Lessons Learned from Two Weeks of Crowdfunding

From Anne Giles Clelland:

A quick review:  I’m co-founder of a health startup born in Blacksburg, Virginia. Virginia Senator Mark Warner invited startups to consider crowdfunding in November, 2012, I met Pat Salber, founder of a new crowdfunding site for health startups at the mHealth Summit in December, 2012, I was inspired by both, and we launched a contributions-based crowdfunding campaign for our behavioral health app, Cognichoice, on January 15, 2013.

Lessons learned from crowdfunding

Here are the surprising challenges I have encountered since launching a crowdfunding campaign.

  • I wish President Obama would offer Cognichoice to America because I think it would solve the health care crisis, but even he, champion of the  JOBS Act which champions crowdfunding, can say nothing. Crowdfunders are urged to tap their networks to execute successful campaigns but many members of those networks belong to corporations, organizations and agencies with solicitation policies that forbid or restrict sharing fundraising messages. Public officials and economic development executives can back crowdfunding startups in general, but can’t back crowdfunding campaigns in particular or invite others to join them because they have "an ask" and are therefore, by definition, a solicitation of funds.
  • Corporations, organizations and agencies – especially in the the health care industry – who may be open to backing a startup’s crowdfunding campaign can balk when they learn the project is a health innovation. Backing implies endorsement. What if the health innovation doesn’t end up helping, but harming?  Visions of fen-phen lawsuits dance in their heads. Backing untested health innovations, crowdfunded or not, can be perceived as exposure to too much risk, even as fiduciarily irresponsible.

Given all these unexpectedly closed network channels, what’s a crowdfunding health startup to do?

Take it directly to the people, right, starting with one’s personal network?

  • Having been bent over a laptop in near-solitary confinement for 4 years while trying to build a successful startup, my personal network has dwindled to business organizations that can’t do solicitation of funds, two cats, and the people with whom I share the standard workout nod at my fitness center. 
  • To the over 2000 people in my contacts accumulated over those 4 years, I have sent emails.  I have posted news of our campaign on my personal and business Facebook pages.  I tweet about it a bit. I get choked up when I look at the list of our crowdfunders so far. Most of them are my friends and colleagues. I think those in my personal network who can give have given.
  • The hub of my personal network is a small rural town in a county with a population of 95,000. Can rural startups crowdfund successfully?

Then take it to people outside one’s personal network, right?

  • The general public doesn’t know what crowdfunding is.  I say to educated, well-informed individuals and groups, "We’re crowdfunding!" They say, “What's that?"
  • It’s a hard sell.  "I am asking you to contribute your personal money to our company’s idea. The idea is unproven yet and your contribution is to a for-profit company so it’s not tax deductible.  How much would you like to give?"
  • It's a personal hard sell. Shakespeare had timeless reasons for giving Polonius this line to deliver to his son Laertes in Hamlet: "Neither a borrower nor a lender be."
  • And get this. Missing from the rah-rah about contributions-based crowdfunding is the news that a percentage of the funding received will pay taxes. In my mind, my for-profit startup is a cause, but cause or not, people buy products and services from for-profit companies.  If it's not from investors, what is the term for money given to a for-profit company? A contribution? A donation? I have attorney Ken Maready's permission to quote his answer: "Whether you call it a contribution or a donation, the IRS is going to call it revenue."

Isn’t crowdfunding awesome?!

Who knows whether equity-based crowdfunding, when approved, will move barriers blocking contributions-based startup crowdfunding. An invitation to purchase shares is still a solicitation of funds, prohibited in many arms of our networks. Backing health innovations may still seem incautious. We’ll still have to take crowdfunding “to the people” who still may or may not know what we’re talking about.  And startup founders will still be sacrificing building their networks in favor of building their innovations.

Our startup has just over two weeks left in our campaign.  According to Katie Pritchard who executed a successful Blacksburg-based crowdfunding campaign, "…our campaign was funded in the last 36 hours which it seems is common for projects that don't take off in the first 48 hours (just from experience watching Kickstarter.)"

Reaching our funding goal in the last 36 hours of our campaign would be lovely. I am so grateful to the contributors to our campaign and for the money they have raised for us.  We will put it to good use.

If we don't reach our funding goal, I will be unfazed. Upon hearing me pitch my idea to him yet again, Pat Matthews once said to me with a nod, "You are crazy." Yes, I am. I’m crazy about our startup’s idea. I think it’s game-changing because it can be life-changing.

Onward!

. . . . .

Even the link to this post can't be sent by some who back our campaign because it includes a link to "an ask."

Ah, well.  Onward!  Here's our ask:

If 2680 people contribute $25 each to our crowdfunding campaign, we will make our funding goal.

We are crowdfunding Cognichoice – The App That Helps People Change - on Health Tech Hatch.

We would welcome your contribution.

If you would like to see how far we've gotten with Cognichoice and how it might help people make a needed change, we invite you to try it.  Here's where to register to experience our demo of Cognichoice.

Questions, feedback, comments?  I welcome them. Please email me, anne@handshake20.com, or call me, 540-808-6334. 

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For background on crowdfunding and Cognichoice, these posts may be of further interest:

We invite you to contribute to Cognichoice – The App That Helps People Change.

Cognichoice: One Sentence and a Couple of Examples
Crowdfunder, Who Are You?

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