Vantage Point – Risk-averse European VCs drive medtech start-ups to crowdfunding


Best known as the preserve of tech and IT companies, crowdfunding is becoming a firmer fixture in the world of medtech financing.

The well-documented shortfall in venture funding for start-ups has seen established medtech companies step in but these still tend to be in larger rounds, typically worth about $20m - more than the youngest companies need. “A £1m funding round is too large for business angels,” says Gonçalo de Vasconcelos, CEO of UK crowdfunding platform SyndicateRoom, “but it’s too small for VCs, who have generally been moving up the scale to do bigger rounds.”

The crowdfunders used by up-and-coming medtech companies are not the better known $10-a-pop platforms such as Kickstarter and Indiegogo. Instead they are more sophisticated, aimed at experienced investors and business angels – and not only because the minimum stake is much higher.

For example, Israeli crowdfunding group OurCrowd calls for a minimum investment of $10,000, and only accredited investors may participate. The group has around 7,000 such investors.

OurCrowd attracts companies seeking to raise around $1m-$2m. A medtech firm submits a pitch to the crowdfunder, whose medical advisory board evaluates the company and, if it decides to go ahead, sets the deal terms. Information about the business, its technology and the deal appears on a website that can only be accessed by OurCrowd’s investors, who all invest on equal terms and receive the same returns.

Companies the platform has helped fund include Global Kinetics, developer of a wearable sensor for tracking Parkinson's disease symptoms; Theracoat, a specialist in hydrogel-based drug delivery technology; and UPnRIDE Robotics, which is working on a standing wheelchair for quadriplegics and was started by the founder of ReWalk Robotics.

“Most companies we see are early-stage, but not seed-stage, especially in medical,” says S. Morry Blumenfeld, chairman of OurCrowd’s medical advisory board. OurCrowd prefers to see proof-of-concept before it will consider offering a start-up to its backers.

The crowdfunder is seeing more and more companies seek its help, particularly in medtech, as other sources of cash dry up.

Filling the gap

UK-based SyndicateRoom’s model differs again. The minimum pledge is £1,000 ($1,488) – less than OurCrowd’s, but not so little that investors will not deliberate before ponying up. But it has an interesting approach in that its financing deals are negotiated by an individual business angel, who invests their own money. This is then opened up to the public who can invest on the same terms as the lead investor with a much lower stake.

“SyndicateRoom is the only platform that gives people like you and me access to the same investment as the business angels,” says Mr de Vasconcelos. “Key to our vision is that, pound for pound invested, everybody makes or loses the same amount of money.”

In a world where successful investors are viewed almost as demigods, this can prove highly attractive. A case in point is Cambridge, UK-based Oval Medical Technologies, which last year raised £180,000 through SyndicateRoom after Jonathan Milner, founder of UK antibody group Abcam, negotiated the initial deal.

Oval is developing an autoinjector for the migraine drug sumatriptan, and the cash it has raised through SyndicateRoom will get the technology into its first human trials. After that it will be able to seek its next tranche of funding from traditional VC funds, Barbara Lead, CEO, tells EP Vantage.

“Crowdfunding is filling an important gap,” Ms Lead says, adding that she believes it will become more popular in future, unless VC funds rediscover an appetite for earlier, riskier assets.

Preferable to VC?

Even start-ups that have not taken the crowdfunding route are unwilling to rule it out. This month UK diagnostics start-up Glyconics obtained £150,000 through a different, but also unconventional route: winning a competition run by the UK's innovation agency, Innovate UK.

This, however, must be used for a specific purpose: clinical validation of the company’s technology, which uses infrared spectroscopy to diagnose COPD in patients with suspected respiratory disease.

“This will enable us to complete the clinical trials and get to a position where we’ve got a regulatory-approved product,” Berwyn Clarke, Glyconics’ CEO, says. The company will need additional money to support the functions of the business, for example getting its manufacturing procedures in place.

And this is where crowdfunding could come in – and according to Mr Clarke it is possibly preferable to VC cash.

He says Glyconics is at term sheet-stage with one VC, “but ultimately we would prefer to get non-dilutional money which is why we’re very keen to explore these [other] routes.”


The obvious thing linking all these crowdfunders and start-ups is that none of them are based in the US. Every person EP Vantage spoke to for this piece is united in the belief that the early-stage funding gap is an almost entirely European phenomenon.

“In the UK we have a very risk-averse investment community, and it puts us at a disadvantage when competing with the US,” says Ms Lead. She says that UK VCs tend to want to invest when companies are ready to go to market.

“It’s a different story in the US,” says Mr Clarke. “The US is much more amenable to start-ups and early-stage investment. In Europe VCs are incredibly risk-averse and it strikes me that they are risk-averse without any real logic.”

European VCs will sometimes say that, though they are impressed with a company’s technology, management team and market opportunity, they simply do not invest in start-up companies. Instead they offer to fund the company in a year or two when the products are closer to market and the company closer to an exit.

There are a number of reasons for the different attitudes in the US and Europe, ranging from the simple fact that there are fewer VC funds in Europe, to the long-running disaster movie that is the Eurozone crisis. Conversely, the US healthcare sector has been extremely buoyant in the last few years, with the flurry of mergers and barnstorming performance of the Nasdaq assuring US backers of the prospect of an exit.

On the plus side, healthcare technologies seem to be particularly amenable to crowdfunding. Mr de Vasconcelos says that SyndicateRoom is “sector agnostic”, but investors’ preference for scalable businesses with a lot of intellectual property behind them stands medtech in good stead.

“We have funded 32 businesses and a third of them have been in healthcare – but interestingly that has represented half of the capital invested,” he says.

It is heartening that some companies have been able to raise funds through crowdfunding and from other unorthodox sources. But it is disappointing that initiatives like these are necessary.

To contact the writer of this story email Elizabeth Cairns in London at or follow @LizEPVantage on Twitter

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