Enter the world of crowdfunding. Crowdfunding leverages the power of people, facilitating a way for them to put their dollars behind ideas they believe in. The practice came into the mainstream around 2008/09 when the two leading crowdfunding sites, Indiegogo and Kickstarter, were founded. Since then, people have invested billions of dollars into ideas that range from musical band album releases to digital apps to even medical technology.
The idea of crowdfunding has such potential for the medtech industry that it’s resulted in websites specifically dedicated to the space. MedStartr, MakerStaker, and Healthfundr are three examples of dedicated crowdfunding sites for the sector. Each puts its own spin on the requirements of investors and projects, but in the end, they are all focused exclusively on the healthcare industry.
The crowdfunding of medical technology ideas enables inventive doctors or even patients to address a clinical need and garner support for it from those who either believe in the concept or perhaps are seeking to support a project that will address an ailment they are dealing with themselves. In a perfect model, those in need would support a project that then helps them overcome the disease or treats the adverse affects of it. Everyone involved benefits.
Unfortunately, that’s not how all the projects conclude. As with any investment scenario, there’s a risk involved. There’s no guarantee that a proposed idea is going to work as it was presented. And since a project could have people who would truly benefit from the success of a project, emotions can run much higher among investors of a medical technology idea than that of, for example, a consumer electronic device.
Take the case of the Nanoplug. This technology was described by its inventors as “the world’s first invisible hearing aid,” making it an attractive solution for many people who have impaired hearing. While many of the claims seemed reasonable, there was one technological hurdle that created questions about its feasibility. The battery was surprisingly small. In fact, the proposed functionally of this battery was so unique that it might have made some wonder if the innovation that should be backed was the power source rather than an “invisible” hearing aid. Surely, the battery they were suggesting would have significantly more interest for an array of applications.
As it turned out, the original concept of the Nanoplug faced challenges in gaining a CE mark. As a result, it went through several design changes that included swapping the original battery idea with a larger, replaceable version. The new power source and design changes ended up increasing the size of the “invisible” hearing aid by approximately 50 percent, resulting in a product that resembled an already existing hearing aid. As would be expected, these changes did not sit well with the community of investors. As Indiegogo (the crowdfunding site where the project was presented) allows for comments to be made on the project page, many investors offered their comments to the company. As you can imagine, they were no longer enamored with the project. Unfortunately, the Indiegogo platform does not have a policy for refunds for disgruntled investors. As people are funding a concept, an unsuccessful idea does not result in a return of their money.
This is the inherent problem with the crowdfunding of medical device ideas. An investor is not backing a cool new gadget, but rather, investing in a technology that might resolve a medical condition or positively affect the treatment of a disease that could change that person’s life for the better. As such, emotions can be involved, which is not an ideal situation. A successful investor backs a technology based on sound financial decisions; supporting a project based on the desire to improve the medical condition of a loved one or him/herself will undoubtedly cloud that investor’s judgment.
The idea of crowdfunding to support medical technology concepts is a fantastic alternative to the more traditional investment scenarios commonly used by start-up companies. Additional oversight by industry experts, however, might be warranted, especially on these medtech focused sites. Then again, even the experts aren’t perfect and can get things wrong. See Theranos.
Ultimately, any type of investment scenario is going to come with inherent risk. I just hope more investors take steps to research a project before putting dollars behind it and don’t jump in blindly in the hopes of a “miracle cure” for what ails them.