Crowd Funding + Biotech

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Are you ready for a wild ride? That’s what Xconomy says will happen when the world of crowd funding collides with the world of Biotech

Health Tech Hatch and Medstartr have gotten some attention for efforts to use crowdfunding for health technologies. But one well-connected startup, a New York-based company called Poliwogg, could end up being the place where little biotech companies raise real money through crowdfunds before they hit the NASDAQ.

Crowdfunding is the kind of thing that 75 million members of the “millennials” generation—those who came of age in the ‘90s and 2000s Internet era—instantly get. Think about it. Just like how anybody can open a TD Ameritrade account and buy shares in Dendreon (NASDAQ: DNDN) to express support for prostate cancer R&D and hopefully make money, individuals will soon be able to invest in private and venture-backed startups that were previously off-limits. While most private companies have fewer than 30 investors, the JOBS Act passed by Congress last year enables private companies to stay private even with up to 2,000 investors.

Love the law or loathe it—and the lack of disclosure for pre-IPO companies is something I hate—the only thing holding it back now is some regulatory language from the Securities and Exchange Commission that will clarify the difference between wealthy “accredited” investors and the “non-accredited.” (Essentially, there are more consumer protections being designed for “non-accredited” investors, so they can’t lose their life’s savings on pipe dreams.) Once those regs are published, it will open up a new avenue for investing in thousands of companies, including your local cancer drug developers. And this opening of the floodgates is happening precisely at a moment when biotech is in dire need of cash, as the venture capital industry is going through a historic contraction.

“The potential global size off this kind of funding of equity—and I’m not talking about Kickstarter, Indiegogo, or the nonprofit stuff—is $1 trillion or more,” says Greg Simon, CEO of Poliwogg. “If we were sitting here in 1981, and you asked me ‘how big do you think it will be when the Baby Boomer generation hits the stock market,’ and I had said that the stock market will go from 1,000 to 10,000, you’d probably say I was crazy. This is going to be as big, if not bigger.”

Read the full article here
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