A New York-based serial entrepreneur is preparing to launch a crowdfunding website focused on innovation in healthcare in what its founders hope will provide an alternate funding source for companies that might otherwise not get it from angel and venture investors.
The new company’s creation follows the passage of the JOBS Act, intended to create more jobs by making it easier to start and fund new companies. A provision of the JOBS Act enables startups to raise as much as $1 million through crowdfunding and award equity to nonaccredited investors.
MedStartr co-founder and CEO Alex Fair, who also is an organizer for the New York City chapter of Health 2.0, said it works similar to the way Kickstarter, RocketHub and other crowdfunding channels operate. Companies present a video explaining their business to users and what their product will do. Currently it enlists two types of investment: charity-based and rewards-based. He is avoiding equity-based investments until the U.S. Securities and Exchange Commission sorts out the details of equity crowdfunding rules this summer.
Among companies with a presence on the website are EndoGoddess, an Ohio-based company raising money for a clinical trial of a diabetes management app, and Avado, a physician-patient communication platform in which physicians can address the patient engagement requirements of meaningful use and patients can schedule appointments.
“I’m really intrigued by the crowdfunding model,” Fair said. “We see crowdfunding as part of the continuum of funding; we don’t think of it as a be all end all. … But we can certainly help some companies gain traction.”
He said the biggest difference between Medstartr and Kickstarter is Medstartr will have more medical projects on one site than Kickstarter has in its “entire ecosystem.”
He added: “Because you have a highly motivated population, there is a great potential to fund many diseases.”
A survey of 188 investors and healthcare startups conducted by Sperlingreene Marketing following a crowdfunding conference last month revealed that nearly half are still on the fence as to whether they would pursue it or not. Another 30 percent said they would probably use it, with 13 percent reporting they “definitely” would. Of those inclined to pursue it, 44 percent said they would use it in 12 months and 19 percent said they would use it in six months.