Does Crowdfunding Have a Future In Life Sciences?
May 17, 2016
While it may seem intuitively odd to welcome the public into the highly- skilled sphere of life sciences, there is a growing body of successful crowdfunding ventures in the life sciences field.
It’s clear that the sector needs the injection of capital, with medical innovation across the globe currently mainly relying on the efforts and funding of a few big companies and occasional government grants. This is not sustainable- particularly as investment and grants are often skewed towards later-stage projects that carry less risk. The traditional model of researching behind closed doors also fails to access the breadth of human knowledge and effort available-particularly across disciplines.
As such, there are two types of crowdsourcing: one raises funds, the other raises ideas.
Equity crowdfunding has provided the answer to financial challenges for some life sciences businesses, and this new strategy has generated considerable funding in recent years. Equity crowdfunding has raised over £17 million for 42 life sciences businesses across Europe between 2010 and 2015, with the average campaign raising around £400,000, according to a study by BIOCOM as reported here. Crowdfunding for life-sciences is also gaining momentum in the American and global markets- with some spectacular successes such as the 1.2 million dollars raised via crowdfunding for ReWalk Robotics- the exoskeleton that is allowing people with spinal cord injuries to stand upright and walk again. That company is now a public company with strong share values and is a great example of the financial potential of crowdfunding ventures.
The benefits are not just financial. Equity crowdfunding as described above can be very helpful at raising funds for later-stage projects, such as when they are approaching clinical trials, and have encouraging results to present to the public. Yet this is rarely helpful for projects in the early development stage.
Reward-based crowdsourcing is particularly useful for this early development, or for accessing solutions across other academic disciplines. By offering a reward to provide innovative ideas and research, life sciences companies can access a wider pool of specialised knowledge and synchronised effort that companies working alone (particularly the small biotech firms or promising start-ups) can’t hope to match. With hundreds of people working on the same path (while paying only those that succeed), a company can make faster progress towards trials and development than when restricted to their own team.
This is particularly helpful for research requiring solutions across disciplines, such as the case of the Cleveland Clinic crowdsourcing for an algorithm that could predict cancer survival rates.
What are the possible pitfalls of crowdfunding in life sciences?
Detractors have put forth their concerns about crowdfunding in life sciences, pointing out the requirement for long-term investment, and the potential for fraudulent companies approaching sick and desperate patients for money. However, proponents argue (as in this article) that the crowdfunded projects often go public earlier than companies funded by traditional investment, and that the very public nature of crowdsourced ventures will work towards preventing fraud.
Is there a future for crowdfunding in life sciences?
As the human population grows and life expectancy increases, it’s crucial to be able to fund health research properly. Crowdsourcing allows innovation, funding, and input from all sectors of society.
While only the very ambitious are currently envisioning total investment through crowdfunding, there’s certainly a sense that crowdsourcing of ideas and funds has a bright future in the life sciences.