments around the world say they are being pushed into creating regulatory frameworks to force tech giants to comply with laws. A regulatory net is closing in. And the types and effectiveness of these regulations and controls are set to evolve over the coming years.
It goes without saying that technological advancement has come with a slew of risks attached. This is particularly true where financial technology (fintech) is concerned. With large-scale data breaches occurring at regular intervals and with greater frequency, fintech and data privacy are being put to the test.
The First 48 Hours – How to Respond to a Data Breach
March 15, 2018 / by Yuval Lazi
March 15, 2018 / by Yuval Lazi
If you’ve discovered that your company has been hacked, the first 48 hours are absolutely critical. Knowing how to actively marginalize further harm and eliminate cybersecurity vulnerability can be dealt with in the first 48 hours with an incident response plan.
2017 was a significant year for the blockchain industry in general and for cryptocurrencies in particular. 2018 is expected to be an equally interesting year for the cryptocurrencies industry, as new trends take shape and regulation becomes even more refined. Check out some of our digital currencies predictions for the year.
Israel’s International Innovative Edge in Robotics Technology
January 10, 2018 / by Itay Gura
January 10, 2018 / by Itay Gura
The 21st century robotics industry impacts nearly every facet of life – business, health, commerce, education, and even government. In fact, Tractica, a market research firm, forecasts that this technological area will grow from $31 billion in 2016 to $237.3 billion by 2022.
Sports Tech – When Sports Join Up with Technological Innovation
December 24, 2017 / by Danny Boguslavsky
December 24, 2017 / by Danny Boguslavsky
In recent years, tremendous progress has been made in introducing know-how and technology into sports – despite this being a conservative world concerned that the introduction of new powers might compromise the ethos of sportsmanship.
Glossary for Beginners in the World of Digital Currency
November 30, 2017 / by Karin Kashi
November 30, 2017 / by Karin Kashi
Do you keep hearing people talk about blockchain, bitcoins, and ICOs with no idea what they mean? - Here’s a short glossary to help you understand what the fuss is all about. Decentralized coins/digital coins These coins are basically digital money that is secured through encryption technology (cryptocurrency). Digital currencies are not issued or managed by any country or central bank. Thus, their value is not under their control, but rather is determined by the agreement of and according to the demand among the network of users. Bitcoin The bitcoin is the first digital currency used, and the first and most famous application of blockchain technology. Digital wallet A digital wallet is software that is linked to the digital currency network. It enables the user to hold, transfer, and receive digital currencies. Every digital wallet has two “keys”-a public key and a private key. The public key corresponds to the bank account number, i.e. the address to which the money is transferred. The private key is the key to the safe. Only its owner can perform transactions with the digital currency in the wallet. Blockchain Blockchain is a technological concept that enables secure activity on the internet without needing a central management entity. Blockchain serves as a digital ledger of all the transactions performed on it since it began. The information maintained in blockchain is stored in cells called blocks, which are linked together in chronological order (in a "chain of blocks"). Upon completing any transaction in blockchain, it is documented and automatically stored in the devices of all users of the system. The structure of blockchain technology and its decentralized nature provide the structural security of the blockchain. The chaining of the blocks does not enable information stored in blockchain to be altered without changing the definitions of all subsequent blocks in the system, which is practically impossible. Moreover, the decentralized nature of blockchain does not allow for the system to be compromised without taking control of the majority of the devices connected to blockchain, which, due to the number of users of the bitcoin blockchain, is practically impossible as well. Blocks Blocks are storage units in which all information maintained in blockchain is stored. So, if blockchain is likened to an accounting ledger, then the blocks are pages in the ledger. The blocks that comprise blockchain are linked to each other using a complex mathematical puzzle, making it nearly impossible to alter information saved in blockchain. Bitcoin mining Bitcoin mining is the process by which bitcoin transactions are verified and documented in the bitcoin’s blockchain. The mining process is performed by a particular type of users of the bitcoin system, known as “miners”. The mining process basically involves solving a mathematical puzzle. The miner who solves it first creates the next block. The first miner who succeeds in solving the puzzle is rewarded for his successful mining with bitcoins and sometimes also with transaction fees. Virtual coin offerings or Initial Coin Offerings (ICO) An ICO is a crowdfunding channel. An ICO is a process where entrepreneurs who are developing platforms or projects raise money in exchange for digital coins. The digital coins give the projects' investors the right to use the platforms developed in projects funded by the ICO. Additionally, the digital coins provide liquidity to investors in ICO projects, since they are tradable assets in the secondary market. Smart contracts Smart contracts are considered the most dramatic application of blockchain technology. They represent a promise to change the way traditional processes are carried out, characterized typically by a dependence on middlemen. A smart contract is a computer protocol that enables two strangers on the internet to conduct business in a way that is secure and reliable. Since smart contracts are based on blockchain technology, they can reliably and securely complete operations on the internet without involving middlemen. Source: barlaw.co.il
Israel’s Successful Incubators and Accelerators Develop the Future
November 19, 2017 / by Daniel Lorber
November 19, 2017 / by Daniel Lorber
In its innovative journey, Israel has exhibited technological achievements and economic advancements that have proved it to be one of the strongest leaders in the entrepreneurial world. Through the aid of the Israel Innovation Authority (“IIA”) or accelerator programs, Israeli startups are able to receive funding at very early stages of their venture, or a set of tools and insights that fast-track startups in terms of their management skills, business focus, and marketing capabilities. Incubators and Accelerators in Israel In addition to the financial aid granted by the IIA to eligible startups, incubator and accelerator programs provide startups with significant tools to enhance their products and services. Incubator and accelerator programs offer valuable assistance, including a supportive infrastructure, mentoring by industry experts, and the necessary training required for new startups to further enhance their development. A significant difference between incubators and accelerators is that accelerators are intended to accelerate the development of startups within a short time frame. In contrast, incubators operate within more extended timeframes -approximately 24 months on average. As such, they focus more on the initial phases of startups and aim to guide startups through their preliminary stages of development. Incubators The support of incubators encompasses market penetration, legal consultation, laboratory guidance, and technological development. Such incubators are located throughout Israel, advancing fields like biotechnology, aerospace, life sciences, and cybersecurity. In Israel, incubators operate through the support of the IIA, which contributes 85% of the financing received by startups through the respective incubators. It is important to point out that any grant received by the IIA, including through incubator programs, is subject to the Law for Encouragement of Industrial Research and Development. This law includes provisions that restrict companies’ ability to transfer IP or manufacturing overseas without the IIA’s consent. It is essential for startups to be aware of such restrictions, and to contemplate their applicability in light of the startups' business strategy, prior to accepting such grants. Accelerators In contrast to the governmental support incubators enjoy, in general, accelerators do not receive financial aid from the Israeli government. Accelerators are used as a tool to expedite startup development by giving investors the chance to discover startups in their early stages and to then aid in their rapid growth. The accelerator program is also beneficial for the startups themselves, as such startups are able to take full advantage of investors’ experience and know-how. Currently, there are approximately 90 accelerator programs in Israel. These programs can differ substantially with regard to their framework and engagement terms. It is therefore prudent for startups to research and take the time to fully understand the specific terms and itineraries these programs offer, prior to engaging with them, as this will affect their future development and the likelihood of securing future investments following the completion of the accelerator program. Source: barlaw.co.il
Fintech combines for the first time the worlds of financial services and technology, as banks and insurance companies serve as fintech’s main playing fields. As such, both sectors must become more efficient and acquire the technological solutions that will help them fulfill their roles. Fintech promises to bring innovation to existing players, but also threatens to disrupt conservative industries and replace them with new models and players. The connection between the two components of fintech has proved challenging, in light of the fundamental differences in the characters of these two components. Technological solutions are provided by startup companies that, by nature, are small organizations driven by the need to work quickly and efficiently, due to the short time-to-market and the requirement to sell and recruit capital. On the other hand, the MVPs in the financial services sector are large, hierarchic organizations characterized by sluggish bureaucracy that negates rapid decision-making and agility in implementing innovative solutions. Regulation and Fintech Fintech companies operate in a regulation-intensive environment, and this is the first main challenge, because regulations essentially define their ventures and their feasibility. On the other hand, in most of the technological fields that startup companies engage in, the challenges are innovation, competition, and the business model. Regulation is less of a challenge, if one at all. The dominant role of regulation in the fintech sector is unique. Therefore, gaining in-depth knowledge of the synergies between regulation and fintech is critical during any analysis of a fintech venture’s prospects. And the venture must know how to maintain compliance with the various regulations in order to succeed. By their very nature, financial services are subject to a wide range of meticulous regulations. The types of regulations that affect fintech include banking regulations, insurance regulations, and the prevention of money laundering, as well as privacy, consumer, and securities regulations. The various regulatory categories in the financial services sector follow and are adapted to the structure of the traditional market, with each sector being closely governed and controlled by its own set of regulations and regulatory authority. In many instances, fintech strives to resolve the problems created by existing regulations, but it also must keep in mind that its operations are subject to those same regulatory systems. Already at the stage of defining the product and service a fintech venture wishes to launch on the market, it must familiarize itself with the relevant regulations. It then must find solutions that comply with the regulatory conditions, as well as that enable it to obtain approval from the relevant regulatory authority. There are numerous dimensions to gaining familiarity with the regulations. First of all, similarly to every startup company, fintech ventures are also striving to go multinational and operate in a variety of countries. The problem is that regulations in one country are different and sometimes contradict the regulations in another country. The differences are in language, laws, and even approach. This means that the learning and compliance process is multi-dimensional and, in essence, an unending task. If this were not enough, another problem is that regulations are drafted based on the structure of the conservative market—banking regulations for banks, insurance regulations for insurance companies, and so forth. On the other hand, in many instances, fintech ventures disrupt the structure of the traditional market. This disruption, by its very nature, creates new connections and approaches. As a result, fintech companies find themselves in a minefield of differing, overlapping, and contradictory regulations. However, the regulatory challenge is not just difficult, but also a main foundation for creating value. Any fintech venture that has already become well-versed in the subject, and has adjusted its solution to the various regulations, creates a real advantage over existing and new competitors. The entry barrier to this sector is not only the development stage, but rather the strength of the regulatory solution. In essence, regulatory knowledge actually becomes intellectual property. For example, the banking sector is characterized as a regulation-intensive sector. The banking supervisor’s regulations relate to various aspects of banking corporations’ operations, including licensing, corporate governance, various regulations relating to capital adequacy and banks’ capacity to assume various risks, consumer regulations relating to banks’ relations with their customers, the prohibition of money laundering, and more. Any fintech venture seeking to interface with the banking system, to provide it services or replace some of the banks’ roles, must be well-versed in the relevant local regulations and ensure its compliance with them. Clearly, the greater the challenge, the greater the potential. Privacy and Fintech During the coming year, new and enhanced privacy-protection and information-security regulation systems are expected to come into effect throughout the world. These are headed by the European GDPR, which deals with privacy protection and will take effect in May 2018. As a result of these processes, the issues of privacy and database protection against cyber risks will have an impact and a presence on the technological agenda in the coming years. Fintech ventures create solutions that make use of sensitive personal information. As such, the ventures are engaging in fields that are exposed to privacy and database issues. Basically, all financial services involve the collection and saving of sensitive personal information. Electronic mail addresses, phone numbers, personal details, financial information, marital status, special identifying details, workplace, family members, and more are collected as part of the process of getting to know the customer in order to provide him with services, advice, and an identity. All this sensitive information has been collected, saved, stored, processed, and transferred within the companies' technological systems. But these systems are also exposed to attacks and challenges from all sides. The exposures, in instances of intrusions, are not limited to sanctions that may be imposed on a company by the regulatory authorities, but also include a potential mortal blow to the company’s reputation and civil suits being filed by individuals on the grounds of infringement of privacy. In light of this, the fintech sector must adopt high standards of privacy protection and security. Fintech companies are required to create privacy-protection and information-security regulations for the enormous volume of information they collect, at standards on par with the customary international practices. Source: barlaw.co.il
Developing Marketing Strategy for Potential Investors
October 16, 2017 / by Yuval Lazi
October 16, 2017 / by 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
Israeli Innovation in Bolstering the Water Supply
August 28, 2017 / by Inon Yogev
August 28, 2017 / by 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
How Tech Transfer Organizations Drive Israel’s Growth
July 30, 2017 / by Yuval Lazi
July 30, 2017 / by 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 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
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
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
The speed in which vast and complex “bits” can now be processed is staggering. This information is being collected, stored and analyzed to drive efficiency and create actionable intelligence – translating into increased revenues. In short, in today’s world data is power. For those engaged in technologies that collect data sets and use Machine Learning and Deep Learning techniques, there are a minefield of legal issues to avoid. Privacy Privacy, has long been established as a right, and despite popular belief it is not dead (yet). An individual’s consent is usually required before Personally Identifiable Information (PII) about him or her can be stored, used or shared. However, one of the main hurdles for those who collect data is that such information is often amassed from across the globe. Crawlers and scrapers are being employed to scour data from all over the web, but different jurisdictions have different laws, regulations and interpretations. What constitutes PII or consent in one country may not be the same in the next. These laws are also evolving, for example Israel’s Protection of Privacy Law, (1981), is soon to be bolstered by the Protection of Privacy Regulations (Data Security) 2017 (the Regulations) which come into force in March 2018, and the new European General Data Protection Regulations (GDPR) come into force in May 2018. In addition, different sectors such as banking and healthcare have their own privacy provisions. The breadth of laws to consider poses a serious challenge for those engaged in Big Data. Not only do we usually have the right to object to our data being collected, in certain circumstances we also have the right of erasure (AKA the right to be forgotten), and can demand that our information be deleted at a later stage. This means that companies that hold PII need to ensure they have the ability to locate and erase such information further down the line. Many jurisdictions require the holder of data to register a database with the local privacy regulator – in Israel the Israeli Law, Information and Technology Authority (ILITA). Given the value of data it is unsurprising that the news is full of stories of database hackings. Under the Regulations, Database Owners are required to immediately notify the ILITA and, in some instances, data subjects upon serious security breaches. While this increases transparency, it also increases exposure to litigation and class actions, and can be a PR nightmare. Accordingly, the security concerns around PII should not be trivialized. A popular way of avoiding these privacy mines is to anonymize and aggregate all data obtained and store as little of it as possible. With both the GDPR and Regulations coming into force early next year, the former carrying significant fines (the maximum being the greater of €20million or 4% of the total worldwide annual turnover for the preceding financial year) and the latter carrying civil and criminal liability, anyone engaged in Big Data in Israel should be taking steps to mitigate risks and ensure compliance. Ownership Enterprises understand that although data is power, holding it tight to their chest is not always the best way to leverage it and realize its economic potential; so such information is often shared with third parties. Take the autonomous driving space for example, car manufacturers such as BMW may share data garnered pertaining to vehicle performance and driver safety and behavior with the OEMs developing their cars’ autonomous driving capabilities. These OEMs may then combine BMW’s information with their existing data sources and/or create a Deep Learning model based on BMW’s information to achieve this goal. The question then arises as to who owns what in the co-mingled data or the conclusions derived from the model. Data is usually protected by copyright laws, but when it is shared it is paramount to clearly and contractually define each party’s rights and obligations, including ownership, scope of license, confidentiality, limitation on liability and consequences of termination of the relationship. Competition Data is being seen less as a byproduct and more and more as an asset in and of itself. Some recent acquisitions clearly suggest that the potential of the target to acquire data can be the driving force behind the deal. Think of Microsoft’s $26 billion purchase of LinkedIn last year, which brought it an enormous amount of data about users’ work, skills and interests. If data is indeed power and can be used to suppress competition, then legislators and anti trust regulators will soon sit up and reconsider how they calculate market power and categorize restrictive trade practices, affecting how data companies behave and current relationships. Discrimination Algorithms dissect data and spew out conclusions. Allegedly this enhances our ability to make evidence-based decisions and avoid human bias. However, an algorithm is only as impartial as its author or the data sets it works with. There have been various high profile instances of technology discriminating, for example Google Photos tagged several African-American users as gorillas (experts say this was probably due to insufficient representation of African-Americans in the database used to train the computer vision algorithm), and Microsoft’s artificial intelligence bot “Tay”, designed to learn from the behaviors of Twitter users, went rogue last year after processing racist tweets. There are a plethora of laws prohibiting discrimination and in the event your algorithm falls foul of these, reliance on raw data rather than intent will not absolve you of liability. With the proliferation of Big Data in the last few years, the role that data is playing in replacing human decision making and the move towards a connected world, I am sure we have not heard the last word from our legislators and regulators, and the legal landscape on which businesses are being built will continue to shift. For those engaged in Big Data even in today’s legal world, you better be careful where you tread. “Originally published on the Dun's 100 website”
The life sciences are advancing at dramatic rates in capabilities and goals. For most of human existence, we have been trying to keep up with the path of diseases as they emerge. Now, we are starting to push more toward prevention and improvement of life in a forward-looking manner. Israel sits at the front of the developmental curve, with over 1,200 active life sciences companies. With its national innovative drive and start-up mentality, Israel provides fertile ground for growth in the sector. Why Life Sciences Are Growing The growth in this sector comes as more scientists recognize the direction companies take needs to change. Much of the research in the area has come in academia, which develops information well but limits the practical development that comes more through entrepreneurial action. One big shift Israeli companies are showing is the push to develop technology for how people actually behave, rather than how a hypothetical person would act in an ideal world. Integrity Applications, Inc., for example, has developed technology in its GlocoTrack system to measure blood glucose without a finger prick, thus reducing human error and time lag issues in measurement. Israeli companies are also attacking some of the biggest health challenges in the world. CureTech, for example, is working on ways to harness the immune system to fight cancer, while Teva works on Parkinson’s disease, cancer, and a host of other health concerns. The overriding theme is using research and development in the private sector to combat real problems that people face everywhere. Israeli Funding for Life Sciences In 2016, investments in life sciences companies in Israel increased by 42% over 2015, though the total amount of investment declined. More significantly, the mergers and acquisitions for life sciences company increased almost tenfold from 2015, a sign of an economy maturing and companies growing in the industry. As companies continue to push toward the future, Israel provides a friendly structure for companies to not only get started with funding, but to grow into entities that can change the world. Understanding in the life sciences field is still scratching the surface of what we can achieve, but investing and developing in Israel continues to push the standard forward. Barnea & Co. can help you work through the legal and regulatory path to setting up so you can do your part to change the world. Source: barlaw.co.il
Israel has long been acknowledged and admired for its vibrant start-up culture, fostered through government investment and pro-business policies. Further, the national focus on business development provides a regulatory structure that protects business owners from creditors and ensures proper structure for the public – incorporation. To take advantage of the corporate structure, you need to ensure that you follow the proper registration process, and select the right corporate vehicle to fit your emerging business model. Why should start-ups incorporate? The most common corporate vehicle in Israel, and especially for start-ups, is a limited liability company. The main reasons for its popularity, and why entrepreneurs should incorporate at an early stage, are: The first and foremost reason for any individual to incorporate a company and become a shareholder thereof, is the fact that a company is a separate legal entity from its shareholders. This separation creates a “wall” between the company’s shareholders and its creditors, so that the shareholders and their private property are protected against the company’s creditors and they will not be personally liable for the company’s debts, to the extent allowed under the ‘piercing of the corporate veil’ provisions, according to law (whereby in extreme cases a shareholder can be held personally liable for the company’s debts). In addition, the shareholders cannot be obliged to pay the company's debts beyond the amount of their investment. Any early stage start-up is always seeking investors to invest in their product or idea. In exchange for their investment, the investors expect a form of guarantee in return. When operating under a company, the company can leverage its capital raising without actually giving a substantial consideration in return (such as personal guarantees) by offering the investors consideration in the form of company shares and/or share options. One of the main reasons for investors to invest in a start-up is its intellectual property. With incorporation, the IP is owned by the company and not by the founders, and the investors, who are also shareholders of a company, are the owners of the intellectual property too, in proportion to their shareholding percentages. Moreover, in the event one of the company’s founders terminates its engagement with company, the IP shall remain with the company and not with the departing founder. A start-up which wishes to expand will search for quality employees to join and can offer them benefits such as options. For those start-ups who are or become profitable, the tax rate for companies in Israel is 24% (as of 2017), compared to the individual tax rate, which can be as high as 50%. How to incorporate Before you can do business in Israel as a company, you must register your company with both the Registrar of Companies and the Tax Authorities, which fall within the control of the Ministry of Justice and the Ministry of Finance, respectively. When registering a company, the following steps must be taken: File an application for the company’s incorporation which includes, inter alia, the company’s suggested name, its share capital, its shareholders and their holdings, and its first directors. Draft the company’s articles of association, which governs the relationship between the company and its shareholders and between the shareholders and themselves. Pay a registration fee of NIS 2,606 (as of today). The process can feel onerous at times, but each step is important. Besides the importance of operating legally, the paperwork establishes the rules of conduct and governance both in respect of the present and going forward. This is why the incorporation procedure is critical. “Originally published on the IDC Legal Clinic website”
Distributors, agents, resellers and OEM partners all share the same commercial function of selling goods to end users. Thus, although there are significant differences between the legal statuses of each of these players, this article below treats all of them collectively as "distributors". Appointing a distributor involves significant inherent risks. The drafting of the distribution agreement may help in mitigating these risks and realizing the potential benefit of your relationship. While formulating distribution agreements you should pay special attention to the following key issues: Choose an Effective Distributor:Choosing the right entity as the distributor of your products or services is the most important point. You may appoint a distributor you happened to come across, or that appears impressive. However, you have to remember that you made the appointment so that your products will be distributed and sold. The concern is that the distributor will not act upon the appointment, and the agreement that you signed will remain “on the shelf". These situations get complicated when the distributor is granted with long term exclusivity over a territory. In such event, the concern is not only that the distributor will do nothing, but that you will not be able to appoint other, better, distributor for the same territory. Specify the Distributed Products: a distributor may be excellent for the distribution a certain product, but unsuitable to distribute other products. Therefore, it is advisable that you define the subject matter of the agreement carefully and provide an explicit reference to issues such as upgraded or updated products. For example, when you designate certain software as the products to be sold under the agreement, one could consider newer versions of the software as being covered by the exclusive rights of the distributor and another may consider them as being beyond the scope of the exclusivity (and there is no doubt as to who is the one and who is the other). Consider the Territorial Coverage: the territorial scope of your distribution agreement is not just a question of geography. For example, if exclusive rights are given for distribution of a certain product in the East Coast of the USA, it should be made clear that such rights are not infringed if the same product may enter the territory through an OEM partner, embedded in another product. You should specify precisely all the possible channels through which the product may penetrate the market and thus protect yourself from future disputes with your distributor. Include the Distributor’s Commitments: suppose that you and your distributor have set sales targets or even established minimum purchase quantities, failing which you are entitled to terminate the exclusivity or the entire agreement. In the real world, you do not get to impose these sanctions so quickly. They are often subject to long grace periods, to further conditions or to both, so that basically, they give you no real guarantee. With that being said, it is very important that you perform a due diligence on your distributor and receive a detailed business plan. Such business plan should include, at least, commitments regarding marketing expenditure and details of the human resources to be assigned to the distribution. If you add to this a proper incentive for meeting sales targets, you will acquire some confidence that you have a suitable, capable and motivated distributor in place. Beware of Exclusivity: exclusivity can be unilateral, that is, the distributor is your sole distribution channel in the market, but he may sell competing products. Similarly, you may supply your product to others, but the distributor may not sell competitors’ products. In reality, these one-sided arrangements usually do not work so that it is more advisable to conclude bilateral arrangements. In this regard, it is important to note that in many countries, exclusivity arrangements are considered anti-competitive and thus, in some cases, unlawful. Thus, it is highly advisable that you consult with an anti-trust specialist lawyer to make sure that the arrangement that you are about to enter into is not illegal. Set the Term of the Agreement: flexibility regarding termination of the distribution agreement is crucial. Take for example a case where your company is facing an acquisition and the acquirer conditions the purchase on the termination of the distribution agreement. In such event your exit is dependent on your distributor's consent to release you from the agreement. This issue also arises where "change-of-control" provisions are included, whereby your distributor may terminate the agreement upon a change of control in your entity. Thus, if your buyer's proposal depends on the continuation of your relationship with the distributor, you are at his mercy. Therefore, set definitive and short initial periods that can be extended repeatedly by mutual consent. In this way, you may not be free to end the relationship whenever you want to, but you will always be able to do so within a specified period of time. Deal with the Post-Termination Period: questions of no less importance can arise in relation to the post-termination period. Among the things you must consider are return or buy-back of remaining products, non-competition and confidentiality undertakings, commissions for transactions that are close to being concluded, continued support for the supplied products and more. Opt for Home-court Governing Law: in some cases, well defined “choice of law” provisions may impact upon the probability of disputes between the parties leading to actual litigation. In many cases, when you have a local jurisdiction clause in your agreement with a foreign distributor, your distributor will be hesitant to initiate proceedings against you. Another way to avoid proceedings is to set an expensive arbitration arrangement as the sole and exclusive procedure for settlement of disputes. In this way, the party with the greater economic strength sometimes assures for himself a sound and peaceful relationship. Remember your Intellectual Property: when you appoint a distributor, you also grant a license to use your intellectual property for purposes of the distribution. You are basically giving him access to your most sensitive assets. He is authorized to use your domain name, your logo and your trademarks. If these issues are not specifically addressed in the agreement, this may lead to situations where your distributor takes possession of your intellectual property and actually blocks you from the territory. Limit Liability: in most jurisdictions, the liability for damages caused by the use of the products lies with the manufacturer. Some agreements attempt to shift this liability to the distributor, but when tested by the courts they will probably not hold. Therefore, the correct way to address the risk of liability is to formulate an effective indemnification mechanism that will limit the scope of your liability. Such mechanism should limit your liability both in terms of amount and time and be backed up by adequate insurance coverage. Originally published on the "ChannelSmart website”
Funding your startup company is an inexact science. The first round of funding helps get your company established, but often leads to a realization that you need more. After the first round, new issues and growing capital requirements emerge and you need to adjust course moving forward. To help you build your company successfully, you should know what the challenges are in each stage you are in, and to be prepared for them. Challenges Following the First Round The first round of investment allows you to bring on employees. Following the completion of the first round, your company has shares issued to the founders, to employees through an ESOP, and to the initial investors. The board of directors begins working together with the founders. This is the point where you begin to discover your ongoing needs and start facing mounting challenges. Money is running out, the available stock option pool is spent, some investors may lose interest and even certain funders may be looking to move on to other ventures or cash out on this one. To allow the company to face these challenges and continue and grow, another round of fundraising quickly becomes necessary. Plan and Execute the Second Round When starting down the road to the second financing round, you should have a better sense of what your company is, and should be. This is the opportunity to raise money based on what you have in place. You want to focus on raising the right amount rather than aiming for a specific valuation. When structuring the second round, you should focus on your current and future capitalization table. The allocation of the shares in your company may distinguish between active and departing founders, must ensure that current and future employees are sufficiently covered, should consider the cash waterfall upon an exit event so that the valuable team is incentivized, and secure the reasonable stake of current and incoming investors. As part of the second round you should also prepare for a change in the control of your company. It is inevitable that the founders would lose the control of the board that would gravitate towards the investors. This means you should be very careful in selecting the right investors for the second round, as they will have the ability to impact the future of the company, and even have a major role in determining its future direction. The second round is where you grow from starting a company to building it. “Originally published on the IATI website”
Forces That Drive Innovative Countries – The Israeli Example
March 27, 2017 / by Itay Gura
March 27, 2017 / by Itay Gura
Innovation occurs at different levels between one country and another. Innovation does not occur by accident. While some nations depend on individuals to drive the creative process, others provide an environment and infrastructure that foster and support technological development. When a country focuses its attention on providing the best opportunities to innovate, that country can rise above the pack. Global Innovative Powers The United States and Japan have thrived for many years as countries that foster innovative development. Each nation has maintained an interest in educating its citizens in science and technology, encouraging the best and brightest to create ways to improve the world. The United States is responsible for almost 30 percent of the world's patents, and hosts 15 of the top 25 research universities in the world. Japan, meanwhile, has the world's third largest economy and has long established itself as a key global player in the auto making and electronics markets. In Europe, several countries have risen as leaders in the race to innovate. Denmark, Germany, and the United Kingdom in particular support technological growth through educational opportunities and governmental spending. The World Economic Forum ranks Germany fourth globally in company spending on research and development, and sixth for the quality of its research institutions. Meanwhile, the United Kingdom has pledged to increase its national R&D investment by two billion pounds by the year 2020. Denmark possesses particular strength in emerging and renewable energy innovation. Israel: The Perfect Innovative Storm Israel, nicknamed the “Startup Nation”, is known as a center of technological innovation, and appears on the radar of many leading international companies looking to invest in and acquire innovative technologies. Israel can be seen as an example of a country focusing on fostering innovation. The international interest in the local innovation economy is reflected in the scope of international investments and acquisitions of Israeli based tech companies and by the presence of more than 200 development centers of multinational top-tier corporations. Cyber security, Automotive technology, Fintech and the Internet of Things (IOT) are the current favored flavors. The innovation ecosystem is spreading across the entire country, branching out from Tel Aviv, Haifa and Herzliya, to Jerusalem, the Galilee and the Negev. The Israeli government endeavors to support the technology innovation ecosystem, which is also supported by numerous accelerators, incubators and early stage funds, some of which are supported by leading international companies and major financial institutions. Last year saw the introduction of an important amendment to the Encouragement of Research and Development Law, easing the rules governing technology transfer and establishing a new National Authority for Technological Innovation (NATI), replacing the Office of the Chief Scientist (OCS). New relevant tax rules are being considered and are expected to come into effect in 2017. Matters under consideration include treatment of intellectual property held by multinational companies, cross-border transfer pricing, taxation of online based businesses, and treatment of “reverse vesting” mechanisms. Source: barlaw.co.il
How Blockchain will Revolutionize a Paper World
February 26, 2017 / by Barnea
February 26, 2017 / by Barnea
In many ways, electronic communications dominate the world as we know it. We "talk" through email, text, and social media, to the point that the written letter is almost an anachronism. Still, some areas still thrive on paper. Real estate, for example, depends on paper deeds and documentation to confirm authenticity. Similarly, many corporations depend on paper records to demonstrate regulatory compliance. But blockchain is helping to change all of that. The technology that made Bitcoin work is expanding, in Israel and beyond, to help secure online processes and chains of custody in ways that can help shift paper-dominated fields into the 21st century. Smart Contracts When contracts determine payments or other actions, they operate inefficiently. Before you move funds, you have to confirm conditions have been met, organize your information, and perform accordingly. Smart contracts use blockchain technology to change this. Once information is entered, you move through the conditions required and the contract auto-updates. You can even update a smart will without creating a new will for every change. You complete everything more efficiently, using a cryptography-secured function that prevents problems the paper processes cannot. Paper Bureaucracies Similarly, bureaucracies exist to create layers that protect information and ensure fairness and accuracy through process. Blockchain saves time and money by building this in electronically. Imagine a system that once required 12 forms, signed in triplicate to allow a decision to become implemented. Blockchain technology creates a mechanism by which this process plays out online, all through secured processes. You need not worry about tracking down every person in the chain when something has to be done quickly. Rather, you move forward quickly and efficiently without losing any of the fail-safes in place. Real Estate In Israel, you must move through the Land Registry Department, or Tabu, to purchase and register real estate. The property world remains a bastion of paper processes in an electronic world. But the legal functions that have long necessitated paper documentation can adapt to blockchain technology. It creates the security that paper has always done, but with a process that is efficient, transparent, and public. To sell or purchase property, this option can vastly improve on the time currently required. Blockchain technology is exploding in Israel, with new startups and applications emerging constantly. To learn the ways in which you can navigate the legal landscape in the face of all this change, contact Barnea & Co. Source: barlaw.co.il
For many years now, Israel's emergence and growth on the world's economic stage has captured the attention of national and private investors all over the globe. It is only in recent years, though, that this has come to include Japan. In the past few years, more and more Japanese corporations have opened R&D and sales centers in Israel, while business delegations are continually streaming into Israel. One of those companies which recently entered Israel is Fujitsu, the largest IT company in Japan and the fifth largest in the world. Technological Relationships Business relations between the countries received a substantial boost, after Prime Minister Netanyahu's visit to Japan in 2014. The visit led to an historic R&D agreement that included a Memorandum of Cooperation and a Memorandum of Understanding, both designed to foster relationships between the two countries and create cooperative endeavors in technology. In July 2015, this lead to three distinct joint industrial R&D projects and on February 2017 both countries signed a bilateral investment treaty. One of the attractive areas for Japanese companies is Cybersecurity; Japan has long recognized Israel's position in this area, and stands to benefit from Israel's knowledge base and growth. The agreement between Israel's Radiflow and Japan's NEC focuses on integrating cybersecurity with physical security. Another agreement, between VocalZoom Systems and Fuetrek, focuses on audio technology that hones in on a speaker's voice while eliminating background noise. These agreements just scratch the surface of the potential this relationship creates. Japan has long been a world leader in technology engineering, and Israel's prowess in these areas has led to a sustained boom period in startups and technology investment. Together, the countries should be ready to build new technological opportunities in finance, technology, agricultural technology, the Internet of Things, Automotive, Cybersecurity, and much more. Where Next? The interest factor is not a one way street. Israeli companies are also showing interest in investing in the Japanese market in various sectors. Both countries enjoy innovative entrepreneurs who are driven to constantly push the boundaries of technological development and advancement. This era of cooperation between Israel and Japan will most likely help to cement relations between the countries on various levels, such as mutual tourism and support in international forums. Source: barlaw.co.il
Investors in startup companies need to learn as much about those companies as possible to make an informed decision. You do not want to go in blind before you put money into a startup a company. Still, the company in which you seek to invest needs to protect its confidential and proprietary information; otherwise, it stands to lose the benefit of introducing an innovative solution to the market. In order to put both sides at ease at the initial stages of the engagement, investors and startups generally turn to non-disclosure agreements (NDA’s). These agreements are designed to protect confidential information, while providing investors the information they need in order to make a determination whether to invest in a given startup. Defining Parties As with any contract, an NDA must define who the parties are. An investor may have interests in related companies and the agreement will spell out whether any information can be shared within a larger network, specific entities, or just specific individuals employed by the investor or acting as the investor’s consultants. It is important to define the party receiving the confidential information in a way which provides the startup comfort that any confidential information revealed to the investor will not end up in the hands of a potential competitor, as well as limiting the investor’s exposure by spelling out clearly to whom the confidential information may or may not be disclosed. Defining Confidential Information The parties must also carefully define what confidential information is protected under the NDA. For startups, this can provide particular challenges; products and services may be developed over the course of the term of the NDA. The definition of confidential information must be broad enough to cover variations and emerging confidential information, while still maintaining a definition which is focused on the concrete engagement between the parties. Both parties benefit from clarity here; too broad a definition of confidential information can potentially expose the investor, while a narrow definition can leave the startup unprotected. Exclusions The NDA should also set certain exclusions to protected confidential information in order to limit the investor’s obligation to safeguard certain information which may already be in its possession or which may become insignificant to the startup in the future. Typical exclusions will include public information or any information which the investor already knows at the time of disclosure. In the high-tech industry this exclusion is of specific importance as sophisticated investors often have a detailed understanding of a startup's industry and will not want to be penalized for any pre-existing knowledge. On the other hand, startups need to make sure that the exclusions are not drafted too broadly as to negate their confidential information. Terms The rest of the agreement will include terms for both sides to follow: how information is to be protected, permissible use of the information, the parties’ duties after the agreement expires and what actions the disclosing party may take in the event it reasonably believes its confidential information has been jeopardized. The two sides have diverging interests, so negotiating terms fair to both sides helps create conditions that allow the sides to work together. Creating well drafted, effective NDA’s allows startups and investors to start working together towards a future investment. Contact Barnea’s experienced team to help you start your relationship on the right foot. Source: barlaw.co.il
8 Things that Happened in the Israeli Hi-Tech World in 2016
January 4, 2017 / by Ariella Dreyfuss
January 4, 2017 / by Ariella Dreyfuss
It has been an interesting 2016 in the Israeli Hi-Tech world, here is a rundown of 8 things that happened, in case you missed them. Angels’ Law: In early 2016 an amendment to the "Angels’ Law" clarified the scope of the tax benefits available to private investors in new early stage start-ups; clearing the ambiguity that surrounded the law and had rendered it ineffective. Cash investments by angels in young Israeli companies in their initial research and development (R&D) stage can be recognized as deductible expenses for tax purposes, in an amount of up to NIS 5 million over a period of three tax years. The amendment is a temporary order and will remain in force until the end of 2019. SAFE: The Y Combinator’s “Simple Agreement for Future Equity” (SAFE), popular in Silicon Valley has become more acceptable in Israel. The “positive evolution of the convertible note” is not a debt instrument, it does not accrue interest, is not secured and is not repayable. It is essentially a deferred equity investment. While some argue that the SAFE is too entrepreneur friendly, others note that the protections offered by a convertible note are of little significance, as if the start up fails there is often little recourse for the lenders, if any. Hi-Tech Brain Drain: Avi Hasson, the Chief Scientist of the Ministry of Economy and chairman of the Israel Innovation Authority, voiced his concern that the “seven good years are over and that we are approaching our glass ceiling”. He explained that unless the government takes immediate action to educate Israeli students in the sciences, there will be an acute shortfall of engineers and programmers in the next decade. Drop in foreign VC Investment: The IVC Research Center noticed a drop in foreign investor participation in Hi-Tech capital raising in 2016, particularly by foreign VC funds. According to an IVC and KPMG report in the third quarter of this year VC-backed deals attracted $662 million, reflecting a 41% decrease from the previous quarter and a 24 percent year-on-year decrease; the lowest number in the past three years. However, Koby Simana, CEO of the IVC Research Center noted that this is a reflection of a global downtrend and not unique to Israel. Interest from the Far East: Interest from the Far East in Israeli Hi-Tech continues to spike. Hundreds of investors and entrepreneurs from the Orient have visited Israel this year to scout talent and the set-up of various incubators, accelerators and funds, including Techcode and The Kuang-Chi GCI Fund & Incubator, which has already invested around $4.3 million in the Israeli video analytics company - Agent Video Intelligence (Agent Vi). While Sony acquired Altair Semiconductor for USD 212 million earlier this year, just this month Taiwan's HTC Corporation and Quanta Computer invested US$30 million in Israeli augmented reality company Lumus which follows a US$15 million investment from China's Shanda Group and Crystal-Optech in the same company in June. Disinterest in IPOs: IPO’s are facing a downtrend, with few Hi-Tech companies choosing to go public as an exit strategy. An exception to the rule is trendIT, an analytics company that floated on the London Stock Exchange in the first quarter of 2016 raising $5.9 million at a $17.6 million valuation and smart VoD company Vonetize that raised NIS 16 million on the Tel Aviv Stock Exchange; a far cry from the highlight of the Mobileye IPO on the NYSE in 2015, which raised $1.02 billion at a $5.3 billion valuation. Crowdfunding: Israel is seeking to soften the regulatory hurdles to crowdfunding and will allow small start-ups to crowd fund without the need to issue a prospectus (which can be an expensive and time consuming task). Although the applicable regulations have been slow coming (a year now) it is believed that the Securities Authority has some sympathy for the trend. The current expectation is that investments of up to NIS 10,000 per investor for each investment, and NIS 20,000 per investor in the aggregate per annum will be exempt from the need to issue a prospectus. In addition, the relevant company will be limited in the aggregate amount it can raise through crowdfunding per annum, and the expectation is that the cap will be several million NIS. In the interest of protecting the public, the regulations will require that at least one accredited investor participates in the crowdfunding and that such crowdfunding is executed through an internet portal regulated by the Securities Authority. New Licenses in FinTech: With the aim of combatting financial crimes and money laundering and regulating the growing field of FinTech, a new law – the Control of Financial Services (Regulated Financial Services) Law - was adopted in August. The new law requires that credit providers and providers of financial asset services hold a license (as of June 2017 and June 2018 respectively) and will be subject to supervision by a new financial regulator. The licenses are subject to certain thresholds, including minimum equity (starting from NIS 300,000) and corporate requirements (for example board composition). Now bring on 2017! Originally published on the “TOI website”
Three Technological Predictions for the Next 5 Years
December 8, 2016 / by Yuval Lazi
December 8, 2016 / by Yuval Lazi
The world around us is changing. In labs and living rooms around the world, people are creating new technologies and finding new applications for existing and emerging technologies. The products and services available to everyone thus expand exponentially every year. In the next five years, then, you can expect massive growth in what we can do. Three areas in particular will provide important developments. 1. Augmented Reality Will ExplodeTechnology mavens have talked for years about virtual reality and the applications available. Augmented reality is related, but allows us to lay the virtual world over the real world. Games like Pokemon Go provide examples of how this works; you use technology to "see" virtual creatures and items in real spaces. Beyond fun and games, this technology provides a wealth of planning potential. You can drive your car, and arrows will appear on your road, guiding you to the right path. You can create visual representations of organizing tasks, building endeavors, and almost anything else that you want to see before you start working. Manuals will virtually overlay real items to be joined together – everyone will actually be able to construct an Ikea bed. The technology is here; ways to use it are just beginning to emerge. 2. Mobile Apps Will DeclineAt the same time, the ubiquitous world of mobile apps will begin to slip back. The ways in which we connect to the world often require us to work through a smartphone or tablet. The mobile app ties us to devices; you have no doubt seen rooms full of people who never make eye contact, only staring at small screens. The cost of developing sophisticated apps and the marketing efforts needed to place your App on the most expensive “real estate” in the world, does not always give a return on investment. 3. The Internet of Things Will Grow ExponentiallyAvailability and affordability of connected devices grow each year. We connect massive data networks to our homes, vehicles, and personal health monitors already. The ability to connect more devices, appliances, and objects to these networks means companies will know more about those they serve than ever before. Almost any device with electronic components can be configured for the IoT, and in the next five years, more will. All of these developments will require you to examine closely not only what is possible, but how privacy laws, intellectual property issues and the corporate ecosystems interact with those possibilities. Barnea has a wealth of experience in helping companies avoid problems and get the most from their developing technologies. Contact us today to get on the right path for you. Source: barlaw.co.il
Crowdfunding: Funding Companies in the Startup Nation
November 30, 2016 / by Daniel Lorber
November 30, 2016 / by Daniel Lorber
For many small businesses around the world, crowdfunding - the pooling of usually small investments from a large group of investors - facilitates the ability to start a business without large institutional investments in the company. The portfolio of crowdfunding investors is diverse and is comprised of a broad array of ROIs (returns on investment). Investors may be donating to a specific cause, seeking repayment with interest or claiming equity in the company. In the past year, Israel has loosened some of its regulatory impediments which existed under the Israeli Securities Law and regulations in order to enable and promote crowdfunding as a viable investment alternative for startups and small businesses. Under the new regulatory regime, investors can now come together to help fund companies in the startup nation, without the offer by the company to potential investors being deemed an Initial Public Offering. The Israeli Legal UpdateCrowdfunding has long been difficult to do in Israel. Section 15 of the Israeli Securities Law required until recently that the Securities Authority approve a prospectus for any offer of shares to more than 35 investors. This process made investment onerous for startups unable to access funds from venture capital funds and large financial institutions. In late 2015, Israel enacted its new Law for the Encouragement of Investment in High Tech Companies. This new law is actually an amendment to the Securities Law. It provides an exception for small investments, thus clearing the way for crowdfunding to occur without the prospectus requirement. It allows for tradeable venture capital funds to be created, which should further encourage group investments in new and emerging companies. The law also encourages startups to remain in Israel by making local funds more available; companies that may otherwise have sold or moved to more funding-friendly locations now have fewer incentives to leave. Crowdfunding Boosts in IsraelAs with any financing structure, investors and companies who wish to invest or raise funds through crowdfunding need to take the time to understand the legal and commercial implications of this financing tool before diving in. Crowdfunding in Israel still requires at least one accredited investor to participate in a fund. The idea of a completely deregulated funding scheme has not yet taken hold. Furthermore, investors need to remember that, in a crowdfunding scenario, they may have limited rights compared to other investment routes. Since the latest regulatory changes, a significant increase in crowdfunding investments has already taken place. In 2014, the aggregate investments through crowdfunding worldwide amounted to USD 10 billion. This number grew by 350% in 2015 and reached a staggering USD 35 billion. We have seen a dramatic increase in Israel as well during this period and expect to see these numbers increase in Israel and worldwide as the regulatory barriers which currently exists are gradually lifted.If you are interested in raising funds or investing through crowdfunding, you need to navigate a new legal structure that is still being defined. Contact Barnea for help in getting started. Source: barlaw.co.il
Cybersecurity: Protecting Your Investments
October 18, 2016 / by Barnea
October 18, 2016 / by Barnea
Your company faces potential threats every day from hackers and online criminals. Whether they are interested in stealing money, absconding with information, or just harassing and creating embarrassment for your organization, you need to be prepared to stop them. While you can gain a measure of protection by investing in antivirus and anti-malware software, your cybersecurity strategy needs to be built into your technological infrastructure. Investing now in a sound, broad-based approach to cybersecurity concerns can save you headaches, customers, and money. Your Legal Risks According to the 2015 Global Risks Report from the World Economic Forum, the risk of cyberattacks, both in frequency and in severity, is only growing. As the devices and networks involved in what you do every day become more complex, more data is at risk, and there are more points of attack where cyberattacks can create problems for you. The problems themselves can be severe. Under Europe's new General Data Protection Regulation, companies have duties not only to protect their customers' information but to respond and report quickly in the event of a breach. Failures in either area can result in large fines and other sanctions against the company. Further, failure to protect private or confidential information can lead to lawsuits against your organization for negligence, breach of privacy, or breach of contract when contractual obligations include the protection of confidentiality for customers or trade partners. Creating the Right Cybersecurity Strategy With the risks involved, creating a comprehensive strategy to combat cyberattacks is critical for your organization. This should begin with mapping and analyzing your entire system, identifying how and why data is stored. Beyond this, your strategy should include testing to identify potential vulnerabilities. Scan your system constantly for evidence of existing infiltration. Work with programming experts who can attempt to breach your defenses, and can then create patches to eliminate those weaknesses before a cyberattack can occur. On top of that, you must have in place the means and personnel to handle a cyber-attack crisis, if your system is breached. This should include, of course, what is required in order to repair the breach and end the data leakage, but also public relations experts and lawyers, in order to handle the crisis and what will most likely immediately follow – reputational issues, possible loss of business as well as lawsuits. And all of this must be handled in a quick and efficient manner; any delay has the potential to create catastrophic damage to your business. Preparing your company to prevent cyberattacks and what happens after them represents one of the most important security investments you can make. Contact Barnea today to learn more about how we can help you protect your company. Source: barlaw.co.il
Israel's ‘startup boom’ has grown unfettered for decades. Its emergence as a nation of opportunity for business creation and innovation came not by accident, but through careful planning, tendency to think ‘outside the box’ and constant strive towards execution. All of which have been accomplished due to ability of Israel to support and grow qualified and innovative individuals. After years of steady growth, though, the country now faces some challenges to its positioning in the technology sector. Shortages in their high-tech labor pool and a need for companies to grow more within the country are forcing adjustments. How Israel navigates these concerns will have a significant impact on the year ahead for high-tech companies. Challenges in Human CapitalOne significant challenge area lies in the need for more qualified personnel. Israel trains thousands of individuals through compulsory Israel Defense Forces service, but tech sector growth has created a need for much more. Scientific and mathematical degrees earned have leveled off; the proportion of scientific and technical degrees among overall college degrees has dropped below 10 percent in recent years. As a result, the supply is not keeping up with the continued demand for more workers in this area. Current trends suggest a shortage of 10,000 engineers and programmers in the coming decade. After 13 years of continued growth in Israel's economy, investment and national leadership will need to focus on reversing these trends to develop a labor pool that keeps up with the appetite for national startup innovation. Need for Companies to MatureAnother issue for those looking to invest in Israel to consider is the increasing exit costs for businesses. New regulation and tax burdens now create incentives for companies to develop further before exiting the economy. Where short-term investments and profitable exit strategies once carried the day, your investment focus now should move toward a longer plan, increasing profitability over years rather than months. The government is developing plans to create new growth paths; as with any maturing nation, these will work to marry growth to stability. In the coming year, those who invest for the long term will find greater high-tech opportunities. As the regulatory and taxation systems change in Israel, you need experienced legal and consulting assistance to guide your strategy. Barnea can help lead you through the new paths to growth in Israel. Contact us today to learn how we can assist you and your business. Source: barlaw.co.il
Israel’s Leadership in the Internet of Things
August 9, 2016 / by Barnea
August 9, 2016 / by Barnea
The Internet of Things (IoT) has emerged as a popular technology buzzword in the last decade. As with many such phrases, it has garnered widespread usage with little understanding of what it actually signifies. Far from meaningless terminology, though, IoT already pervades the consumer marketplace, and growth opportunities abound. Israel's sophisticated tech sector provides fertile ground for continued expansion in IoT investment and development. What is the Internet of Things? In simple terms, IoT consists of objects with the ability to collect, process, and share data across the Internet. Items like the Fitbit and home security monitoring systems are examples. Currently, software and apps hold almost 80 percent of this market. This leaves room for hardware and platforms to explode in the coming years, particularly in areas like healthcare, consumer electronics, and security. Israel's Emergence in IoT Technology Further technology development in many sectors focuses on ways to further connect you to the world in which you live. Emerging trends in this area must balance people's interest in privacy with their desire to participate in the growing connectedness of the world. Health information, for instance, now moves online among providers and patients to monitor biometrics, prescription schedules, and a myriad of other markers to track healthcare. The technology opens doors, but also must prevent those doors from opening to anyone but those for whom the information is intended. This delicate balance makes Israel a logical world leader in the IoT arena. The country has long been a leader in both general technology and online security innovation. Its national demands for security, and its intense investment in technology development training, as well as the inherent inclination of Israeli entrepreneurs to seek the next big thing, have been a boon for local startups and foreign investors seeking paths for sensible growth. To take advantage of the sophistication Israel offers in IoT development, you need experience and knowledge in the legal, regulatory, and geopolitical landscape for doing business in the country. Contact Barnea to learn how we can guide your Israel IoT development strategy.
Financial technology (“FinTech”) is a broad term that encompasses many kinds of technology across many industries. It includes hardware and software, apps and analytics, and solutions for companies of all sizes. Because FinTech plays a role in virtually every kind of company, it is worth taking the time to understand its position in the world economy. 1. Everyone Uses ItThe financial sector is the most obvious place one would look to understand FinTech's rise in prominence. Indeed, large banks and lenders in many ways lead the growth in demand for FinTech solutions, and have developed many of them. But if you look at the opposite side of the coin, every kind of company relies on financial applications. Companies in all industries look for better, more efficient ways to collect revenue and make payments. Much of this is now paperless, meaning that cloud technology, smartphone and tablet apps, and on-site hardware solutions matter to anyone whose business involves money. 2. The Regulatory ChallengeFinTech operates in heavily regulated areas, perhaps more than any other area of developing technology. As a result, when you bring products and solutions to the market, dealing with the regulatory challenges already in place across myriad disciplines is a must, rather than an option. You need to consider and resolve the legal challenges as you define the product, rather than waiting for a later stage of development — or worse, until you are taking the product to market.Further complicating this issue, as with any area of emerging technology, national and international regulatory agencies are struggling to keep up with financial services regulation. Although it seems that technological offerings level the playing field between large financial institutions and lean startups, most of the regulatory regimes tend to focus only on one-size category. Accordingly, the laws and rules that govern FinTech companies and innovators are necessarily in flux while companies emerge and grow. You need to plan to address issues that create moving targets in your development. 3. Israel's Increasing PositionAs is the case with many kinds of startups, Israel is developing quickly in FinTech. The country's focus on innovation and entrepreneurship has led naturally to growth in this vital sector. Further, because the world relies more every day on FinTech products and solutions, global demand for this kind of innovation shows no sign of abating anytime soon.Beyond the technological innovations required, because money is involved with the development and use of FinTech, any new product needs to offer solutions to cyber security threats that abound in the financial sector. Israel has long maintained a national interest in battling on the cyber security front. Its emergence as a leading producer of startups has included a surge into a leading position on security issues as well.Because it is so well positioned in these areas, Israel's highly trained technology workforce has grown into the FinTech industry. In the first quarter of 2016 alone, Israeli startups raised over $1 billion, with FinTech capturing a large portion of that windfall. Those numbers should only grow as companies and individuals develop more specialized understanding of the industry. With all the technological expertise available, Israel offers a natural place to develop FinTech companies and resources. To take advantage, you will need expertise in both the local and international legal aspects of building in FinTech. Barnea can help you navigate the industry so you can grow quickly. Source: barlaw.co.il
Israel: A Clean Tech Nation
June 16, 2016 / by Gal Oren
June 16, 2016 / by Gal Oren
Our world today looks very different from what we knew even twenty years ago. Climate change has emerged as a concern across the globe. With this, though, new opportunities have risen for investors and entrepreneurs in the area of clean and renewable energy. Israel has embraced this more than any other country by fostering growth and embracing policies to encourage and develop new small business in this area. More and more, Israel has stepped forward as the world's leading clean tech nation. Encouraging Innovation and Clean Energy Israel has earned a reputation for encouraging start-ups and commercial innovation. Its technology sector in particular benefits from training its brightest citizens during compulsory Israel Defense Forces service. Those citizens carry their training into the private sector and lead the country's push to develop new business ideas. A significant part of this push now moves into clean energy companies. Israel's Ministry of Energy and Water Resources is working as part of national policy to push development of clean and renewable energy sources. The purpose is twofold. From an environmental perspective, this push will help Israel reduce air pollution and decrease the health burden that pollution places on its citizens. And from an economic perspective, boosting local businesses as they strive to create and implement new clean energy technologies reduces national dependence on imports and increases investment from outside entities that can further bolster Israel's financial future. Clean Tech Success Stories The policies in place are already paying off for Israel. According to the 2014 Global Cleantech Innovation Index, Israel holds the best opportunities in the world to start and develop clean tech companies. Among the report's findings: Israel ranked first overall among the 40 countries studiedIsrael scored well above all other countries in emerging clean tech innovationIsrael reuses about 97% of its wastewater, far above standards in other countriesOther countries are taking notice. Investment in Israel is booming, through individual investors and international agencies alike. Despite having fewer natural resources available than many other nations possess, Israel is already generating over 2% of its total electricity from renewable sources, largely due to its technological innovation and development. If you are looking to invest in clean energy opportunities, you need representatives who understand Israel's legal and regulatory systems and the international marketplace. Barnea can help you tap into the clean energy innovation available here. Source: barlaw.co.il
Engaging in any business startup can be risky, and even more so when you are attempting to initiate a startup in the technology sector. Available risks cross both B2C and B2B vectors, and while the risk percentage can fluctuate between said vectors, it clearly illustrates the wide array of risks present for your technology startup. When these risks are combined with potential missteps by the founders of the technology startup, a perfect storm can be created that only terminates with the complete failure of the endeavor. Mistakes Do HappenMistakes in any endeavor are bound to happen, but there are several key mistakes that are most certainly responsible for a significant portion of startup failures. Many of these founder mistakes apply across all startups in any location. The top 10 mistakes startup founders inadvertently make are: Failure To Partner With the Right Co-founders: Failure to connect with trustworthy individuals who have the relevant skill set. Failure To Understand Current Trends: Inability to translate future market demands into marketable or operational results. Failure To Have Clear Objectives: Not having set goals and knowing how and when they are reached. Failure To Account For External, Non-Related Pressures: For example, working with partners who have other business activities and inability to fully contribute. Failure To Identify The Customer: Not understanding the targeted consumer and their needs. Failure To Implement The Appropriate Marketing Strategy: Not setting marketing goals and benchmarks to determine effectiveness. Failure To Establish a Clear Founders Agreement: Not laying out the roles and responsibilities between founders at the outset. Outsourcing Core Element: If your team relays on outsourcing for core elements of the product, your chances of raising funding decreases. Attempting To Shorten Incubation Limitations: Trying to grow the business too quickly. Unwillingness to Finance Boot Strapping Independently: Not willing to show ‘skin in the game’ may raise difficulty in initial fund raising. Indeed, there are other mistakes that startup founders can make that will contribute to the decline of startups, and while the above might seem obvious, these are among the most common.It is incumbent on you to endeavor to avoid these mistakes. One of the best ways to make sure you are avoiding the pitfalls is to work with and engage with qualified professionals who understand what is at stake and how to provide solutions to the problems outlined above.