Crowd funding has taken off over the past few years with all sorts of innovative ideas and products being invested in from the general public online. The medical device and the pharmaceutical industry to some extent have started to take this into consideration and more and more companies are looking to gain investment online. An article written in the Medical Venture Capital highlights some of the success stories for medical device companies including the Pebble smartwatch, a health and fitness focused device with a goal of $100, 000. They managed to encourage the public to invest more than $10 million. However, we must acknowledge that the average crowd funding campaign raises about $7, 000 – therefore the Pebble smartwatch needs to be recognised a great success story but it is not the only one. There are both arguments for and some arguments against crowd funding for medical devices that are being deliberated at the moment, this article is more of an overview of the opportunities and handicaps of taking the crowd funding approach.
Clearly funding is always small start-ups; if you do not have contacts with a big company or have access to funding yourself – finding the money to get your medical device developed and on the market can be very taxing. Crowd funding has surfaced as a door that opens up new avenues for these smaller companies and there are numerous crowd funding websites, especially designed for medical devices that are appearing on the web.
As future customers, investors and the general public are able to view, in detail, potential products for development, crowd funding websites give a platform for medical devices to show off their new products and what could be on the market. Therefore, not only does crowd funding open up a gateway to money but it also offers a new approach to advertisement and can get the word out about your product. Taking this approach also has the potential to attract bigger investors later down the line; for example a device will look a lot more attractive if it already has $100,000 worth of investment provided by the general public already.
Some companies are also using these new found investors as a way to find out how to improve their device. Investors can provide feedback throughout the development, therefore there is a higher chance the product will be desirable for a wider audience and promote an idea of ‘user-centricity’ from the outset.
However, there are numerous obstacles that are associated with crowd funding that have not been fully explored. The nature of how some medical devices are brought to market creates a hazy cloud over the crowd funding method of investment. Devices with the least risk, that do not need to go through clinical trials (Class I device) can be promoted through crowd funding without any complications. It’s the high risk devices such as pacemakers that are creating a bit of a stir.
An article written by statnews.com clearly shows the challenges that can be created through this type of funding. One of the problems is that medical device companies start to advertise a product that has not gained FDA approval. Potential customers have been investing in some companies with the hope that they will get the product by a certain date. However, due to increasingly long process of getting approval these dates are being pushed back.
Medical device manufacturers are also being persecuted for the language used to advertise them on these sites. Some companies are making extravagant statements that could be considered as false advertising that entices the public to invest. The threat involved with having promised online investors rewards or a product by a certain time frame can be detrimental for your company. You could be in line for a lawsuit if you are really unlucky.
Crowd funding is still a relatively new phenomenon for the medical device industry and there is still a lot to learn about the implications of the public investing in devices that are still in development. However, if you tread with caution and don’t make promises you are not able to keep – crowd funding could be a means to an end for the medical device industry.