I recently caught up with Andy Richards, a member of the highly exclusive angel network Cambridge Angels, one of the most well-known business angels in the UK, and one of the most experienced business angels in the biotech and healthcare sectors. We had such a great discussion on the role of equity crowdfunding in healthcare, and the role the crowd could play in the future of healthcare, that I decided to write about it (sorry Andy!).
Why do people want to invest in healthcare?
The key difference between investing in a technology business versus a healthcare business is the motivation behind the investment. While business angels invest for financial gains, most will also consider why they want to see a specific business or technology succeed. In healthcare this second component plays a larger role than usual in the investment decision. Who wouldn’t want to be part of the cure for cancer? And while you’re at it potentially make a large financial return.
Doing good, and investing in matters close to the heart, are clearly going to play a big part in drawing crowdfunding to healthcare. Just ask our friends across the pond at BIOtechNow.org, who echo our thoughts.
Crowdfunding is not for all healthcare projects
Drug-discovery businesses tend to be very capital-intensive (often requiring tens of millions of pounds) and have very long timescales (it sometimes takes decades to know if they will sink or swim). Not your standard crowdfunding campaign, and not likely to succeed in the current market.
However, there are many investment opportunities within the healthcare sector that are less capital-intensive, and run to shorter timescales. Technology in medical care, wearable technology (such as watches that can measure blood pressure), and innovative products or services aimed at the NHS are all candidates for crowdfunding.
You are not investing in the next Facebook (but possibly something bigger)
Experienced investors understand that investing in sophisticated healthcare investment opportunities means getting involved with a long-term game, and while you may invest in a company that could eventually become more valuable than Facebook (and some healthcare giants are), it usually takes decades, not three–seven years, to get to a multi-billion pound valuation.
The opportunity could lie with businesses that improve the lives of elderly people
While young entrepreneurs and the crowd tend to focus on physical-activity-related tech, such as smartwatches that track your workout, Andy suggests that the better opportunities from an investor perspective are in healthcare for the elderly, and disease-related innovations. So while the young will continue to crowdfund hip new gadgets, the investment opportunities with the most potential, both in terms of social impact and financial return, are more likely to be spotted by the wiser and wealthier investors.
All in all, Andy and I had no doubts that the future of innovation in healthcare will include crowdfunding as one of the funding mechanisms. Not all projects will be or should be funded this way, but just imagine how great it would be if you were to wake up in ten years’ time and know that you supported a once-tiny innovative company on its way to helping to cure cancer.
And in my opinion that is what makes crowdfunding and healthcare such a cool thing to think about.
If you are thinking about raising funds for your healthcare company, read this post about the four key strategies to a successful healthcare crowdfunding campaign and get in touch with us.
Note: this post is focused on investment through equity crowdfunding for innovative companies. Other types of crowdfunding for healthcare exist. For instance, in the US crowdfunding to pay for your own healthcare seems to be growing, as is raising small amounts for small healthcare projects in exchange for a reward.
4 min read
Just don't do it: Why Ali Ahmed should reconsider his perspective on crowdfunding
3 min read
Entrepreneurial investment – let’s get this show on the road!
3 min read
De-risking biotech investments: A novel strategy
2 min read