MedStartr Offers Crowdfunding for Health IT Firms, Including Itself
A couple years ago, when Alex Fair was tossing around ideas on how to raise money for his new healthcare marketplace, FairCareMD, he knew that putting the startup on the uber-popular crowdfunding platform Kickstarter would be out of the question. Kickstarter has collected $250 million for 24,000 projects since it was founded three years ago, but virtually none of that has gone to health-related companies. “I said, ‘Hey, there’s an opportunity here,’” Fair says. “No one’s really doing health care crowdfunding.”
Enter MedStartr, Fair’s New York-based site that’s making its debut today. MedStartr allows entrepreneurs to find backers for healthcare technologies and services. The site, which Fair says ran a brief alpha test starting in April, is launching with six projects, including MedStartr itself. During that early project, which was designed to test the concept, Fair was surprised to find MedStartr was able to raise enough capital to run the company. “Of the 71 people we invited to view the alpha, six invested,” he says. It’s a sign, he believes, that “crowdfunding has hit the public consciousness.”
The other projects on MedStartr include a Web portal for physicians and their patients and a smartphone app developed by a Johns Hopkins graduate student for tracking and reporting sexually transmitted diseases.
One of the most popular MedStartr companies, Fair says, is Duet Health Partnership, run by pediatric endocrinologist Jennifer Shine Dyer of Columbus, OH, who developed an app to help teens and adults with diabetes manage their disease. Dyer, who calls the app EndoGoddess, hopes to raise $25,000 to run a clinical trial testing whether people who use the app to track their blood sugar have fewer complications related to their disease.
Dyer initially went to Kickstarter, but was turned down. “They told me it wasn’t within their project guidelines because it has a medical focus,” she says. During the alpha test on MedStartr, 12 people pledged a total of $500 to the EndoGoddess trial, raising Dyer’s hopes that she may get close to hitting her funding goal, especially after the site opens itself up to the public and she’s able to spread the word about it on diabetes websites and social networks. “I think it proves that people want to part of financing this research.”
MedStartr plans to bring in revenues by taking a 5 percent cut of funds raised via the platform. The company will also offer video packages and other services to help MedStartrs bring attention to their projects. Fair and his small staff carefully vet each application, he says, to make sure the projects will have a good shot of success on the site. “We guide the MedStartrs,” Fair says. “We spend a lot of time helping them shape their products.”
Fair brings a career’s worth of insights to his role as health-startup mentor. He was originally trained as a molecular pathologist and was waiting to get into medical school when he decided to open a physician practice management company in the 1990s. He abandoned the med-school plan, built up the company to 1,000 physicians under management, he says, and then sold it. After a string of IT jobs, he started FairCareMD in 2009. The company allows physicians and dentists to offer their services to patients who have to pay for their healthcare out-of-pocket. The providers then establish contracts with patients to provide the services at mutually agreed-upon prices. Fair continues to serve as president of the company.
Fair has become a well-known figure in the New York health IT scene, acting as manager of the industry association Health 2.0 and a mentor for Blueprint Health, a new health IT incubator in the city.
The response to MedStartr has been surprising so far, Fair says, as 75 entrepreneurs have sent in applications. “There are fitness projects, wellness projects. There’s an oncology center that wants to open a second location,” he says. In late June, he recalls, while he was participating in a Tweetchat on crowdfunding, three applications arrived in MedStartr’s inbox. “We are flooded with requests,” he says.
MedStartr is looking for $1.25 million in seed capital to expand the company’s offerings. In the fall, Fair hopes roll out a series of events for health entrepreneurs, and to begin testing an extension he’s calling MedFundr, which will allow accredited investors to purchase equity stakes in MedStartr projects.
Fair was partly inspired to found MedStartr by the recently passed Jobs Act, which includes a provision that allows entrepreneurs to raise up to $1 million by selling securities via crowdfunding. The SEC is still working on the final rules—and many health-related startups will be subject to other restrictions, including FDA guidelines—but Fair isn’t concerned. “It’s definitely going to add to the challenge of what we have to do. But uncertainty leads to innovation. Whatever comes, crowdfunding is here to stay.”