Crowdfunding for medical devices hits Web

Daniel Yachia, left, and Sedat Barokas
Source: B-A-Medfounder
Daniel Yachia, left, and Sedat Barokas

Here's a prescription for cash-strapped medical device inventors: Crowdfunding.

A new Web company is taking advantage of the trend of Internet-enabled public funding of projects by offering to connect inventors of smaller medical devices from around the world with people who can give them the cash they need to get off the ground.

"There are people in many different countries that have bright ideas, and they don't have the contacts in order to show them," said Daniel Yachia, co-founder and chief medical officer of the new online crowdfunding company B-a-MedFounder.

"If you're not well-connected to big companies or funding yourselves, it's very difficult to get funding for your idea," he said.

"We are giving them a stage to show," said Yachia, a professor of urology at Technion-Israel Institute of Technology in Haifa who holds more than 30 medical device patents.

He founded the site with his brother-in-law's son, Sedat Barokas, who has worked in private equity and investment banking at Turkven Private Equity in Turkey, and JPMorgan in the United States.

B-a-MedFounder is just Yachia's latest venture. In 1996, the medical stent company InStent that he co-founded was sold to Medtronic for $200 million.

Other websites, including MedStartr and HealthFundr, are offering similar crowdfunding opportunities for inventors and funders in the health sector. But unlike those sites, B-a-MedFounder is focused exclusively on obtaining financing for smaller medical device projects.

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"During the last year, I saw there are lots of problems in getting funding for new ideas," Yachia said, talking about his motivation for creating the site. "The source of funding for venture capital is almost dry for new entrepreneurs."

The dearth of investor money is particularly disappointing for inventors of small medical devices, which often don't require large sums to get off the ground.

"If I have a project and I got to a VC [venture capitalist], the minimum I need to ask for is $5 million, or they won't even look me in the face," Yachia said.

B-a-MedFounder expects that the bulk of the projects seeking funding will be looking for amounts in the range of $70,000 to $100,000. That's what it usually takes to properly bring a concept to the stage where it is ready for a second round of funding with an eye toward marketing the devices, Yachia said.

Through the, people an contribute as little as $10, in U.S. dollars, euros or British pounds to any posted project. The funds are donations, not investments, that will translate into equity for the funders—at least for the moment.

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Inventors pay the site a listing fee of 100 euros—the euro-based fee reflects the company's incorporation in Cyprus—to have their ideas begin being funded. Before anything is listed, B-a-MedFounder will vet the idea with experts to see if the project is viable.

B-a-MedFounder takes a cut of 5 percent to 10 percent on a sliding scale based on the amount raised.

The money is released to the inventor when a threshold of 75 percent of the funding target is reached. A project has 90 days in which to reach the threshold. If it doesn't make it, the project will be removed from the site, and inventors have to wait to reapply.

"Basically, interesting ideas will get funded," said Barokas, who is CEO. He and Yachia expect that both the projects and their funders will come from around the world.

Two examples of the kinds of projects the site will feature are seeking funds now even as the site remains in beta.

One is a bladder drainage device to get around the need for self-catheterization by patients, many of whom are wheelchair users. The other is a pelvic-floor reinforcing device, to address the incontinence that women sometimes experience as a result of childbirth.

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Yachia said some funds probably will come from the people and families who need such devices.

About 10 other projects, Yachia said, are moving toward being listed.

He anticipates that many devices that investors will try to raise funds for will address unpleasant conditions, but that are ripe for funding from people suffering from those conditions, or their families.

"These are problems that people don't talk about," he said. "They don't talk about leaking bladders or inserting a catheter. The medical devices are discreet things."

In addition to helping obtain funding for medical device projects, the company also has plans to enable crowdfunding for universities and other academic research institutions that want to obtain money to augment medical device research grants that have already secured.

By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan