Wow, Pebble Technology’s ePaper Watch has really activated the KickStarter investment crowd raising nearly $5 million after apparently drawing broad rejection from the Venture Capital community.
As someone who’s been involved in fundraising, research and advising roles in the European medtech investment market for nearly a decade I find this development fascinating. When I organised the world’s first mHealth investment event (as a contributor to Informa Telecom and Media’s 2009 Mobile Healthcare Industry Summit) featuring some exciting companies (eg. PatientsKnowBest, Health Smart, MedApps, t+ Medical, Toumaz, etc) that have all pretty much gone on to be recognised as trailblazers in their sectors I recall thinking as I heard their CEO’s presenting that if they could just ask their audience to invest a small amount to be part of the change that they’re trying to make in the world they’d have found it a lot easier and done a lot better than they would from getting a large chunk from a single investor or VC.
This was particularly obvious at this event as in addition to a lot of successful business people there were also a lot of senior clinicians and owner/operators of London’s leading private clinics and hospitals (as a result of a relationship I had with the Harley Street alliance). At an event that cost more than £1000 per ticket there really would be very few that didn’t have at least £10,000 sitting in an idle savings account that they would be only too happy to invest in a market they understood and a company that could benefit from their involvement.
Why I think crowd sourcing your funding makes perfect sense for a mHealth business:
> Exit, it’s all about the exit. Opportunities for exit are in abundance as the result of the convergence of the healthcare industry with mobile – the newest Trillion dollar industry.
> If you’ve worked in mobile, mHealth VAS’s are so under-explored your contacts are directly convertable into new business for your startup.
> If you work in Healthcare you already have the customers and have incredible insights and understandings of the clinical priorities and patient needs.
> Most mHealth firms are led by clinical leaders who have a proven track record of applying themselves (it takes 7 years to finish med school), getting results (through understanding of their patients needs) and communicating (in most cases it’s the key tenant of the job). They also have a contact book full of business leaders within potential partner companies (eg. via the sales reps who constantly hound them!).
> If you’re an early adopter of mobile you can easily imagine that what should be connected is going to be connected and with care having always been mobile this is an industry crying out for such innovation.
> Investors become sales people. If you’ve ever witnessed a desperate VC pitching a business they’re looking to exit on you might have thought you’d heard it all but wait till you meet a Doctor who wants his shirt back.
> Due diligence. I don’t think you can overestimate the confidence that corporate investors would place in a company that has not just been able to sell to clinical experts but also take their money.
Hasn’t this been done already?
I’ve noticed several companies have taked this model on a smaller scale already and it’s been by and large very successful. One of the highest profile of these would be a company that back in 2008 (before there where websites providing crowdsourced investment opportunities) went through a £4 million round of funding by calling on a group of British Doctors and topping this up with private equity from Sloane Robinson Private Equity and founding shareholders Comvest.
As you’d expect with the growth of mHealth over the last decade the company has evolved quite substantially originally starting out as E-San, then becoming T+ Medical and now after converging with Vivatec (a company that 6 years ago had an incredible clinically validated motion sensor that wasn’t too dissimilar to the FullPower Nike Fuel/Jawbone UP) and raising an undisclosed amount from Vodafone Ventures is now called OBS Medical (the OBS standing for Oxford BioSignals).
While the company is still a leader in making sense of the back end of mHealth apps news has been thin on the ground since the undisclosed Vodafone Ventures investment and with a turnover of the companies senior management it seems to have been left behind by not getting in on the growth of Apples iOS platform which has obviously pushed the boundaries of mobile user experience design over the last few years leaving their solutions starting to look very dated.
In summary I’d say the “Doctorsourcing” strategy was a big success, helping the company find early support, customers and attract Vodafone Ventures to what appears now to have been a buy out. There are a few downsides but the company was so early to market (eg. it existed before Facebook) you can’t really expect for it to have all been plain sailing.
So what happens when the crowd includes patients
I’ve seen a few of these already but they’ve largely been half baked ideas put out by concierge Doctor services looking for hype/press attention and were in reality more like pyramid investment schemes eg. you bring other patients and I’ll give you a free consult credit, etc.
Ignoring these I think in the very near future we’re going to see a mHealth startup extend beyond professional investors and start enabling the public (and patients) to invest. For one thing the tailspin this will send the FDA into is going to be unprecedented. I can imagine this will probably preoccupy them to such an extent that they’ll either resign from a role where they regulate apps or blanket ban everything.
I can see several issues and opportunities:
Patient investment could undermine the quality perception of an innovation amongst other patients and clinical leaders
The lines will be blurred as a result of patients having direct financial benefits from an intervention. It won’t be long before this creates distrust and ethical challenges. I’d expect to hear adoption being held back by phrases like “well of course you’d say it’s great as you’re benefiting financially from its wider adoption”.
Firms may miss out on the lessons criticism will give them
This is a difficult one to explain so to help make this point let’s consider 3G Doctor as an example (in most part so that no one will shoot me for highlighting criticism of their startup). One of the things we really try to do is listen to social media and let it write our copy for us. A good example of this came in 2008 when in a comment in an Irish Sunday Tribune article about 3G Doctor, Dr Mel Bates, spokesperson for the Irish College of General Practitioners, criticized our service by stating that the service offered “convenience but nothing more” (the original article is no longer online as the Tribune entered receivership in 2011 but you can still read my post on this here).
This helped me realise that I could wax on about the quality of what we can do, the advantages for patients of taking a detailed history and documentation with every consultation, the 24×7 access, the independence of our Doctors, the capacity we had to serve informational needs that were growing from increasing use by patients of online resources and communities, the benefits for those worried about picking up infections in waiting rooms for example during the swine flu outbreak, the additional privacy, but, it would be missing by a country mile what was going to be cracking up our competitors.
So instead we decided to focus on the criticism that had been levelled at us. If all we offer is convenience why not make that our strapline? Let’s focus on the opportunity we have when “The Doctor can see you now”. I even had some “We apologise for any convenience” signs made up to give people a smile.
Of course we’ve never met with a patient who didn’t very much want convenience but I could imagine our awareness of it’s appeal to patients could have been missed if Dr Bates had the opportunity to make a few €’s by just buying some stock and saying the service was great.
Impact on social conversation and collateral damage from supporters
Across the world there are controls on advertising of healthcare services for very good reasons. mHealth companies that are invested in by crowds are going to find this to be very challenging.
Imagine if you have an owner who is convinced they can boost support for your brand (and get a better return on their investment) by placing fake profiles on patient communities like PatientsUnlikeMe? Imagine if you have owners who think they can boost your adoption rate by placing negative opinions of competitors across the web?
It’s not hard to see this could get very messy very quickly if not approached in the right way.
Is there a perfect middle ground?
I get a feeling that there might be an area where we’re going to see results. Perhaps a rural clinic in an emerging market that’s been set up by a local Doctor where the funds are pledged for their charitable value in addition to the interest in a ROI. Perhaps in advanced markets this could help fund open source initiatives?
I can imagine major barriers to mHealth innovation being broken down very quickly by small innovative companies taking a Local Motors approach that would radically highlight the inadequacies of regulators because it would have an investor community that hasn’t just got money on the line but also potentially their lives.
Would you really want to be the regulator that is holding back educated patients (eg. like “e-Patient Dave”) who have much more collective knowledge, invested funds and the boundless talent and energy it’s going to take to take you to task?
Want to give it a try?
Here’s a list of websites that I’ve seen offering community investment platforms (if you know of any please add them in the comments and I’ll update the list):