Health entrepreneurs looking for relatively small amounts of seed funding can turn to crowdfunding sites like Medstartr or Health Tech Hatch. But if they need funding in the $2.5 to $5 million range, they’re largely left to venture capitalists, strategic funders or other traditional investors.
Healthfundr, a startup launching Thursday, wants to give health entrepreneurs another option while opening up investing options to a wider pool of people.
Generally speaking, these are pretty good days for digital health startups. According to accelerator Rock Healtb, for example, funding in digital health was up 35 percent in the first quarter of this year.
But Healthfundr founder and CEO Jared Iverson said that not all areas in health technology are getting strong investor interest — for example, medical device startups haven’t received the same kind of backing as health IT startups. And he added that he wants to make investing in health and medical technology less intimidating to the average investor.
“We want to broaden our reach and move past what I call the good ol’ boys’ clubs, angel groups and people in the know, who get access to these deals, to reach doctors and other people that qualify as accredited investors but may not know how to plug,” he said.
Since June of last year, Iverson, a former securities attorney, and his small team have been working to build Healthfundr’s platform, identify potential startups, reach out to investors and make sure it’s compliant with regulatory requirements.
Similar to San Francisco-based CircleUp, which provides an investment platform for consumer startups, securities on HealthFundr’s site are offered through broker dealer ARI Financial Services, Inc. With each startup accepted to the platform, it negotiates a commission based on the amount raised or an equity stake. When it’s implemented, the JOBS Act will enable a broader set of investors to participate in crowdfunding. But even now, Iverson said Healthfundr supports investors under an existing regulation.
Instead of an AngelList or Gust, which offer open marketplaces of startups for investors, Healthfundr deliberately keeps its community of startups small. So far, Healthfundr has accepted three startups to its site and will add two more soon.
Part of its mission, Iverson said, is to make health investing more accessible to investors, and careful curation is an important part of that. In an effort to educate investors, it also helps founders present themselves through explanatory videos, arranges conference calls and enables one-on-one phone calls and meetings through the site.
While it doesn’t have hard requirements for startups, Iverson said it looks for those that have already gained some traction, earned revenue and raised funding from investors. The point of the site isn’t to be an option of last resort for startups struggling with traditional investors, but to work with companies that may want more flexible terms than what a venture capitalist would offer and support a new model of investing.