Latest / StartUp Health NOW Podcast / Crowdfunding for Health Startups: A Masterclass From a Founder Who Raised Millions

Transcript

Crowdfunding for Health Startups: A Masterclass From a Founder Who Raised Millions · StartUp Health NOW Podcast

• 0:00
  Welcome back to Startup Health Now, the podcast where we celebrate the entrepreneurs and innovators who are transforming health. I'm your host, Logan Plaster.
• 0:07
  [piano music] I don't know about you, but when I think about crowdfunding, I generally think about a Kickstarter campaign for a viral product, let's say a 3D-printed prosthetic limb or some new board game under development.
• 0:21
  That perspective changed after I had a conversation with Jim Iverson, the CEO and co-founder at Senjam Pharmaceuticals.
• 0:28
  Jim has been a part of the Startup Health community since 2018, and I learned recently that he has successfully raised more than $3 million through crowdfunding platforms like RedCrow and Wefunder.
• 0:40
  I wanted to hear exactly how he did it, so I invited him on for a master class in front of an audience of a few dozen founders from our community. The following conversation you'll hear is an excerpt from that full hour.
• 0:53
  Jim and I dive into which crowdfunding platforms are best for healthcare startups, how to get your first campaign launched, and strategies for incentivizing your investors.
• 1:03
  Interestingly, you'll hear how Jim has created a portfolio of 22 patents and made a way to give fractional royalty rights to that portfolio of patents to folks who invest.
• 1:14
  We'll also talk about the kind of communication strategy necessary to turn your current investors into repeat investors. Let's get into the session.
• 1:22
  [upbeat music] So when people think about crowdfunding, I think, uh, it would be understandable for folks to think, "That's not for me. That's not for my type of business.
• 1:35
  Uh, maybe Jim's got some magic product or startup that works better for crowdfunding than my company would." So let's just start by understanding you, a bit of your background, and what you're building at Senjam.
• 1:46
  I've spent a career in supply chain. I've built a number of supply chain companies, both on the engineering robotics side and on the software side.
• 1:54
  I sold my last operating company seven years ago, a software company I had in Houston, and it was at that time my wife, uh, Jackie, who's a pharmacist, came to me with this idea, um, a- a- about changing the course of inflammation and how inflammation is such the red thread through, you know, most disease states, um, with acute inflammation going to chronic, chronic inflammation gone untreated, goes to tissue damage, disease and death.
• 2:20
  And we started out with, uh, you know, this in mind, looking at some large unmet needs that Jackie had, uh, interest in.
• 2:28
  And, um, you know, prior to 2020, we self-funded the company, and we did that, and then in, in 2020 was our first foray into crowdfunding. You know, leading, leading up to that, um, I, I was a student of crowdfunding.
• 2:44
  I was fascinated when the Jobs Act came out. Um, I like disruptive technology.
• 2:50
  As we're looking to disrupt, uh, the life science space, we saw this coming through as from a fintech perspective of really giving access to capital to, um, you know, to companies and allowing retail, uh, unaccredited investors to participate in, in investments that they'd never been able to participate.
• 3:09
  We started our first campaign with a company called RedCrow, and we raised about $600,000 with, uh, under Reg D, and then we, uh, we went to Wefunder after that and raised over a million dollars with Wefunder.
• 3:24
  I think when a lot of folks think about crowdfunding, they think about things like Kickstarter, obviously a, you know, huge player, uh, but, but that has been more known for sort of viral products like tiny projectors and collapsible bottles and things like that.
• 3:39
  So, but that's, that's sort of the old way, and there's a whole new world, like you mentioned, Wefunder, uh, and you said RedCrow.
• 3:46
  Beyond those two, can you give us a little bit of a, like, a industry overview, kind of what's the current state of crowdfunding for startups like the folks on this call? Yeah.
• 3:57
  So the two lead horses are, are, uh, StartEngine and, and, uh, Wefunder. And, uh, and then there's a whole bunch of other players that are behind that, that, uh, you know, that all have a, have an offering.
• 4:10
  But, you know, there's a, there's a rating company called KingsCrowd, uh, and KingsCrowd, uh, similar to what Moody's or, or, um, Standard & Poor's rating stocks, KingsCrowd, uh, was created in order to evaluate crowdfunding companies, as well as the companies like Senjam who are in crowd-- uh, w- you know, who are, who are a part of, uh, a crowdfunding initiative.
• 4:36
  Is there a type of startup that you think is particularly well-suited to this type of raising? Is there a type of company that is really not well-suited, or is it just a matter of your, your ability to sort of execute?
• 4:50
  My entrepreneurial career has been focusing on what we can do and not what we can't do.
• 4:55
  If you're a, a health transformer and you got a moonshot, and, uh, you've got a large unmet need, which is in defining any business model, you know, you need a large unmet need, you need some type of proprietary technology, you need a team to execute, you need to know how much money you need to get to a inflection point, um, and y- uh, and, you know, h- and where are you gonna-- how are you gonna raise that capital?
• 5:18
  And then you need to, you know, you-- number five is you wanna make investors a lot of money. I think anyone who can identify those five elements i- has potential for crowdfunding.
• 5:30
  Crowdfunding's an incredible proxy for, for, you know, how well your business is and, and what you're doing.
• 5:37
  After trying a, you know, a bunch of the different, um, crowdfunding companies, you know, we, we've done two campaigns now on Wefunder, and we're very, very partial based on everything I've learned to what W- based on what Wefunder does.
• 5:51
  They s- do some really unique things that others don't. Um, but, you know, the ability to test the waters.
• 5:58
  S- so you're able to set up a campaign page very, very quickly, and then you're able to go out and do some testing of the waters to see how well your campaign's gonna g- gonna, gonna go. Yeah.
• 6:09
  And you can make a decision before you press the Go Public button, which means that you're now allowing anybody to, to buy it, whether you have enough momentum or not.
• 6:18
  And, uh, so, so there's a, there's a way of if you're not feeling up to it or you don't feel like you have the momentum-You, you could, you could pull it, and there's, uh, and there's no real damage It's l- it's low risk is what I hear you saying.
• 6:30
  Low risk. Exactly. And, uh, relatively low time commitment. A couple details. You said you could get a, a page set up pretty quick. How long did it take you to get set up? It's less than a day. Okay. Less than a day.
• 6:41
  To, to do, like, the initial, obviously we can talk about marketing and talk about how much you built it out. Do you have to spend time on this every week? What's the maintenance, uh, that you have to put into it?
• 6:50
  Yeah, one of the things that I realized, this is not... This is serious. So after, while you're, you're getting your, your campaign up and you're testing the waters, you've got to complete, um, w- a Reg CF form.
• 7:03
  And, uh, and it's, it's really, like, it's, it's filed with the SEC, and every year you have to do annual filings.
• 7:10
  And, you know, what I learned with some of the different crowdfunding companies, some are much better at helping you with that than others. So that- that's a, that's a big thing to, to do and complete. It's not hard.
• 7:21
  They, you know, Wefunder has been fantastic with, you know, with the work that we've, we've done there.
• 7:27
  You know, and then, and then after that, after you, you test the waters and you feel like it's, you know, time to green light things, you flick, you know, you flick the switch and you're live.
• 7:36
  You know, when we first started, you know, I asked the question of, "How many of the investors come from the crowdfunding company?" And everybody said 60 to 70%. And I realized that was not true at all.
• 7:48
  And I think that there...
• 7:49
  If you were to ask any of the crowdfunding companies now, they would probably say, you know, "20 to 30% are, you know, coming from our investors, and the rest come from, you know, your, your investor base," which is, you know, friends, family and, you know, contacts and all of that.
• 8:05
  Tell me about, like, the inflection point. So you, you, you put a, um, a, a campaign live. You have no idea really how it's gonna go. And w- what's your first step in toward, in terms of letting the world know?
• 8:17
  Is it mostly LinkedIn? And at what point do you start to see a little bit of, of, of growth?
• 8:22
  Yeah, so it's all the traditional social media stuff, but, but within the crowdfunding, uh, companies, uh, they have update pages, and some are better than others.
• 8:33
  You know, when, you know, you know, looking at Wefunder's ability to update a, update a, create an update, and then take that link and put that link onto, uh, LinkedIn or, or Facebook or other social media things, that's a real great tool, and that's, that's worked very, very well for us.
• 8:51
  And as people start to follow you, um, when you put an update out, it goes to all of your followers as well.
• 8:58
  And, you know, that's, that, that's when you start, you know, building the ecosystem of followers and investors.
• 9:04
  In addition to that, Seng Jam has been very, very heavy on, uh, uh, marketing to our existing investors, you know, high communication, high touch, and then, you know, putting updates, and then doing webinars.
• 9:17
  Webinars have been the highest performing, for Seng Jam, have been the highest performing return for, given the work that we're doing. And I send personal emails.
• 9:28
  When we get a new investor, I send personal emails to everybody, and then I put them on our Angel Span investor relations letter for, for following up. Let's go to some questions from the chat.
• 9:38
  We've got a bunch of good ones. W- we're gonna start with Ariel Messer from Insulearn. So my question is, what are the advantages of doing crowdfunding as opposed to raising money with VCs?
• 9:49
  And are there any downsides of crowdfunding, um, as opposed to VCs, or just in general?
• 9:56
  You know, when we first started, uh, when I first got involved in crowdfunding, there was, there was a little bit of pushback and, and, uh, around VCs, and VCs saying, "Oh, you're doing crowdfunding."
• 10:06
  And it's been much more accepted now. And a- another reason we chose, um, uh, Wefunder, Wefunder sets up a special purpose vehicle, and, uh, so you have one line item on your cap table.
• 10:18
  So if, you know, and that's a, that's a real advantage over some of the other crowdfunding companies. Let's go to a question from, uh, Piyush Gupta from Ambrosia. Go ahead.
• 10:28
  You tried before Red Crow, and which one is better and why? And what we need to be cautious about, and how we can market it better. Yeah. So we, um, we, we first went to Red Crow.
• 10:41
  Uh, and then after that we went to Wefunder, and then we did StartEngine, and then we did DealMaker, and then we went back to Wefunder. Yeah.
• 10:49
  And, uh, you know, there's a, you know, it's a three-dimensional, if not four-dimensional, uh, equation, because, you know, a big part of it is what type of security you're setting up, whether it's equity, preferred equity, the debt, a SAFE.
• 11:02
  Seng Jam is about truth, trust, and transparency.
• 11:05
  And, uh, one of the things that I've found, that there are a l- uh, there are a lot of people who aren't so truthful, and it's only through working with them that you find out that they're overselling and under-delivering.
• 11:17
  And for an entrepreneur, that, like, they're the mistakes that I want every entrepreneur to make sure that they, they avoid, um, because, you know, it's, you know, it's one thing if it's 5,000 or 10,000.
• 11:29
  If it's 50,000 or 75,000, that could be the, the end. We've circled back to Wefunder for a reason. The, the ability to do updates without somebody editing your updates and seeing whether it's good enough to go out.
• 11:42
  [laughs] You know, their, their, their, um, their support, the, you know, account administrator has been good. Uh, with some of the others, we've, we've, we've always bought all the white glove treatment.
• 11:53
  Anything, if somebody offered something, we'd always buy it, because I would never wanna say, um, you know, we didn't do the be- we didn't try the best that we could. Hmm.
• 12:01
  Uh, and even buying some of those white glove treatments, um, we've got a lot, we often got a lot less than, [laughs] than what we thought we were getting.
• 12:10
  Before I get into a couple more question, I just wanna talk about time, because time-Is, is such a valuable asset for any founder, and if they're thinking about this as a possible tool, they're thinking, "Is this the best use of my time?"
• 12:24
  For the folks on this call, how do you think they should go about assessing that question?
• 12:29
  I'm pretty structured with this, that we, um, you know, our marketing person and myself have a call every Sunday morning at 10:00 AM, and we put our, we put our comps calendar together for the week of what, how we're gonna communicate.
• 12:41
  And then, uh, we're, we are forever generating a lot of content, whether it's publishing papers, whether it's getting patents filed, whether it's starting trials, w- new partnerships, and looking at all of that, you know, we, we're, you know, as we're repurposing small molecules, we're repurposing as much content as we can possibly create.
• 12:59
  And, and startup, uh, health is a great forum for that too because when, you know, we all have our landing page there, and we repurpose so much of the material that, that, that is, that's published.
• 13:11
  And so if from an allocation of time perspective, you know, one of the things I love about, uh, crowdfunding is that it's open twenty-four by seven.
• 13:20
  And, and, uh, you know, there's thresholds that when you hit certain milestones that they do-- uh, they'll do a promotional push for you into a larger audience or a targeted audience.
• 13:31
  And I spend, you know, between one and two days a week. Let's go to a question from Ronak from MedCo Share. Is there an amount where you would say, "You know what? Crowdfunding is not worth it."
• 13:41
  So like for example, if you're trying to raise five or ten million dollars, would you go, you know, maybe it's just better I go to VC route or, you know, private equity route.
• 13:50
  Like, what's your kind of cutoff for crowdfunding? You know, Cengiam's mission is develop therapeutics that are, uh, effica- safe, efficacious, and accessible to all.
• 13:59
  So that accessible, accessibility to all is, like, baked into everything we do. [chuckles] Like, so that's a big part of, of, of who we are.
• 14:07
  So being-- gaining access to retail investors, I don't know where we'll draw the line. We'll probably draw the line when a big investor comes in and says, "You can't do that anymore." And, uh, I hope that never occurs.
• 14:18
  Uh, let's squeeze in one more question about sort of the logistics of, of marketing and really get, getting your campaign out there. So, uh, Mark Mathis, can you come off mute and ask your question?
• 14:28
  How do you find-- how are you doing the marketing to, to find the inve- investors to bring them to the site so that they may be able to, to buy on, on the crowdfunding platform? Yeah.
• 14:41
  So what we're doing directly is, you know, I've-- we've used PitchBook, and, uh, and you know, we've done a lot of sorts around, uh, you know, family offices, individual investors, high net worth individuals.
• 14:53
  Uh, then we've taken those CSV files, and we've uploaded them to our investor relations database. And I, you know, track the, the, uh, analytics very, very closely with open rates and...
• 15:04
  So that's what we're doing, and then we're using all the social media outlets and repurposing everything with our goal of trying to get them onto our investor relations database.
• 15:12
  Then on the We-- on the Wefunder side, you know, we're using, you know, we're, we're publishing updates, uh, with Wefunder, and that's going to people who are following us and, and then they're, they're coming into our network as well.
• 15:25
  There's a lot of picks and shovel people out there that, you know, promise you the world from, you know, paying three thousand dollars a month to we've paid up to fifteen thousand dollars a month.
• 15:34
  When you sign up for somebody, you gotta give them at least three months to see if there's any there there. And, uh, and unfortunately, the vast majority, uh, you know, haven't produced much.
• 15:46
  And, and, you know, we get bombarded every day with people promising that, that we can do, you know, we can bring in all these contacts, and we've not, we've not spent any money on ad campaign.
• 15:57
  Jim, you mentioned that you've had a lot of success with webinars. Give us just sixty seconds on kind of how you frame out a webinar and what makes it successful.
• 16:05
  Relevant to the work that we're doing, always talking about our lead assets. If there's a tipping point event or, uh, you know, uh, an event, a lot of times we'll just invite our investors to those.
• 16:15
  And, you know, that's, that's been very, very fruitful.
• 16:19
  We, we've gotten so many comments about our transparency, and it's more about educating people about what we're doing, how we're doing it, telling our story, you know, how we're advancing our technology and, and what to expect, and let people similar to this to let everybody ask questions.
• 16:34
  You know, something you'd mentioned to me when we were talking before the interview was about the emotional side of building a community of people who believe in you, 'cause it's a grind.
• 16:44
  It's difficult to be a startup, uh, to be a founder. And so maybe you could talk just a little bit about that side and how you get sort of fed by, by the success of the campaign. Yeah.
• 16:55
  So thank you for bringing that up again.
• 16:57
  And we, you know, we have a slogan that the, uh, you know, the, the invested dollars, uh, fund the, you know, the econ-- the, the engine of Cengiam, but it's the kind words that fuel our soul.
• 17:09
  So I get notes from people who, who are so-- they re-- they echo back the work that we're doing, the appreciation of the work that we're doing, the impact that we're making. They truly know deeply.
• 17:22
  They're, they're reading everything that we send. They're participating in our webinars.
• 17:26
  And, you know, I make it a point, as I said earlier, that, you know, every time we get an investor, it doesn't matter what size, I write a-- there's a personal note I write to them, thanking them.
• 17:34
  And, and if they made a comment, I, I acknowledge the comment that they made. I think that is a huge piece of your success, Jim, and I applaud you for really going that extra mile.
• 17:44
  I, I, I've heard from other folks that, that it takes that kind of attention to detail for something like this to be successful.
• 17:50
  You know, I'm, I'm all about best practices, and I'm all about sharing best practices because we all succeed. You know, together, everybody achieves more. What's your final takeaway for this group?
• 18:01
  We started out with a poll. Ninety-five percent of folks are interested in thinking about crowdfunding. What's your final word to them?
• 18:08
  So my final word is if, if you're interested in doing it, try it and try the testing of the waters. Get, get a campaign up. It's not a big time investment.
• 18:18
  And, uh, you know, if you truly believe in what you're doing, there's a point where you-- we gotta sell it. We got-- every one of us has to get out there and sell what we're doing.
• 18:26
  It's-- and this is an opportunity of doing that. I love it.
• 18:30
  Jim, thank you for taking the last hour, but more than that, thank you for your, uh, attitude on calls for the last five, six years as you've been helpful to other founders. Thank you, guys. Thanks, team.
• 18:42
  [outro music] Thanks for listening to Startup Health Now. We'll be back again with another episode next week. [outro music]