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As originally asked by Mark Nowotarski.

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Mario Martinez
Managing Partner at Tecnix, LLC
Things to Know About Crowdfunding vs. Raising Capital in @TNWMagazine: http://tnw.to/n65h

Jerry Robinson
Consulting Designer: mHealth, IoT, Embedded Products, Wireless Commun, Consumer, and Disruptive Innovation Tech.
I think all devices.. just my opinion, but when you start limiting – then the overall synergy gets reduced…

Mark Nowotarski
IP strategist helping entrepreneurs get their patents faster.
@David,

Yes, Pebble watch is very inspiring. And yes, many crowdfunding project creators are not prepared for success. I cover a number of examples, both tragic and inspiring, in my talk.

Jerry Robinson
Consulting Designer: mHealth, IoT, Embedded Products, Wireless Commun, Consumer, and Disruptive Innovation Tech.
yes…

it takes a set of skills to start up a business, plan for change ( + or -), and deal with growth.. these are diverse and complex skills..

But.. you can’t expect VCs or Angels or other funding organizations to really understand the value of a good invention or innovation… they have to plan on a good payback and a reasoned business growth.. it’s just different than that an innovator has to deal with…

It would be a good place and time to write a “how to” book. Might be a kickstarter project in that, as well…..

Mark Nowotarski
IP strategist helping entrepreneurs get their patents faster.
@Jerry,

As a numbers guy myself, I absolutely agree. I don’t if we can get overall statistics specifically relevant to medical devices, but we should be able to find a handful of exemplary cases.

By the way, for this group, does “Medical Devices” mean strictly devices requiring FDA approval (e.g. oxygen therapy), or does in include all health related devices (e.g. exercise monitors)?

David Guy
VP, Sales and Business Development
Jerry,

One of my favorite crowdfunding stories is Pebble Watches. They presented to dozen of VC’s with no takers. Then they launched their Kickstarter project with a goal of $100k and ended up raising $8M. It demonstrates that VC’s don’t always pick the winners and what the market wants. Now an interesting piece to know is that the demand for Pebble’s product created a problem with execution by the company. They were not prepared for success. People often mistake having a good idea, for the inate ability to run a company.

Jerry Robinson
Consulting Designer: mHealth, IoT, Embedded Products, Wireless Commun, Consumer, and Disruptive Innovation Tech.
When you quote actual numbers (GOOD FOR YOUR SEMINAR, MARK…), the choicesmake a lot more sense… discussing Crowdfunding mechanisms, without numbers, is philosophy – not business, math, or science….)

So…
How many companies – or startups – in 2012 will be
a – go public (& raised $$?)
b – get “non-relative” based angel, venture, or investment group funding? how much?

In our area, much used to be made of “venture or angel” funding. Few companies were funded. Innovation was usually SHUNNED (there is risk…), and few people seemed to know the numbers. Lots of people and companies spent considerable time (and $$) chasing funding that did not and could not exist. What a waste..

Crowd funding is at least new… and there are also other new sources of fund raising (startup, growth, stock, or inventory) that one must consider. When CTI almost went out of business a while ago, that was a real wakeup call.

–jr

Benjamin V. Booher, Sr.
Entrepreneur, Inventor, Scientist, Technologist – Aerospace, Automotive, Defense, Manufacturing, Materials, Med-Tech
So you set us up! LOL (Just kidding — I’d be ineterest in the webinar).

Mark Nowotarski
IP strategist helping entrepreneurs get their patents faster.
I am very gratified to see the enthusiastic discussion. I recently gave a webinar to the London Charter Institute of Patent Attorneys on crowdfunding both in the US and internationally. It was very well received. They were interested on behalf of their inventor clients.

Would a similar webinar hosted by this Medical Devices Group make sense? Who should I coordinate with to set it up?

Kim Nielsen, RN, BSN
Healthcare Management Professional
David, thank you for your thoughtful comments. I agree with your summary and would not proceed independently unless I had a substantial market of qualified investors beyond family and friends.

David Guy
VP, Sales and Business Development
@ Kim, you may be right that there will be a Gold Rush of Crowdfunding sites similar to the EMR proliferation over the last 5 years. Now the market for EMR’s is consolidating and I expect a similar life cycle in crowdfunding.
The value of using crowdfunding sites with a niche focus is the traffic they organically generate and subsequent waves of new users that visit with every new project posted. I first supported a project on Kickstarter for a friend and return to fund other cool ideas. Look for a site that has a laser focus on your market. Setting up your own site with singular offering could have difficulty reaching far outside your current friends and family you likely already approached in the real world.

David Guy
VP, Sales and Business Development
@ Todd. Having run a campaign for an art friend on Kickstarter and also presenting to VC’s – the two audiences are much different. There is a big difference in the amount of funds being raised. Crowdfunding will be good for sub $1M raises. Most VC’s want to put more money than that to work. Managing a $3M investment requires the same effort as a $20M investment. VC’s have such deal flow they can cherry pick deals with the most upside and less risk that fit their sweet spot.
Crowdfunding is better suited for seed funding that will advance a concept into a working prototype. Crowdfunding allows the maker to cast a wider net through the reach of the internet, think 6 degrees of Kevin Bacon.

Benjamin V. Booher, Sr.
Entrepreneur, Inventor, Scientist, Technologist – Aerospace, Automotive, Defense, Manufacturing, Materials, Med-Tech
Thanks for the ‘meat’, Andrew — very interesting. I was not aware of those ‘qualifiers’ (good information!).

Benjamin V. Booher, Sr.
Entrepreneur, Inventor, Scientist, Technologist – Aerospace, Automotive, Defense, Manufacturing, Materials, Med-Tech
I won’t bet against your prediction, Kim…

Kim Nielsen, RN, BSN
Healthcare Management Professional
Crowdfunding makes as much sense for medical device companies as it does for any other business. Small business start-ups always face the challenge of raising capital. Too often, the business is not large enough to attract venture capital or, if large enough, fails to impress the venture capitalists. This is true of medical device developers or musicians and anyone in between.

We have looked at the concept of crowdfunding as a means to raise capital for a health insurance related venture. Though not medical devices, health insurance products have a health component within them and can be profitable while contributing to society. If we choose to proceed, we would set up our own crowdfunding platform and raise the capital ourselves. Forget Kickstarter or the like.

In my opinion, crowdfunding is a simple concept and recent legislation has helped clarify the rules of the game. I predict that for every 10 crowdfunding sources today, there will be 500 within two years. It will be easy to start one and will be a far more efficient means for a start-up company to raise needed capital than today’s sources. To give just two reasons why this will work, the fund-raising can be laser-directed and there would be no acquisition fees to pay.

Andrew Adams
Senior Manager of Medical Device Systems Engineering and Quality Systems Expert
Todd, it seems there is a lot to know. I recommend going to Google Images and searching for “crowdfunding infographic” to get started. In the link I provided above, which talks about investors, the following quote is:

“An investor is limited in the amount he or she may in- vest in crowdfunding securities in any 12-month period:

If either the annual income or the net worth of the investor is less than $100,000, the investor is limited to the greater of $2,000 or 5 percent of his or her annual income or net worth.

If the annual income or net worth of the investor is $100,000 or more, the investor is limited to 10 percent of his or her annual income or net worth, to a maximum of $100,000.On the face of the definition a person with $100,000in annual income and no net worth could fall within both of these categories, and clarifying rule making will be necessary.”

Todd Staples, MBA
Account Representative, GYN at Medtronic
Perhaps this is a good opportunity to educate the those of us who don’t fully understand where crowdfunding / crowdsourcing fits in. Who exactly is providing the funds in these scenarios? Individual “Investors”? or everyday folks just surfing the net? Are these investors going to be required to be licensed (or in some way registered with the IRS) investors much like Angels and Venture Capital Investors?

Please forgive my ignorance, I am trying to understand the sourcing method better. It appears at first glance to me like this route to financing will require #1 a large influx of interested smaller investors, and #2 a fair amount of marketing and a strong pull to the site otherwise with one of those two factors missing, it could take months just to raise a small amount of capital while you wait for it to build. It will be interesting to see how this shakes out.

David Guy
VP, Sales and Business Development
Great discussion and yes crowdfunding will absolutely benefit medical devices. Having chased funding for a medical device startup from angel and VC’s I understand how challenging it is for seed funding. It becomes a full time job in addition to the other hats a CEO wears. For medical device crowdfunding to work it must be proctored by experts in the medical device market rather than whomever can write the code for a crowdfunding site.

With less true R&D done in top tier medical device companies, it has become more of a buy over build mentality and increased the need for medical device inventors to have an alternate means for a capital raise and develop working prototypes.

Funding is not the only resource needed to change a medical device companies trajectory, often it is access to mentors and experts that can help a hard charging CEO navigate challenges. For full disclosure, I am a Partner at MakerStaker.com a medical device specific crowdfunding site founded and run by medical device experts available in Q1 2013. We are coalescing both fiscal and intellectual capital for the benefit of medical device inventors.

Perry Mykleby
Customer Activation, Engagement & Retention
Yes. Crowdfunding will play a role in med device development. And the scope it will play will depend on the device. It’s completely possible to rely on the crowd to fund parts of projects…functional prototypes for instance. The crowd will be excellent for seed money.

It will likely be one of several sources of funding for a single med device…again, depending on the magnitude. It’s conceivable to think that entire projects could get funding out of the crowd. I wouldn’t expect that of PMA devices, but maybe Class I 510(k), health and wellness devices.

So much hinges on what the SEC says…we’re staying tuned.

Mark Nowotarski
IP strategist helping entrepreneurs get their patents faster.
“Might anyone here have an idea where ‘we’ (my organization) could look for knowledgeable funding?”

Ben,

I think you’ve hit the nail on the head for crowdfunding of medical devices. You need a community of knowledgeable funders. I don’t know that medstartr is necessarily the place for that, although they are striving for it.