How Biotech and Crowdfunding Are Coming Together

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Scanadu is making headlines around the world for being one of the first real medical diagnostic tools that can replicated what the Star Trek tricorder could do. It raised $1.6 million in crowdfunding and is getting ready for distribution as of early 2015. This rewards-based effort saw success, but is the rewards model really for the biotech industry?

Probably not. The costs of clinical trials and research are much greater than crowdfunding could ever provide. That’s why equity crowdfunding is a better option for this industry. The rules of US equity crowdfunding are still situated in regulatory purgatory, but the same isn’t true for the rest of the world. Biotech has seem some big successes outside of the US.

ReWalk Is Proof the Concept Works

This company has manufactured the first exoskeleton for people who have a spinal cord injuries that was given FDA approval. They couldn’t raise equity in the US in 2013, but they could in Israel. $1.3 million was raised and in 15 months, the company went public and the stock doubled in value on its first day of trading. It’s not trading anywhere near its $43.70 high right now, but backers are still very bullish on what this company could do – all because crowdfunding was able to lend a helping hand in the beginning.

In many ways, crowdfunding for biotech is going to be a lot like opening an account with a broker to purchase stock in Dendreon. It’s just going to be a lot cheaper to do because there won’t be any of the typical fees that backers would need to pay to get some skin in the game. If you have $1,000 to back, do you really want to spend $10 on fees from an online platform? That’s almost an entire share of ReWalk at the time of writing.

The internet has been talking about crowdfunding being the future of the biotech industry since 2013. If the equity crowdfunding rules can finally be released in the US, then 24 months of hopeful opinions and reflections can finally be turned into a reality. Although crowdfunding won’t completely replaced private backers or grants, there is no denying that the average person is very interested in being on the cutting edge of the biotech industry.