In August 2013, crowdfunders raised $12,814,216 to fund the development and release of a new smartphone, the Ubuntu Edge. The millions of dollars raised on crowdfunding website Indiegogo wasn’t enough to reach the Ubuntu Edge’s ambitious fundraising target, but it is a sign that crowdfunding can raise big dollars.
Crowdfunding is a new breed of online fundraising where members of the public pool their money together to support ideas, projects and dreams. It can provide small private companies with the injection of capital they need to get their ambitions off the ground. In brief, there are two models of crowdfunding:
1. The first is the â€œKickstarter-esqueâ€ model, where individuals donate money for relatively little in return – perhaps a gift or a discount in the future.
2. The second model is closer to the standard investment model, where private companies solicit investment from the public in return for an ownership interest. Where one investor would have previously written a cheque for $100,000, the risk would be split amongst 50 crowdfunders each writing cheques for $2,000.
A key change in this second crowdfunding model – equity crowdfunding – has been the writing of the JOBS (Jumpstart Our Business Startups) Act, which proposes making it legal for companies to publicize their fundraising needs to non-accredited strangers all around the US via a web portal. â€œAll investors, not just the so-called accredited investors, will have the opportunity to invest in entrepreneurs and their ideas at an earlier stage than ever before,â€ Republican Securities and Exchange (SEC) Commissioner Michael Piwowar said (you can read more about equity crowdfunding at Bloomberg).
While crowdfunding has previously been the domain of trendy creative industries, technology start-ups, artists and musicians, could the innovative funding method also be applied to life science companies?
Well, why shouldnâ€™t this work for vaccine research and development? It would allow the public to engage in research that they believe will transform lives and feel a personal connection with. A few vaccine entrepreneurs have engaged with the idea in the past. For example, Nexlead Analytics put out a call on Indiegogo for funding into ColdTrace, a low-cost temperature sensor that keeps track of vaccine refrigeration on the journey across developing countries. The project raised $6,308, according to their Indiegogo page. PepVax are looking to raise $50,000 to develop candidate therapeutic vaccines for breast and prostate cancer, but with 5 days to go (at the time of writing), the Indiegogo page records just $135 raised. The National Breast Cancer Coalition launched the Artemis Project to develop a breast cancer preventative vaccine, and sought crowd-sourced funding on Rockethub.
There are now even crowdfunding web portals devoted entirely to scientific research. Microryza is one such platform, particularly focussed on risky research ideas. Others include Healthfundr and Medstartr. Poliwogg is a life science crowdfunding platform for accredited investors, and Georgia Tech launched their own, called GT Starter.
On the face of it, it seems unlikely that crowdfunding will be a revolutionary source of capital for vaccine R&D. When hundreds of millions of dollars are needed to bring a vaccine to market, a few thousand here and there raised by the public isn’t going to even register on the scale. But perhaps crowdfunding could lead start-up biotechs through the so-called â€œvalley of deathâ€, and bring an idea to the stage where venture capitalists get interested. Crowdfunding could revolutionise funding at the stage where only family, friends and angel investors dare step in.