New epilepsy treatments plus solutions for certain genetic liver and lung ailments will test the power of crowdfunding.
New York’s Poliwogg will announce today at the JP Morgan Healthcare Conference that it has struck partnerships with the Epilepsy Foundation and Alpha 1 Foundation. Both groups will leverage their connections, used primarily for nonprofit grants, to crowdfund some of the same innovations in for-profit, private crowdfunded investments. The foundations will get a first look at the deals, and companies funded through Poliwogg should expect investments between $1 million and $3 million. In some cases they could go as high as $10 million, Poliwogg officials said.
It’s the first of several aggressive moves you’ll hear this year from those focused on crowdfunding in healthcare. The likes of Poliwogg and MedStartr are eager to break the perception that crowdfunding, typically connected to funding Veronica Mars movies and trendy consumer goods, can consistently provide serious capital to traditional and capital-intensive medical breakthroughs.
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Warren Lammert, chairman of the Epilepsy Foundation’s board of directors and the co-founder of the Epilepsy Therapy Project, said crowdfunding is a “natural follow-on to support young companies” beyond the grants and other support the organization provides.
“We absolutely hope and intend to help bring more innovation, more effective new therapies forward to people living with seizures and epilepsy,” said Lammert, whose organizations have also experimented with crowdfunding platforms including Indiegogo.
Lammert will circulate Poliwogg crowdfunding opportunities through its newsletters, websites and social media to tell its members about the opportunities. He expects investments from his Poliwogg initiatives to range between $1 million and $3 million.
Poliwogg CEO Greg Simon said investments will complement grants, give donors a chance to continue supporting key projects and push companies through the “valley of death” – allowing them to complete proofs of concept and other testing that make them more likely to receive larger, venture capital investments.
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Venture capitalists will get behind this concept because crowdfunding like this will help “stock its pond” with more quality companies, Simon said. He added that crowdfunding will not siphon off donor money of a foundation.
“It will energize the donor base,” Simon said, adding that Poliwogg partners will get a first look at these deals.
“Philanthropy begins these companies but it won’t sustain them,” he said.
The Alpha 1 Foundation, meanwhile, will pair Poliwogg investments with investments it makes through TAP, its for-profit investment subsidiary, said John Walsh, president and CEO of the Alpha 1 Foundation. Walsh’s group supports treatments for ailments related to Alpha-1 Antitrypsin Deficiency, a genetic condition that results in serious lung diseases in adults as well as liver disease.
“We often will need co-investors, and see that Poliwogg may be such an investor,” Walsh said.
Foundations would be a critical validator of the crowdfunding process. Consider that the Epilepsy Foundation has provided funding to about half of the 100 new drugs, devices and diagnostics under development. Though, while some foundations, like Alpha-1, have developed fundraising arms, others have explicitly stayed away from fundraising – some to the point that they keep investors in those sectors off of the board.
Establishing this approach as a bridge for grant-making organizations and their donors to walk across could help plug the gap left by venture funds, which have dwindled and moved upstream.
Poliwogg will be busy in the coming month. It will also announce today that Dennis Purcell, a senior managing partner at Aisling Capital and a Poliwogg investor, will join the company as a special adviser to help find quality companies for Poliwogg’s platform. Poliwogg will then make another, smaller announcement on Tuesday at JP Morgan.
Poliwogg prefers to call itself a “financial innovation firm” because of its interest in new and diverse ways to fund medical innovations. Over the next few months, it will unveil a series of S&P-like indexes for healthcare (its first, focused on the Affordable Care Act, is already available under the ticker symbol CARE). Poliwogg also hopes to launch publicly registered venture funds.
Simon said Poliwogg will soon complete private investment of its own that is “well beyond $2 million” but less than $5 million (the company has already secured $2.1 million, according to SEC filings).
[Photo from Flickr user Catlinator]