October 1, 2013
Healthcare is hot. With a massive aging population, the implementation of the Affordable Care Act, and a growing focus on health data, healthcare is a market of great interest, activity, and innovation and will be for decades to come. Healthcare startups continue to emerge, and the potential growth opportunities continue to attract investors – institutional and individuals. Health care professionals, however, are not as active as they could be as investors. As many would be considered accredited investors, it would be beneficial for this vertical to get its investor community involved as it brings not only money, but perhaps something even more valuable – knowledge and passion.
Recognizing that there are still barriers in the alternate asset class that is startup investing, Healthfundr is seeking to lower those barriers and get the healthcare community more directly involved with healthcare startups. The biggest barrier is simply awareness. The typical investor in this community is unaware of the market, or if they are, find it too difficult or time-consuming to navigate. Further alienating this group (and others) is the perception that in order to invest in a startup, you have to write a big check. Healthfundr addresses these challenges by providing a platform that curates high potential startups, creating a structured investment capability where the investor can invest in funds or directly in startups (at a $5000 minimum in most cases), and promoting direct engagement between investors and startups in the hopes of accelerating growth or otherwise lending vital support. By increasing the awareness and reducing the risk, Healthfundr is hoping to expand a niche funder-pool while increasing funding to healthcare focused startups.
Healthfundr was founded by two lawyers; both have extensive experience in securities law, and one maintains his series 63 and 82 licenses. They saw a huge hole in the startup funding community where the healthcare profession should be. What they wanted to do was to find a way to get these experts and professionals involved – for as they saw it, who better to understand the “problems” than the ones who face them head-on in their daily lives? At the same time, the founders also recognized that healthcare startups suffered from a lack of knowledgeable investors in terms of appreciating the nuance or science involved in many of the startups. As cofounder Sean Schantzen explained in an interview with TechCocktail, they wanted to create a platform that allowed a new class of investor “an easier way to get their feet wet in the startup funding market.” To do this, the founders built a platform that streamlines the identification, selection, funding and follow-up processes significantly. This benefits the potential investor by providing a transparent process that is informed by experts and managed by Healthfundr, which in essence “brings” this market to the investor, compared to forcing the investor to seek out, research, negotiate, and follow up on any investment themselves.
Healthcare startups benefit from Healthfundr’s model by having a larger decentralized investor pool, of course. But the real value may lie in the intellectual capital that is extended to the startups beyond the financial capital. As most niche markets require specialized expertise and knowledge, healthcare is heavily laden with regulatory and ethics challenges as well as inconsistent best practices and procedures that change depending on provider or region. These realities, combined with the sensitive nature of healthcare, make for a daunting field of innovation. Any startup that has subject matter expertise or can create some level of credibility based on the profile of certain investors, has a leg up in market adoption, product iteration, or follow-on funding.
Schantzen sums up by explaining that “the goal for Healthfundr is to create a platform that serves the interest of both the healthcare investor and healthcare startup. In the end, though, this will serve the healthcare community as a whole, including the average consumer, by allowing for accelerated innovation of medical and healthcare products and services.”
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