When you see health and wellness companies like Scanadu and Misfit Wearables skyrocket past their Indiegogo fundraising goals in a matter of hours, it’s easy to get gung-ho about raising money from the crowd. But the reality is that, at this point, there aren’t too many huge health-related crowdfunding success stories to point to.
Sure, dozens of small projects and startups on Medstartr, a health-centric crowdfunding startup, have launched successful campaigns in the mostly sub-$30,000 range. But as Patricia Salber, CEO of Health Tech Hatch, told us this week in disclosing that her site was no longer supporting crowfunding alone, getting the crowds to open up their wallets for health startups can be a tricky proposition.
For companies peddling cool devices (like the Scanadu “tricorder” and Misfit’s Shine activity tracker), crowdfunding sites can be a great option for pre-sales and gauging consumer interest. And customers respond because they know they’re getting something tangible in return for their patronage.
But for software companies starting out, especially those that aren’t consumer-oriented, crowds can be fickle and hard to reach. The pool of people interested in a given topic might be relatively small and those who can invest a lot may want more than a T-shirt, certificate or good karma for their contribution. And, while a successful crowdfunding campaign can be a data point in your favor, a lackluster campaign might not give future investors or customers the impression you’d like.
Still, that doesn’t mean health entrepreneurs shouldn’t look to the crowd for support. In the past year, plenty of options have popped up – from general crowdfunding sites like Medstartr to equity crowdfunding startups like Angelist, Healthfundr and VentureHealth. And if you’re a cash-hungry startup, you should give them a look.
But before you do, here a few tips to consider:
Before you make a request of the crowd, figure out which crowd will care the most. One of the reasons why crowdfunding in health care is so interesting and compelling is that it can give patients a bigger voice. The lion’s share of the health care dollars spent is directed by big institutions and corporations. But, through crowdfunding, patients can identify the problems they think need to be solved.
“There are highly motivated crowds in health care,” said Alex Fair, founder and CEO of Medstartr.
On his site, the more successful campaigns are able to find and appeal to the advocacy groups, corporations, agencies and other partners that can help spread the word and reach possible supporters. And the right supporters (as well as those incentivized the right way) can help further magnify a message.
Learn the landscape
Crowdfunding in health care is relatively new, but it’s still full of several, very different options. There are pros and cons to each platform and it’s worth spending the time figuring out where you want to park your campaign.
MedStartr, for example, may have ambitions of hosting million-dollar fundraising campaigns. But, for now, many of its projects ask for less than $10,000, or even $5,000 dollars and its traffic tends to hover around 30,000 visitors a month, Fair said. On the other end, Indiegogo campaigns regularly raise several hundred thousand dollars and the site is far more heavily-trafficked, but it’s not a site known for health and medicine. And it doesn’t provide the same level of marketing or promotional support as MedStartr can.
In equity crowdfunding, Angelist has more cachet among Silicon Valley investors but Healthfundr and VentureHealth, while both are only barely a months-old, could ultimately do a better job of more actively pairing health-centric investors with entrepreneurs.
Sure, you’d like to think that your campaign will go viral and become and instant, organic hit. But, chances are, if you want it to go anywhere, you’ll have to put a bit of “strategery” behind it.
Medstartr will help startups with basic promotion (and provide additional marketing services for a fee). But many sites take a mostly DIY approach and, regardless of the platform, you’ll need to figure out your specific goals and a plan for achieving them.
Unity Stoakes, co-founder and president of Startup Health, for example, said Angelist can be a great way to generate momentum for a seed- or A-round ready company if they craft a smart marketing plan, including a timeline for releasing the latest commitment figures from investors.
Remember, it’s not (just) about the money
Even if you don’t reach your funding goal on a given crowdfunding site, that doesn’t mean the campaign was a failure. Crowdfunding campaigns can be a helpful way to build buzz among potential future investors and customers.
While at least 40 percent of Medstartr campaigns don’t reach their goal, Fair said companies on his site have been able to connect with dozens of helpful corporate and health partners. He also estimates that the site has lead to $9 million in investments off the site.
Brad Weinberg, co-founder of health tech accelerator Blueprint Health, said that while it’s the exception, not the rule, that a company raises a significant amount of funding directly on Angelist, he still recommends it to startups.
“It is the best way to distribute information about a fundraise with very few downsides,” he said.