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08.07.2016

Wide-ranging appeal

Acquiring film-rights, financing new software or investing in medical progress – crowdfunding makes it all possible. Be honest - have you really ever heard about "crowdfunding"? The uninitiated should read this article closely – the new phenomenon is acquiring ever-greater significance in the healthcare industry. This unusual financing instrument, developed around 10 years ago on the US art scene is as simple as it is effective. Ideas and new business models are advertised on the internet and financed by a collective of investors – all with a small outlay for the individual and without the involvement of banks and large-scale investors.

With names such as "Kickstarter", "Indiegogo", "Seedmatch" or "Startnext", these crowdfunding platforms enable individuals, start-ups and established companies to present their ideas on the Internet. After registering online, anyone with an idea can present it to the wider world and ask the other users for financial assistance to help make it happen. Whether vegan yoghurts, super-sized rakes designed to filter rubbish from the sea, packaging-free supermarkets, new software developments, film projects or laser technology, there are no bounds to the ideas collected and presented on these sites. There is however, no guarantee of success. Only those who convince the greatest number of investors can actually start work. In Germany, some 60% of such ideas attract sufficient investors.

Change a lot with a small investment

Every action requires a minimum amount of capital to be gathered by a large number of users (the "crowd") within a defined time frame. Only then can the project start. Each member of the crowd invests only a small proportion of the required final sum. The financing volume, the duration of the project and the minimum amount contributed by each investor is determined by the entrepreneur. The amount invested can range from 5 to 500 Euros or even more. The American crowdfunding platforms often move millions of dollars. Investors in a project that does start up usually receive a return, the nature of which depends on the financing model selected by the entrepreneur.

Experts differentiate between classic crowdfunding, donations and returns. The donation model usually applies to a social project and there are no returns for the donor apart from the pleasure of having contributed to a good cause. Investors in the classical crowdfunding model usually receive non-monetary returns such as shares in the project in the form of film rights, a music CD or a copy of a book. The yield model is different. Here, investors are granted a share in the success of the project and are paid back their money plus an agreed rate of interest.

Originating in the USA, the first crowdfunding platform went online in 2006. Starting as a vehicle for collecting donations (e.g. for micro-credits for small-scale farmers in developing countries) or financing niche projects in the arts scene, this model for raising funds took a while to spread over the "pond" and catch on in Europe. The first major publicity in Germany for crowdfunding came in 2011 with the cinema film "Stromberg", which was financed in this way. Generating considerable hype around crowdfunding, this campaign saw the launch of many new platforms.

An interesting option for the healthcare industry as well

This new funding instrument also represents an interesting option for the healthcare industry. For example, the American Molly Lindquist and her husband, the anaesthetist Dr Scott Finkelstein, launched the not-for-profit crowdfunding platform "Consano" to collect donations for medical research projects.

The German platform "aescuvest" on the other hand, was established to find funding solely for medical products and services. One of the projects it publicised last year was "Anamneseguide", special software designed to help the doctor ask the right questions at the right time, regardless of his/her specialism and interests. The software combines this anamnesis function with a database of diagnoses. The user enters the symptoms and laboratory data and receives a list of questions to ask regarding the symptoms, risk factors, previous conditions and other symptoms in relation to the most probable diagnosis at the time in question. The system accesses an artificial neuronal network to select further questions and answers in the form of a differential diagnosis. The software algorithms are also designed to incorporate less-probable diagnoses in the decision-making mix.

Two further creative souls who drew inspiration from the crowdfunding approach are biochemist Dr Martina Schad and physicist Dr Jim Kallarackal. Founding "OakLabs" in 2011, they needed a crowdfunded investment of EUR 500,000 for the development of their "PCRdrive" and "SimPCR Kit". Their idea involved the use of gaming technology to revolutionise the PCR standard analysis methods of molecular biology. PCR is used to diagnose infectious diseases, analyse spoiled foods and create a genetic fingerprint or lineage report. OakLabs wanted to accelerate the analysis process via molecular simulation on graphics cards by a factor of up to ten, thereby also increasing efficiency. The financial goals were met within the same year.

A further example is "uBiome", a crowdfunding project presented on the US platform "Indiegogo" for a new and innovative analysis method for microbes in human bodies. The campaign gathered more than USD 350,000. A further initiative from the same stable was the "Dental Genome Kit", which sought to reveal the microbiological causes of bad breath using a saliva sample. Collecting around USD 60,000, it was supported by 331 investors.

Published by: ml/rf
Wide-ranging appeal

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