After a lot of pre-publicity, Medstartr is here. Modeled after Kickstatr and other crowdfunding sites, Medstartr is the brainchild of Alex Fair who is not only the founder of FairCareMD but also the generalissimo of the Health 2.0 NYC chapter. Lots has already been written about crowdfunding and even crowdfunding in health care (see this Health 2.0 News article on LumoBack last week), so I thought we’d let Alex describe it in his own words.
Matthew: If I have a company looking to raise money how does Medstartr work? What share of the money do you take?
Alex: Crowdfunding is a little like talking to your in-laws about your healthcare startup. Give a great explanation that works for everyone who has a stake in your project’s success: Patients, doctors, institutions, Big Pharma, HHS, and any partner you want to work with. Then list the rewards they get for supporting your project. Everything from a heartfelt thank you note, to a tax-deductible contribution (through our Partner Cancer101), to a production ready version of your product or service when it is ready to licensing rights for distribution. Next, spread the word through the groups of people who will love your products. Not just the Health 2.0 crowd, but everyone whom your innovation helps. MedStartr helps people fund the innovations in care that people care about and gives them a say in what comes next.
Depending on the amount being raised, MedStartr takes different percentages. On projects with goals less than 100K we take 5%. Later, after a successful first raise and delivery, MedStartrs are eligible for our planned MedFundr platform which enables larger raises with qualified investors, automating due diligence for Angels, VCs, and high net worth individuals. The more you raise, the smaller the percentage we charge. We try to be “Fair” about it. (Mine is a good name to try to live up to. It gets worse, the middle initial is a B, making it pretty much a directive… Alex B. Fair–it was the 60s, mum and dad were at Woodstock the month before, who knows…)
Matthew: Why do we need a separate health care focused crowd-source funding site? Aren’t Kickstatr & Indiegogo enough?
Alex: Healthcare is different for a number of reasons. First and foremost, it matters in a different way. Art is important for enjoying or understanding life, Health is life, so it is not something you can mess around with. This means credentialing the projects is critical and there needs to be a review of the clinical data that exists. Secondly, a typical “purchase” in healthcare is multi-dimensional by nature. It is not like buying a $100 widget, it is like buying a $500 widget that often takes an expert to install or prescribe, cost $200 million to develop and get approved, and that ultimately the “customer” doesn’t want to pay directly for. This breaks the typical producer / buyer relationship that works so well on Kickstarter for Pebbles and Lumoback, but that is not how it generally works in healthcare. This is why MedStartr projects all engage all four major types of customers for every innovation: patients, physicians, hospitals, and partners.
This makes for a less simple sale. The solution is simple though. On MedStartr each stakeholder is catered to with their own section of benefits and rewards. One of the nice things we are starting to see, even in the private beta, is that once a company gets some traction with patients big partners come in and want to work with the startup. Finally, for the most part, crowdfunded medical projects on other sites don’t work or are generally rejected. Kickstarter specifically states that they do not want medical projects in their terms. There have been a few exceptions recently, but these are very consumer focused products with a one dimensional sale. MedStartr enables startups to create a wave of interest.
To paraphrase Clay Shirky in his 2008 Keynote at the Health 2.0 conference, “Patients need to lead the way.” MedStartr enables this vision where 100 patients can say, “I want this care innovation” and 10 doctors say “we would like to be able to provide this care innovation” and then a Hospital will say, “we want our community to be made healthier by this innovation”, and finally a Partner will come forward and realize that the innovation will improve their bottom line and you have the full implementation / adoption problem solved. Most importantly, unlike the way I test marketed FairCareMD, the early adopters vote with their wallets, showing how they will behave in a more realistic way.
Matthew: We know that it takes a lot less money to start a company than it used to. How significant a source do you think Crowdfunding will be to get new companies in health care off the ground?
Alex: We see crowdfunding as an adjuvant therapy for healthcare startup funding, part of the continuum of the care and feeding of healthcare innovation, if you will. There are times in the life of an idea or company where you need to go to market, engage with potential customers, get feedback, drive adoption, or raise funding. This is what MedStartr is perfect for because we enable all those things at once. Certainly in early stages it is a great way to get going. For example, MedStartr itself is entirely crowdfunded through our own site and thanks to our first MedStartr event in New York last month. While this is a great start, to execute on our overall plan we need are also doing a round this Summer. Of course, if you want to help make our next version happen faster or get a great deal on a MedStartr project, you can just fund us now.
Matthew: For Medstartr what does “good” look like? Where do you hope to be in 2 years?
Alex: We anticipate having had over one thousand projects on the site by the end of 2013 and to have done a MedStartr event in every city, bringing the crowd to crowdfunding. We expect to have enabled the distribution of at least 40 million dollars in funding both from the crowd and from partners through our Partner Program. We hope to have had over 250 partners offer matching grants through the site as well, and we’ve already had some great interest there.