Serverless Computing, a Paradigm Shift for Software Development

By Avi Arnon, Investments Team

The ever growing expectation of customers for great software products has subsequently brought companies to increase their rate of code deployment and adopt a new “microservices” approach to software development. This approach involves splitting a software application into pieces that can be independently updated in quick release cycles, meeting the consumer’s desire for increasingly sophisticated digital experiences delivered at speed.

However, in the past year, we’ve seen things moving on a step, taking microservices to the next level with the advent of “serverless computing” which marks a paradigm shift in the world of software development.

One of the first to introduce and subsequently revolutionize cloud computing was Amazon with their AWS lambda Serverless platform introduced in November 2014. AWS Lambda is an event-driven cloud computing model whereby the cloud provider manages the allocation of machine resources. In this model, the company does not have to rent and manage servers but only deploy their code to the serverless platform, leaving Amazon, the cloud vendor, to do the rest.

Comparing this serverless revolution to the delivery industry as an analogy, companies are moving away from owning large trucks (representing the “monolith application” run on on-premise servers), to having a fleet of leased vans that they manage instead (representing “microservices” on cloud servers). Realising that things could be more nimble, they adopt an outsourced transportation service (or “serverless platform”) that consists of a fleet of speedy scooters managed by a third party.

Source: iAngels Investments Team

The benefits of this new software development approach, (illustrated above) is that it massively simplifies deployment and reduces the need for System Administration, or a Transportation Manager, to continue the analogy. As a result, by removing the burden of server management in favor of relying on the cloud vendor to manage the infrastructure, developers are able to deliver more quickly, decreasing time to market and accelerating innovation.

An advantageous pricing model for startups
An additional key benefit of adopting a serverless platform is its pricing model, which is not based on the number of servers used (or vehicles on the road) but rather the cost is based on the amount of resources consumed by the application. If there were no users (or no deliveries booked in), the company wouldn’t be charged. This new concept is especially important for startups as it aligns the recurring revenue with the recurring cost, helping small companies to optimize their cost structure at an early stage, even before reaching scale.

Opening up opportunities for increasingly disruptive business models
From a business perspective, serverless technology doubles down on the Software as a Service (SaaS) business model, as it allows companies to have a more granular level of unit economics based on a user’s interaction with applications. This lays the foundation for new disruptive services that take into account cost, speed, quality of service and additional metrics that are yet to be unlocked.

Early signs of large scale adoption
As serverless architecture is an event-based computing system, it has become an attractive option for companies using it for automated backups, customized log analysis and the operation of serverless mobile/web websites – tasks that take advantage of serverless’ attractive scaling and pricing models. Some of the big unicorns including; AirBnB, Netflix, Expedia, plus others have already migrated their infrastructure to a serverless setup and we are seeing many more moving down the same path.

Looking forward, we see serverless technology being the driving force behind many emerging tech trends, including API-driven platforms, facilitating voice-operated systems, internet of things (IoT) applications and even blockchain technology applications where serverless could power off-chain transactions for the execution of smart contracts.

Like all new technologies, serverless architecture is not without its challenges. Currently, the ecosystem that supports this distributed architecture is missing key tools and capabilities that could reduce the barrier to entry, especially for larger organisations. But what we consider to be the most exciting thing on the horizon, is for this growing ecosystem to help facilitate new business models that weren’t previously feasible.

Similar to the way cloud computing changed the face of business by allowing a company of any size to use and sell the best applications available, serverless technology will allow smaller teams, with less funding, to do things that only big companies were once able to achieve.
Just as the cloud revolution enabled WhatsApp to reach billions of users and be acquired by Facebook for $19B with just 55 employees, if we’re to see a single digit employee startup, with a billion users and a multi-billion dollar valuation, it will probably be built on serverless.

10 Considerations for Successful Scaling Up

by Efrat Dagan 

Congratulations, you have just landed round A and you can finally hire some great people to take your team to the next level, you have so much on your mind now. Your team is small and you are in a race to get your product to market. As you scale, you will probably run across a few challenges. Perhaps I can help you a little, by sharing with you some of the following tips:

1. Your core team has huge impact on your success. The decisions you make have long term impact on your ability to execute and thrive. The decisions you make now will have a lasting effect on the culture and product you create. Take the time to make those decisions thoughtfully and systemically. Don’t rush and definitely do not make them on your own.

2. You’ll need to make room for growing, hiring takes time, focus and energy. It’s hard because you have so much going on and that is partly why you need to grow. It will slow you down at first but if you do it well, it will be your superpower. If you do not dedicate the time needed for hiring you’ll end up behind, which leads us to the next item.

3. Hiring is your job. One of your more important roles. You may need the help of a professional recruiter to drive traction, but at the end of the day, you cannot be hands off. Your engagement is crucial and will never really cease.

4. Great culture is your number one hiring strategy. Cultivate a great culture and make sure you reinforce it with your hiring decisions. It will pay you back time after time. Make sure to diversify your team from the get go. Diversity carries many positive traits, and it’s easiest to achieve if you’re mindful from the beginning.

5. Hire the best recruiter and treat them like gold. Because if a product is only as good as its team, a team is only as as good as its recruiter.

6. Hiring is cyclical, don’t fall into the trap of thinking it ever stops. Always be on the look out for great talent, the best candidates may become available when you are not actively looking. It’s also your edge in a very competitive market.

7. Hiring mistakes are very expensive, and recruiting is not easy as it looks.  We can all read a resume and ask questions. But few of us do it professionally. Think about people who can add value and grow with your company.

8. Make sure interviewing with you is a great experience whether you decide to hire or not. Make sure your team treats candidates with respect and curiosity. Just like you would have liked to be treated.    

9. It’s not all about you! Make sure to involve others in your hiring decisions. Decisions that are made by a team tend to be better and less biased. 

10. Give candidates a (few) good reasons to come and help them choose you!

Having the right people is your strategic advantage, don’t sell yourself short.

   

Efrat Dagan is A Global Staffing Lead At Google, She has hired hundreds of happy Googlers until this day and is a contributing writer at iAngels. 

How Banks Can Survive in an Increasingly Competitive Financial Landscape

By Daniel Bahar

For quite a few years now, financial institutions considered fintech companies as the industry’s biggest potential disruptor, as confirmed by KMPG’s recent survey. As such, many financial institutions have been formulating their fintech strategies, opening innovation hubs and investing in fintech startups to some extent. However, collaboration levels have been limited to specific service acquisitions and initiatives and there is so far limited evidence of a significant enough change taking place in the traditional banking sector.

Being slow to embrace new technologies, highly sophisticated fintech startups have managed to flood the market, offering customers superior user experience as standard and enabling the strongest fintechs to gain significant share of the banking world’s core business. Over the past year we’ve seen a dramatic increase in the complexity of the competitive landscape both from early and later stage fintech startups. To add to this, competition has come from the new economies being created thanks to blockchain technology on the one hand, and the big tech giants strengthening their fintech capabilities on the other.

In this rapidly changing market, financial institutions are feeling the pressure and are tooling themselves up by adopting new technologies, breaking down the barriers between siloed internal systems and creating fintech strategies for adopting a more collaborative working framework with the wider industry. If they are to maintain their relevance moving forward, the banks know change needs to happen now.

In the past few years we have seen over 30 fintech unicorns and many equally significant companies start to rival the banks at their core activities including lending, investments, payments, personal finance and digital banking. 

Top 5 fintech companies by area of focus:

Unburdened by outdated legacy systems and heavy operational costs, the fintechs of tomorrow benefit from having strong artificial intelligence and machine learning capabilities and are able to offer highly personalized, timely, optimally designed financial products that are often perfectly tailored to a consumer’s behaviour.

Supported by regulators trying to level the playing field and open the market up for more competition, rulings such as the PSD2 regulation in Europe allows 3rd parties (mainly fintechs) to access consumer financial data, stripping the banks from one of their most valuable assets.

The blur between pure e-commerce and fintech as the worlds of offline and online shopping start to merge is creating a totally new dynamic and threat for traditional banks. An example of this was eBay’s acquisition of PayPal back in 2015. PayPal, a fintech company now valued at $90B, alongside other payment solution providers included in the image above, retailers’ growing credit card business, consumer loans and lending solutions are becoming more deeply rooted in the overall shopping experience.

In Asia, we’re seeing e-commerce platforms expand their remit by providing full stack financial service offerings. The most significant of which is Alibaba’s Ant Financials. Founded in 2014, it’s now the world’s largest online banking platform and is planning to IPO with an estimated valuation of $100B. Pure evidence of the potential power that can be created thanks to an alliance between a fintech and an online retailer.

2017 has also been a transformative year for blockchain technology and the crypto economy. A substantial financial services ecosystem has emerged in creating a $400B plus blockchain based economy in less than a year. Given the size of this new economy and its rate of growth, the threat posed to traditional banking is very real. Consumers and businesses are steadily being offered a totally alternative economic system, that has the potential to replace infrastructures, governance mechanisms and the value distribution between parties. The potential for blockchain to truly disrupt the traditional banking system as the technology continues to mature, is not far off.

Whereas blockchain promotes a decentralised economy, on the other end of the spectrum, highly centralised economies are starting to form within the tech giants (GAFAM – Google, Amazon, Facebook, Apple & Microsoft), as they start to build up their fintech capabilities. Their increasing global dominance, reach and technical superiority gives them the potential to overshadow the traditional bank’s relationship with consumers. Built on data collected from each interaction powered by the most advanced AI and machine learning technology, they are defining the standards for customer experience and control the most pervasive consumer social channels and experiences (Siri, Alexa, Google’s personal assistant etc).

To add to this, the increasing adoption of cloud based solutions by traditional banks is leading to a growing reliance on tech giants for their cloud based services. Consequently, this has the potential to erode another valuable asset of traditional banks – their legacy systems.

So far, the GAFAM giants have only displayed subtle attempts at competing directly with traditional banking. Amazon’s growing lending business, and the other giants’ initial attempts to enter the payments and transfers environment have been small in general. But nonetheless, these moves could certainly be seen as early signs of their desire to expand by leveraging the significant power stored in their balance sheets.

The Asian fintech ecosystem serves as an example of the potential dominance major platforms can have on the financial industry. Tencent managed to reach a $500B market cap, now offering full stack financial offering thanks to its WeChat payment solution. Together with Ant Financial, Tencent has managed to capture over 50% of the fintech market in Asia.

Competitive landscape of the financial industry:

It is clear that with so many competitive pressures placed on the traditional banking sector coming from multiple directions, banks should be rethinking their objective of trying to control the entire value chain. Instead, they have a huge opportunity to focus on leveraging what they have and working in a more collaborate way with the wider ecosystem.

The number one opportunity and also challenge, is for banks to leverage their consumer data and become powerful data driven organizations. Their ability to harness AI and and machine learning capabilities is critical to their survival. The challenge comes in organising existing data systems that often sit across multiple, siloed platforms where data is inhomogeneous and the appetite for change is often not aligned internally.

Nevertheless, instead of passing on financial data to industry newcomers, they should instead  use their extensive financial product portfolio and position of trust, to offer their consumers enhanced financial products via GAFAM channels by working in collaboration with tech giants. For example, imagine a time when consumers could openly interact with their e.g eToro account, or apply for a loan from Kabbage via their own bank thanks to a voice activated personal assistant of choice.

In addition, banks should be embracing blockchain technology both for internal system means, as well as for building stronger bridges in order to further strengthen their position of trust.

Despite many weaknesses, the current banking system still remains the backbone of the financial industry. Although outdated, their legacy systems are proven to be the most reliable at scale. They also benefit from having a significant equity cushion and are the ones to carry the inherent risk in every financial transaction. To add to this, their systems and equity position are highly supervised by regulators and government insurance schemes, which over time have given the banks their most valuable asset, trust. Trust, however, can erode quickly if the banking system is to continue to lag behind in terms of customer experience and poor financial product offering.

We have a significant way to go before we see a real transformation of the banking industry but it really is now or never if the banks are to preserve their position of strength. To accelerate this transformation, we’ve seen many interesting investment opportunities in Israeli startups focused on helping the traditional banking system to advance. They include startups focused on advanced data analytics capabilities, more personalised customer journey and interface platforms, process automation, data governance and security solutions. All of which are powerfully trying to close the innovation gap and help build a more collaborative financial ecosystem.

iAngels Newsflash Webinar – Cyber Extortion is the New Threat Economy

This week the world incurred the worst ransomware attacks on record. To respond to the global panic, we held a webinar with iAngels Founder, Shelly Hod Moyal in conversation with David Maman, CEO of cybersecurity company, Binah (previously Unicorn), who will be shedding light on what stands behind these latest attack. 

David Maman brings 23 years of experience in low-level development and networking. David has co-founded numerous successful cybersecurity companies over the course of his career, including Vanadium-soft, Hexatier/GreenSQL, GreenCloud, Teridion, Re-Sec, Securigo, and xPlenty. He also served as director in the office of the CTO at Fortinet (FTNT) and in an elite unit of the IDF.

In this webinar, Shelly and David discuss everything from cyber extortion to Distributed Denial of Service (DDoS) attacks, the darknet, and everything you need to know about WannaCry. Enjoy!

Ushering in the Era of Autonomous Vehicles: A Primer on Sensor Technology

In 1886, Karl Benz revealed the first automobile in history. In 1908, Henry Ford sold the first Model T. In 2017, the $9 trillion global automotive industry sells nearly 100 million vehicles a year. Despite the incredible mechanical and manufacturing breakthroughs we’ve witnessed in the past century, one thing has remained constant: the driver. But this is about to change.

In light of the countless casualties caused by distracted and careless drivers, technology companies like Tesla, Google, Uber, and Apple have developed and pioneered new technologies causing the entire automotive industry to reconsider what is possible. Self-driving, or autonomous vehicles, purport to not only solve the glaring issue of human error and car accidents but also to reimagine the driving experience as relaxing and social, rather than vigilant and dangerous.

The obvious question is how will we get there? How will the industry evolve from current, manually driven vehicles to a fully autonomous system? Below, the National Highway and Transportation Safety Authority (NHTSA) outlines five different levels autonomic achievement necessary to turn this promise into a reality.

levelss

Source: 2024ad.com

In the last year, we’ve witnessed a broad transition from level 2 to level 3 autonomy with Tesla launching autopilot capabilities, GM acquiring Cruise Automation for $1b, Waymo spinning out company of Google’s self-driving car project, and Uber’s purchase of Otto for $680m.

The promise of a fully autonomous vehicle, however, requires the vehicle to perform better than a human driver. Human drivers undergo a three-part process that allows them to navigate the roads.

1) Perception of the environment

2) Decision making based on the perceived surrounding

3) Timely execution of each decision

To illustrate, imagine a driver sees an obstacle on the road, decides to avoid obstacle by swerving right, and physically turns the steering wheel right and re-centers it after avoiding the obstacle. A fully-autonomous vehicle must go through this process as well. Perception is done largely by sensors such as cameras, radar, and lidar, decision making is done by algorithms and processing, and the manipulation of the vehicle based on the decisions is conducted by actuators. The following paragraphs will outline the perception function, and the technologies being developed in the space.

Perception systems can further be broken down into two categories:

  • Proprioceptive Sensors – responsible for sensing the vehicle’s internal state like wheel encoders, inertial measurement unit, driver attentiveness
  • Exteroceptive Sensors – responsible for sensing the vehicle’s surrounding

The exteroceptive sensors are of particular importance for autonomous capabilities, as they are tasked with dealing with the external environment. It is their job to spot all important things on or near the road like other vehicles, pedestrians, debris and, in some cases, road features like signs and lane markings. In addition to detecting these obstacles, these systems need to identify the obstacles, measure their speed and direction, and predict where they are going. Below is an image outlining the key components of the exteroceptive sensor family:

Sensors

 

The below table outlines the three most significant sensors: cameras, radar and lidar and discusses pros and cons, as well as its main function.

updated.tech.comparison

While there has yet to be industry consensus on which sensor will capture the lion’s share of the perception function in autonomous vehicles, many industry experts today are of the opinion that all of the above sensors will play a role in the autonomous vehicle. We see an investment opportunity in both the development of new, more capable sensors, as well as software created that improves the perception of each sensor.

In January 2017, we were excited to announce our first investment in the autonomous enablement category – Arbe Robotics. The Company, led by a serial entrepreneur and a team of radar and signal processing experts, develops proprietary radars designed for the autonomous vehicle that have 4D mapping and sensor fusion capabilities.

How will Israeli innovation play into the global robotics industry?

This article was originally published on Techcrunch 

In the last few months, a Singaporean University hired Nadine as a secretary, a Boston Dynamics employee pushed over his colleague Atlas who was moving boxes at a factory and Tally, a San Francisco Target employee, began checking to make sure all the products in Aisle 3 are fully stocked.

Nadine, Atlas and Tally may live in different cities and industries, but they have several peculiarities in common. None of them need sleep, food or exercise to operate efficiently.

Imagine employing your own secretary who optimizes your schedule, plans your weekends, reminds you about deadlines and iteratively adapts to your preferences and behaviors at a fraction of the cost of a human. Imagine a factory with no humans, no downtime and no errors. Imagine a retail store without checkout lines or items out of stock.

Humanoid robots have entertained us on the big screen for years as “science fiction,” with films like “I, Robot,” “WALL-E” and Steven Spielberg’s “AI” capturing our collective imagination and spirit. In the last five years, however, the number of VC dollars (see chart below) invested into robotics technologies implies that tens of thousands of engineers, data scientists and management teams are now building robots and robotic technologies that will drastically alter our lives over the next few years.

Many of these advances will come from Israel. In healthcare, we see Mazor Robotics helping brain and spine surgeons, XACT Robotics empowering radiologists to improve accuracy and results and ReWalk enabling the disabled to walk again.

In industrial applications, we see Weldobot and SmartTCP enhancing welding capabilities,Dronomy developing autonomous drones and Caja using robotic technology to develop a sophisticated, self-aware warehouse for an industry expected to grow to $79 billion by 2022. NUA is the world’s first robotic luggage that can follow its owner around and avoid obstacles, and is part of a consumer robotics market that is estimated to ship 100 million units by 2020.

We also see applications for the government and military, such as Roboteam, which enables ground troops to minimize contact with targets by sending in robots that scout, report and eliminate threats. These examples only scratch the surface.

image

Just a few months ago, the Israeli Robotics Association signed a $20 million agreement with a coalition of Chinese investors and the city of Guangzhou, one of China’s biggest industrial centers, to develop robots to serve as workers in China. Israeli researchers will develop the technology, and the Chinese will mass-produce mechanical waiters, cleaners, security guards and construction workers. Likewise, robotics startups will need large capital investments to successfully bring their products and solutions to market.

Israel’s contribution to the global robotics industry need not be limited to the robots themselves. Mobileye, the world leader in advanced driver assistance systems has already started software development to power autonomous vehicles, while Argus provides them with state-of-the-art security. Deepsense, Augury, n-Join and Imubit all provide BI and predictive analytics for industrial robots and IoT, while companies like InTalTech provide their docking stations.

Unfortunately, other than Singulariteam’s $100 million fund, few Israeli VCs can afford the risks and timelines associated with financing the R&D of hardware companies. The deep pockets typically come from corporations whose operations and products benefit the most from robotic innovation, e.g. Toyota, Google, Amazon, Alibaba, Siemens and GE. Many of these corporate investors have R&D centers and/or accelerators in Israel, but often will require their investments to relocate and be geographically closer to their production partners.

VC dollars are coming from blue chip funds like Accel, DFJ, Bessemer, Andreessen Horowitz and Dmitry Grishin’s robotics-only funds. Although Israeli companies may share Intel’s vision of a domestic, “Blue-and-White” hardware production line, Israeli companies will need to partner with major players in the U.S., Japan, Korea, Germany and China in order to grow significantly and secure contracts as design partners before the companies are fully operational.

Intelligent robots are no longer science fiction. They are real. They are here. And powered by advances in Israeli technology, they are only getting smarter.

About iAngels
iAngels is a leading Israel-based angel investment network, leveraging best-in-class due diligence to enable accredited investors around the world to gain access to the most-exclusive early-stage technology deals in the market. In less than three years, iAngels has raised over $50m, invested in over 60 Israeli startups, and built a full-service in-house investment team, led by founders Shelly Hod Moyal and Mor Assia. 

How Israel Plans to Disrupt a $4.7 trillion Industry

The digitization of currency presents an incredible opportunity for the world’s incumbent financial institutions, from payment processing to credit and insurance products, wealth management, and currency transfer and exchange. Yet the regulatory, security, and risk management challenges faced by these institutions have paved the way for a flood of new entrants.  In 2015 alone, over $19B was invested in FinTech to disrupt the $4.7T financial services industry.

A successful bank robbery used to require careful planning, orchestration, weaponry, and a bit of luck.  Furthermore, the bank’s maximum loss was limited to its physical assets locked away in the vault. In 2013, Russian cybergang Cabarnak stole $1B from over 100 financial institutions, using nothing more than a few lines of malicious code.  How can today’s financial institutions, encumbered with bureaucracy, legacy systems, and regulatory burdens innovate ahead of tomorrow’s financial reality?

Enter Israel

With domain expertise ranging from enterprise software to information security, business intelligence, and the blockchain, Israel’s brightest engineers, technologists, and data scientists have started applying their knowledge to one of the hottest sectors in the world; FinTech.

Fintech, at its core, is the use of technology to eliminate market inefficiencies. To illustrate, let’s look at one of the biggest money markets in the world today; remittances. Remittances are expected to reach an estimated $610 billion in 2016, rising to $636 billion in 2017. As of the end of 2014, the global average cost of sending $200 was 8%. Let’s think about that for a second. Money is now data, sitting in the cloud, with virtually no cost to disassemble, redistribute, and reassemble. So why does sending $200 still cost $16? Due to the regulatory burdens combating money laundering and terrorism financing, international remittances sent via mobile technology accounted for less than 2% of remittance flows in 2013.  But as mobile phones reach critical mass in the developing world, this will change drastically, and Israeli technology will play a role.

Flavors of Fintech

Now let’s look at an emerging $6.5b market like bitcoin, which processes $110mm in daily transactions, but with pervasive fraud, wire/bank transfers have become the incumbent use case, leading to slow, cumbersome transactions that necessitate minimum purchase requirements. Imagine a system that uses sophisticated algorithms to enable bitcoin exchanges, brokers, and eWallets to accept credit cards with no risk of fraud. Enter Israeli Fintech company Simplex, which has already processed more than $4m in bitcoin purchases via credit card.

Next we have the marketplace lending industry, with a compound annual growth rate of 123% between 2010-2014, projected to grow to $490b globally by 2020. Companies like Lending Club, Zopa, and Prosper have led the charge, but the real innovation will come from inventing new methods of credit underwriting, rather than continuing to price risk using the decades old FICO score. Look at Backed which reverse engineered Lending Club’s underwriting model to discover a huge opportunity in mitigating risks for co-signers, thus reducing APRs for borrowers, or Cinch, which evaluates small business creditworthiness based on a reputation score, rather than the traditional credit score.

Take the $45B in pocket change carried by travelers each year, and turn it into digital currency with TravelersBox. Consider the global payments market expected to grow to $2T by 2020, and Zooz, the only agnostic technology layer that connects to any payment provider and provides business intelligence to benchmark and compare provider performance for enterprises. Finally, combine the global equity markets at an astounding $69 trillion and counting, and throw in eToro, which allows users to track the financial trading activity of top performing users and automatically copy their trades.

Investment Opportunities Abound

There are more than 400 fintech startups in Israel, covering more than a dozen business models, including crowdfunding, money management, financial advisory, banking, wallets, payments, point of sale, currency exchange, virtual currencies, small business funding, retirement, insurance, lending, security, blockchain, security, and investing. And at iAngels, we are seeing them all.

As more banks and financial service companies establish accelerators, R&D centers, and incubators in Israel, the number of investment opportunities will grow in parallel. In 2015, Israeli FinTech exit activity reached $1.3B, up from $700m in 2014, while 47 companies raised $241m. As your trusted partner in Israel, we continue to access and analyze Israel’s highest quality entrepreneurs, providing you with the best FinTech investment opportunities Israel has to offer. Take a deeper dive by browsing through our investment portfolio, here.

Max Marine
Max Marine is an iAngels Investment Analyst. Prior to iAngels, Max was a Junior Partner at Venture1st, providing marketing and communications support to Israeli start-ups. Max passed the three CFA exams consecutively, holds an MS in Investment Management, and a B.B.A. in Finance, Real Estate, and Risk Management and Insurance from Temple University’s Fox School of Business. Contact him at [email protected]

 

Share:

Starting May 16, Entrepreneurs Can Raise Money in a Whole New Way. Here’s What You Need to Know

Monday, May 16, 2016, will be a very big day in the world of crowdfunding.

More people will be able to invest in entrepreneurs through crowdfunding than they were just the day before. And that means that more entrepreneurs with more innovative ideas will be able to launch more businesses.

“The implications of legalizing equity-based crowdfunding are both significant and far reaching. Crowdfunding has the power to help democratize the capital raising process by giving entrepreneurs, for the first time, direct access to tens of millions of prospective investors,” says Brian Burt, the chair of the emerging business group and the law firm Snell & Wilmer, in an email with Entrepreneur. “In their search for startup or growth capital, entrepreneurs will no longer be constrained by the size of their personal Rolodex or the absence of pre-existing relationships with angel groups and venture capital funds.”

So what’s changing?
In April 2012, President Barack Obama signed the Jumpstart Our Business Startups Act into law. Called the JOBS Act, the goal of the multi-pronged piece of legislation was to make it easier and faster for small businesses to get access to capital.

The third piece of the JOBS Act, Title 3, opened up equity crowdfunding for unaccredited investors. “For the first time, anyone can become an investor in a business and be able to share in its profits and growth regardless of income, net worth or level of financial sophistication, and this will open up a new source of potential financing for entrepreneurs, which could be a game changer,” says Ellen Grady, an attorney and corporate governance specialist at the law firm Cozen O’Connor, in an email with Entrepreneur.

Prior to this rule change, only accredited investors — an individual whose net worth, or joint net worth with that person’s spouse, exceeds $1 million, as defined by the SEC — were able to invest in startups through equity crowdfunding in the U.S. (For the purposes of this calculation, an individual’s primary residence is not included in the tally of net worth.) Alternatively, an accredited investor is an individual who had income exceeding $200,000 in each of the two most recent years with reasonable expectation of earning just as much in the current year. Both members of a couple are considered accredited investors if they have joint income of more than $300,000 per year with reasonable expectation to earn a similar income in the current year.

The new equity crowdfunding regulations are updating the eight-decade old Securities Act of 1933 and the Securities Exchange Act of 1934. “Companies across the United States, for the first time since 1933, will be able to seek investments from ordinary Americans without having to go through the expense and rigor of a full-public stock offering,” says Richard Swart, the chief strategy officer of the equity crowdfunding event coordinator NextGen Crowdfunding, in an email with Entrepreneur.

In essence, equity crowdfunding was only available to sufficiently wealthy individuals. As of May 16, all individuals will be able to invest through equity crowdfunding.

We’re not talking about tote-bag-for-a-donation Kickstarter-style crowdfunding here. What is equity crowdfunding?
Kickstarter made crowdfunding a nearly household idea. On Kickstarter, artists and entrepreneurs raise money to fund their projects by soliciting donations in exchange for token gifts, experiences or some sort of recognition.

These new rule changes are not dealing with Kickstarter-variety crowdfunding. They are expanding access to equity crowdfunding, wherein an investor gives an entrepreneur cash in exchange for a piece of his or her business.

“Now entrepreneurs can raise money and use it on any part of the business they think will help their business grow, without needing to offer some perk or commit to giving a pre-order for a product,” says Aaron McDaniel, the CEO of Access Investors Network, mobile aggregator of hundreds of equity crowdfunding deals, in an email with Entrepreneur.

The new rules also open the door for a new variety of crowdfunding platforms.

“These portals will be similar to Kickstarter — companies will post videos and information about their offerings, and if you like what you see, you can invest,” say Jeff Annison and Paul Scanlan, co-founders of Legion M, an equity crowdfunding studio for the entertainment industry, in an email with Entrepreneur. “The difference is that while Kickstarter is strictly rewards based (i.e. your money is essentially a donation in exchange for a reward or a pre-sale version of the product), the companies on these new platforms will be selling equity or debt financing. If these companies are successful, you stand to make money.”

OK, that’s cool. But why does it matter?
Most crucially, expanding access to crowdfunding will expand the amount of money being invested in startups.

“This means more capital for entrepreneurs. While the number of startups will stay the same, the amount of money available to deploy into this asset class will grow. Therefore, the rule change will have a profound shift on the early-stage investment industry and the economy as a whole,” says Shelly Hod Moyal, a co-founder of angel investment network iAngels, in an email with Entrepreneur.

Entrepreneurs will be able to raise more money in a shorter period of time, especially those running startups that can grab the curiosity of everyday investors online, says Hod Moyal. “Title III will shorten the time and expand the scope of fundraising cycles, especially for B2C companies that can easily convey their value proposition if they create compelling digital media to support their company’s narrative, and distribute that media effectively through relevant platforms.”

Taken together, equity crowdfunding from unaccredited investors could bring a couple of billion dollars of additional capital into startups each year in the U.S., once the industry has a chance to grow into and adjust to the new regulations, says Mat Dellorso, the co-founder and CEO of private placement technology company WealthForge, in an email with Entrepreneur.

In addition to making more money available to entrepreneurs, the new equity crowdfunding rules will make more capital available to a wider range of entrepreneurs. Venture capital and angel investor dollars tend to flow to companies based in Silicon Valley and New York City, skipping over entrepreneurs across the country, points out Swart.

“Venture capitalists and angel investors focus on companies with home-run potential. You might have a great little profitable company with dedicated customers, but if you don’t have the potential for a billion-dollar IPO or acquisition, a VC or angel isn’t likely to be interested. That said, your community of customers might be very receptive to investing,” say Annison and Scanlan of Legion M. “The same goes for companies built around a social cause. Large investors are very focused on optimizing the bottom line. Smaller investors may be fine with a lower financial return if they also feel like they are having a positive impact on the world.”

Your grandmother, sister and friend’s brother invest for different reasons than venture capitalists. And that’s great. That will increase the diversity of the kinds of entrepreneurs who get capital investments to build their businesses.

“It’s pretty cool that for the first time in 80 plus years, normal people will be able to invest as little as $100 in a startup or small business that they love,” says Nick Tommarello, co-founder and CEO of the equity crowdfunding platform Wefunder, in an email with Entrepreneur. “You’ll know that whenever you walk into that cafe, you helped make it happen.”

Adtech is going native on steroids, hyper-personalization and consolidation

iAngels’ adviser Kfir Moyal reflects on 2015’s Adtech correction and the opportunities for investors in 2016

After years of VC exuberance, 2015 marked the end of an investment cycle for the adtech industry. Quite a few companies with high valuations stumbled, downsized, restructured and pivoted in order to achieve, or at least progress on a path toward, sustainable profitability.

Yet, despite the contraction in VC investments, the industry is growing dramatically, fueled by agencies and advertisers competing for digital real estate across billions of screens, with billions more forthcoming in the next few years. 2015’s correction sets the stage for adtech to “grow up” in 2016, especially in terms of ad quality and industry structure.

The first trend I expect in 2016 is a spike in contextually relevant ads (CRAs), like native advertising, that blend well with the user experience. Nearly 200 million ad blockers cost publishers $22 billion in 2015, an impact far from trivial. If consumers continue to face harassment from unwanted ads, this figure could double or triple in the upcoming years.

The antidote: CRAs. We’ve witnessed Google command significant premiums from advertisers for more than a decade by serving CRAs along the search dimension, while Facebook’s dominance derives from the wealth of personal data it collects on each user and its ability to seamlessly integrate relevant advertising in the newsfeed experience. In the last few years, Outbrain and Taboola have leveraged content consumption patterns to create an entirely new category of CRAs known as sponsored content/native advertising.

Even today, I find myself still clicking on sponsored content, thinking it’s native. It’s not that I’m being tricked, like with pop-up ads or clickbait; rather, the contextual relevance of the ad suits my interests. It’s nicely integrated in the page and is truly relevant. Contextual intelligence is a meaningful point of differentiation that leads to higher ROI for advertisers and publishers, and thus, the adtech companies that improve the marketer’s ability to provide the right message to the right person at the right time will attract substantial investment.

The second trend we will see is hyper-personalization, with a special focus on what I will call the “smart creative.” During the last few years adtech has focused on data collection and analysis in order to better target consumers, optimizing yields for both advertisers and publishers. Yes, we’ve improved on many different fronts, but the ad creative has remained flat and static. Thanks to the death of privacy, we now have an abundance of data that can be used to make each creative hyper-personalized and much more engaging for the consumer.

In 2016 we will see creatives that change on-the-fly based on each user’s unique characteristics rather than fixed images that are mass-distributed, and smart programmatic creative will become the standard.

The third trend to consider is consolidation. The artificial silo between adtech and martech is crumbling. Despite the pace of advertising innovation the past 15 years, the complexity of adtech as a technology stack inhibits brands, agencies and marketers from seamlessly integrating digital advertising into their full marketing stack.

In 2016, we’re going to see companies like Oracle, SAP, Salesforce, AOL, Google and Facebook beefing up their martech war chests. These incumbents will snap up new entrants to enhance and complete their martech stack in a way that they can really become a one-stop shop for marketing and adverting in a digital manner. This trend is buoyed by increasing demand for accountability from premium brands (after the 2015 AppNexus’ cleanup that shined a spotlight on the pervasive fraud affecting marketers’ ROI).

We’re going to see the CRM technology, the marketing automation technology integrated into the DMP and the DSP and the attribution solutions, the tracking vendors, all coming together into one platform that makes it much easier for the marketers to execute multi-channel, orchestrated campaigns that take advantage of data.

On the monetization side, we’ll see more and more consolidation. Adtech and martech is, in particular, an industry where size is a major advantage. We’re seeing it even with Israeli companies like Taboola and Outbrain that are discussing a merger among themselves. I bet we’re going to see it more. We’ve seen AOL buying Millennial Media, Vidible and Convertro to make it easy for brands and agencies to advertise across their destination properties like TechCrunch, Huffington Post and MapQuest.

We’re going to see that further into 2016, all across the board, either where the marketing players are going to buy the adtech players or the adtech players are going to buy the marketing players.

As an iAngels advisor and general partner at Cyhawk Ventures, I am evaluating companies in the context of the themes outlined above. In light of adtech’s 2015 correction, startups that “face the mirror” will grow fast in 2016, in a much cleaner and accountable environment. This means they will be well poised to attract investments from multiple funds, and the adtech financing environment will get back on track.

 

This article originally appeared on Techcrunch