Is Crowdfunding The Future For Biomedical Research?

7/11/13Follow @3nt

Microryza.com (not the catchiest of names) is a crowdfunding platform for research that raises money over the Internet from individuals who are willing to donate small amounts to fund a specific project. The average donation according to Microryza is $92.

In return for a 5 percent cut of funds raised and a 3 percent credit card processing fee, Microryza provides researchers access to a website where they can solicit money from the public to fund their research. Crowdfunding is typically an all-or-nothing deal, where donors only have to pay their pledged support if the project is fully funded within a defined period of time.

Is this the solution to the reduction in government funding of science?

Crowdfunding has received the endorsement of President Obama. At the White House on June 4, a dozen entrepreneurs who used crowdfunding for start-ups and innovative projects were recognized as “Champions of Change.”

As Thomas Kalil, Deputy Director for Technology and Innovation for the White House Office of Science and Technology Policy, noted in the event’s press release, “Crowdfunding is the 21st century equivalent of barn-raising. We can use it to help our neighbors and fellow citizens start a business, enrich our culture, and apply grassroots creativity and imagination to challenges big and small.”

It’s relatively easy to decide whether to fund an experienced radio journalist such as Andrea Seabrook, who raised more than $100,000 to fund Decode DC, a podcast and public radio show, but does crowdfunding work for science projects?

One young researcher hoping it does is Atif Syed from the Department of Electronics at the University of York who, along with his colleague Zakareya Hussein, is seeking to raise $3,000 to fund initial research into a novel drug-delivery patch (Nanject), which uses magnetic nanoparticles. As of the morning of July 10, they were still a long way off, with only $308 pledged to date.

While I don’t have the scientific knowledge of nanotechnology to make a judgment on the value of their project, or the potential of Nanject, I do admire their entrepreneurial spirit.

According to Microryza, research projects have to meet three criteria to be listed:

1. The projects seek to answer a scientific question.

2. The project goals are within the capabilities of the researcher.

3. We can verify the researcher’s identity.

The weakness in this approach is … Next Page »

Pieter Droppert is a management consultant, lawyer, science writer and editor of the Biotech Strategy Blog (http://biotechstrategyblog.com) on science, innovation and new product development in the pharma & biotech industries. Follow @3nt

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  • FundMyMedResearch

    We, at http://www.FundMyMedicalResearch.org, are a non profit who have decided using crowdfunding with a different angle. We ask people to make donations that will be invested in biotechs looking for funds to finance their first clinical trials. The non profit uses donations to invest in shares, and so get regular updates from the biotech that are shared with donors. Furthermore, in case the biotech gets bought, money comes back under donors’ control that can decide what will be the next biotech receiving an investment. Think of it as the Kiva for biotechs.

  • Nick Dragojlovic

    One way of making it easier for donors to select worthy projects is for research funding bodies to endorse proposals that they have deemed fundable but for which funding was not available on either their own crowdfunding websites or on third-party portals. See:

    http://nickdragojlovic.com/why-science-funding-bodies-should-use-crowdfunding/

  • Lah99

    Biotech is risky and requires a lot of money to get to success, if achievable. One must distinguish between making donations to something one believes in and investing with the expectation of a return. For the former, there are plenty of portals for making these “Crowdfunding” donations. Investing requires a different kind of diligence and disclosure which can be achieved by a crowdfunding mechanism, but still requires these essential elements.

  • Louis Ferland, PhD, PMP

    Interesting new model. A new organization, Bio, Tech, and Beyond is just being set up in Carlsbad, CA, in an effort to “democratize biological research” and make it available to “citizen scientists”. Basically, it will be an incubator space available for rent at very low cost. The set up of the incubator itself will be financed through a crowd funding effort. This is not quite the same as crowd funding of individual projects but I think the concept is worthy of checking out: http://biotechnbeyond.com/. They had their ribbon-cutting ceremony just last Friday, and are having their crowd funding kickoff event tonight. Perfect timing!

  • Phil Pogge

    I think the real value of crowd funding is to get market validation. I don’t think it is a good way to bring capital into a business or funding into a research effort.

    Today, there are two different types of crowd funding platforms. There are rewards based like Microzyra and the granddaddy of the space Kickstarter. These platforms do not sell any securities or equity interests in a project or venture. Instead, it is a donation (which is necessarily tax deductible). Rewards based crowd funding is a great way to get market validation. The project sponsor needs to drive traffic to their campaign. The platform helps, but in almost all campaigns, the large majority of people donating came from the network of the campaign sponsor.

    The other type of platform that has been authorized, but is still not legal because the rule making from the SEC is not complete, is where shares are sold. We call this equity based crowd funding. While congress had the best of intentions in creating this, the downside is too great for most people. If there is any malfeasance (real or perceived), the investors will have the ability to go after the personal assets of the managers. Additionally, the cost of having scores or hundreds of small investors is not inconsequential. There is an ongoing cost to provide them tax statements and required government filings which in a couple reporting cycles could exceed the value of the cash they contributed.

    In summary, I think rewards based crowd funding is great and there is too much risk with equity based crowd funding.

    You can follow this link to get a free promo code for our Udemy course on crowd funding: http://www.capitalcrowdfunding.com Included with the courses is tips and tactics to execute on a great campaign. We also include a 45 minute interview with the manager of three successful crowd funding campaigns.

    Phil

    Co-founder INVESTyR

    INVESTyR is making the world a better place by expanding access to capital