In this weekend’s Bonus Features (Aren’t Bonus Features great?!), you may have seen that Brian mentioned that Rhinogram has launched a crowdfunding campaign to raise money for their secure communication platform for healthcare. Given the Rhinogram has been around for a long time, is used in 750 locations and across 50 different healthcare specialties, you may wonder why they chose to go the crowdfunding route. I did, and so I asked Dr. Keith Dressler, CEO and chairman of Rhinogram, to learn more about the decision.
To be fair, I’ve been a long time fan of the idea of crowdfunding. I’ve been to crowdfunding conferences and part of a number of crowdfunding communities. I believe in the power that’s associated with the widom of crowds. In fact, it’s what I love most about the health IT community we’ve built here at Healthcare IT Today and our healthcare marketing community at HITMC. The crowd has so much more wisdom than any of us individually. However, I wondered how the crowdfunding model would work for a healthcare B2B company and one that was quite well established.
When I asked Dressler about this decision, his main reason for doing so surprised me a little:
The first and main reason is that as our founder, I truly enjoy sharing successes with everyone who has contributed to the current growth of Rhinogram to date. These people are our original investors and their friends and family, our employees and their friends and family, and our existing users and their friends and family. I have heard over and over, “I love Rhinogram’s technology and how it is transforming communications between patients and their providers, I wish I had the money to invest.” Well crowdfunding allows those with smaller resources to invest. An initial investment in Rhinogram can be as low as $250, with the same bonus opportunities as someone with much larger resources.
I’ve read lots of stories about founders who have helped those around them be more successful. That is a beautiful feeling. Of course, it also doesn’t acknowledge the risks since there are as many stories of friends and family rounds that didn’t go as well. That piece aside, it’s a long debate in crowdfunding circles about whether people should be protected from risky investments when they don’t have the liquidity to invest versus those rules meant to “protect” investors actually being barriers to entry to those who don’t have wealth. Basically, are investing rules really protecting lower income investors or are they just helping the rich become richer while restricting those who have less.
We won’t settle that debate here, but it seems clear to me that Dressler believes that access to investment opportunities is beneficial. I tend to agree with him as long as the new investors are well informed and so it’s pretty cool to see that more people will have the opportunity to invest and benefit from the potential upside.
Dressler also said there were several other reasons he saw crowdfunding as a good option for Rhinogram. The first is the most common value stated for crowdfunding which is by having 1,000 or so small investors (or however many invest) in a brand, you just created 1,000 brand advocates that could help accelerate the brand recognition. I’ll be interested to see how this plays out in healthcare and specifically the Healthcare B2B world.
Another benefited cited for crowdfunding Rhinogram by Dressler was “it is non-institutional money, which creates more long-term value for our investors as Rhinogram grows versus bringing in institutional investors today that would most likely dilute Rhinogram’s current shareholders and possibly control the future direction of the company.” A number of benefits that many startup founders and early investors will understand and appreciate.
Now to get to the headline question. Is crowdfunding right for a health IT company?
The answer is classically it depends. I bet many will be watching Rhinogram to see how they do with it. It’s worth also remembering that even with crowdfunding it takes work to drive people to invest. Getting institutional investment is a full time job too, but crowdfunding isn’t just a “if you build it they will come” approach. It takes work to let people know about the opportunity and you have to still convince a mass of people to want to invest. Granted, the risks are lower, but it all still takes work.
We’ll keep an eye on Rhinogram’s crowdfunding campaign and update you on how it goes. What do you think of crowdfunding in health IT? Is this a good option?
