Health Tech Hatch Widens Crowdfunding Choices for Health Startups
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offering services designed to meet the particular needs of health care entrepreneurs.
As the site’s plan was being developed, its staffers worked with very young companies and taught some of them basic skills like setting up a Twitter account. But some entrepreneurs said they’d be willing to pay the company to create their crowdfunding campaigns, rather than struggling to do it themselves, Salber says.
Part of that service could involve developing a budget for the project, or providing marketing support and other expert mentoring. Entrepreneurs also told Salber they’d like a mechanism to get in touch with clinicians, patients and others who could try out early versions of their products and give feedback. Health Tech Hatch has been making those connections informally for some of its first clients, but hopes to automate the process in the future.
That option appeals to Whitters, now the CEO of Higher Learning Technologies, the Iowa City, IA, company he co-founded with a group of other dental students and friends. The startup has completed the iPhone format of its first product, a test preparation guide for the first stage of the dental board exams. (See video.)
“We could really use an easy way to contact people to test it,’‘ Whitters says.
Both Health Tech Hatch and Medstartr are still startups themselves, with fewer than 10 crowdfunding campaigns on each site.
At this point, Health Tech Hatch has two paid full-time employees, three part-timers working for equity, and two contract employees. The self-funded privatebusiness is now seeking venture firm backing, Salber says.
The crowdfunding site screens all applications to make sure the participants have the skills and commitment necessary to complete the projects they propose. Entrepreneurs set a dollar amount and a deadline to reach that goal. If the project reaches the target, Health Tech Hatch charges the credit cards of those who agreed to contribute, and subtracts a fee of 5 percent of the total. It also deducts credit card processing fees of another 2 to 3 percent before distributing the funds to the entrepreneur.
Projects can also receive the contributions if they raise at least 60 percent of the target amount, but in that case Health Tech Hatch charges a 9 percent fee, Salber says. The fees are the same whether the client is a for-profit company or a non-profit.
Salber, who is vice-chairman of the board of the National Crowdfunding Association, says one important aim of her company is to uphold the reputation of crowdfunding, so that it doesn’t come to be seen as “a form of electronic panhandling.’’ As one way to reinforce the credibility of its platform with funders, Health Tech Hatch has created a newsletter as an easy vehicle for its clients to update their contributors on a project’s progress once they receive their seed money.
The Larkspur company now offers two varieties of crowdfunding, roughly termed rewards-based and donation-based. Most entrepreneurs thank people who kick in funds with small gifts or acknowledgments. These rewards can range from a mug with the company logo to the naming rights for an element of the project. In the second type of crowdfunding, some non-profits may be able to offer their funders a tax deduction for their donations.
But next year, crowdfunding sites will be able to support clients who offer equity stakes in their companies in exchange for contributions—an innovation authorized by the Jumpstart Our Business Startups Act (JOBS Act) signed by President Obama in April. Health Tech Hatch plans to offer this equity-based crowdfunding service once the Securities and Exchange Commission issues regulations to govern the new financing method.
The startup will again be competing for health care clients with Indiegogo, which also plans to offer equity crowdfunding.
In the meantime, Whitters is satisfied with the results so far for Higher Learning Technologies, which drew nearly $2,000 in funding pledges in about a week. Its goal is to raise a total of $32,400 by Dec. 6. The money will help the startup create a platform that students can use on any computer or mobile device, so they can prep for tests at home, or in spare moments during the day wherever they are.
As one of Health Tech Hatch’s first clients, Whitters’ company benefited from personal training in social media and crowdfunding techniques. He says the specialized site for health care entrepreneurs was the best fit for his project.