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Exploring the role and impact of crowdfunding on medical research

09/17/2014

How does a society, inundated with a great number of incurable diseases, ensure that those who would dedicate their time to finding cures have the resources necessary to do so? Declines in investment for innovative medical research and early-stage biotech companies have spurred patients and their supporters to be more engaged than ever in raising both funds and awareness for promising science. Crowdfunding has emerged as an increasingly popular vehicle among bioscience entrepreneurs and philanthropists otherwise stymied by the current economic climate, but questions about the sustainability and impact of this funding model on advancing drug development remain.

On Sept. 17, FasterCures hosted a Webinar to discuss the role and impact of crowdfunding on disrupting the traditional biotech investment model, and explore the questions people should ask before initiating or investing in a campaign. The experienced panel, composed of investment experts and users of the crowdfunding model, was moderated by Daniel Gorfine of the Milken Institute’s Center for Financial Markets.

Paying for innovation
Even with venture capitalists moving away from early-stage investments, Greg Simon, CEO of Poliwogg, asserted that “biotech as an investment sector has improved thanks to demand for innovation stemming from the expansion of the IPO market and recent biopharma acquisitions.”

While the more traditional R&D funders (often of the Baby Boomer generation) focus on de-risking their investments by pumping money into later-stage projects that promise a certain level of financial return – crowdfunding, crowd investing, peer-to-peer lending, and Rule 506(c) offerings are emerging as the investment vehicles of choice for a younger generation, for whom online transactions are already the norm.

Born of private sector ingenuity, action on the part of policymakers, and the growing healthcare needs of the community, these new funding mechanisms present a great opportunity for early-stage biotech companies and academic researchers pursuing high-risk, high-impact science.

“Crowdfunding empowers people to support what matters to them,” said Breanna DiGiammarino, cause vertical director for Indiegogo, “and offers a chance to connect with others who care about the same things you do to move research forward together.”

Large and growing fast
Simon had some encouraging news for the biotechnology sector. Venture investment via crowdfunding infrastructure has already doubled since 2013, and venture capitalists are taking note. Simon predicts a wave of biotechnology investment, stemming from the fact that people will be able to invest directly in companies that are working in disease areas of interest to them. “The implication of crowd equity is huge,” said Simon. “Even traditional venture capital is realizing the opportunity that crowd equity is providing to the general public.”

Policymakers are also doing their part to encourage funding in the medical research sphere. The JOBS Act has created new tools that can help innovators raise funds. These new tools help transform health from a “cost to an asset” and give anyone the opportunity to invest in what they care about.

Cross-sector connections
One of the praises for crowdfunding is that it allows donors to give directly to their preferred causes. DiGiammarino emphasized the added benefit of cross-sector connections that crowdfunding delivers – offering fundraisers links to unlikely investors, those who might not otherwise have known about them.

Many organizations have already begun to utilize crowdfunding via channels such as GoFundMe, Kickstarter, and Indiegogo, but what are these campaigns really for? According to DiGiammarino, there are three types of campaigns. The first type is for research advancement, through which organizations raise money for clinical trials, for example. Other campaigns give the organizers much-needed market feedback from target audiences before the product is even offered. The last type of campaign helps raise awareness. Regardless of the type of campaign being run, a key component of success is to acquire the initial contribution from a close network of family, friends, and sympathizers. image

Building a successful campaign
Nick Sireau, chairman and CEO of the AKU Society and chairman and co-founder of Findacure, was thrust into the world of medical research when he discovered that his sons were born with the degenerative disease known as alkaptonuria (AKU), or black bone disease. The AKU Society and Sireau managed a successful fundraising campaign through Indiegogo and, as advised, gathered initial funding from his immediate community of family and friends. While his close acquaintances were willing to give, Sireau described having great difficulty obtaining money from the general public until crowdfunding came into play.

An important aspect of crowdfunding is awareness. Media outlets such as Indiegogo’s newsletter and Daily Mail Online led to a spike in donations as the public became aware of the AKU cause. The other unforeseen benefit of media participation was the identification of new patients that stood to gain from the assistance of the AKU Society. Sireau attributes this success to several factors, which include:

  • careful preparation and planning;
  • communication with friends/family/networks beforehand;
  • a strong, short video;
  • personal connections backed with a big team;
  • seven to nine perks to distribute in exchange for donations; and
  • showing appreciation to donors.

By applying these tips, biotechnology firms, research organizations, and other groups can pull monetary support from across the globe.

So will allowing everyday citizens to contribute to or invest in the science they most care about really disrupt the traditional biotechnology funding structure? According to these panelists: absolutely.

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