By now you’ve heard of crowd-source funding, or “crowdsourcing’’ — the idea of attracting investors for your start-up by reaching out through social media.
But the three co-founders of Inspiration Medical already have financing. They’re using the crowdsourcing techniques to conduct the R&D and marketing work they need to bring their product to the market. And it’s a tough market: bleeders, people who, for a variety of reasons, have trouble stopping a cut from bleeding.
The company plans to launch its AllaQuix nonprescription pad that quickly stops nuisance bleeding for those on blood thinners. They are using social media to introduce their product to potential customers, and get feedback before they spend hundred of thousands on marketing.
“This is why we haven’t put it on a retail shelf yet,” said Inspiration’s Stephen Miller, 43, a former sales-and-marketing executive at Merck & Co. who knows something about big-buck marketing campaigns. “It’s about education and feedback, getting people’s stories about cuts and bleeding.
The feedback was, at times, blunt.
“Some people first said, ‘Is this a scam or a joke?’ ” Miller said. “So we changed the title from ‘Stop nuisance bleeding’ to ‘Help us launch AllaQuix.’ That may have saved us $500,000 in marketing costs.”
That’s no joke for a start-up business.
The three co-founders have invested less than $1 million to get FDA approval for consumer use, prepare for production and license AllaQuix from Minneapolis-based Chitogen Inc., which manufactures hemostats and related wound-care product for medical facilities.
As of Friday, Inspiration had raised less than $2,000 from interested supporters of AllaQuix. But the knowledge gained from potential customers was invaluable as the company prepares for launch late this summer.
“It’s kind of a long shot,” said Dan Leach of Edina, a small-business owner. Leach, 51, is very interested because he has suffered from nuisance bleeding since he started taking a daily aspirin to avoid circulatory and heart trouble.
“I just cut myself shaving and it’s hard to stop the bleeding,” Leach said. “I just have to sit there and hold Kleenex to the cut and wait and wait. Sometimes, the cut reopens later. I know a lot of people with the condition. I want to be a customer and I’ve recommended it on my Facebook page. But I don’t know yet that it’s really resonated with anybody.”
A common problem
The Inspiration team, which includes Jim Hartman, 67, a veteran medical technology executive, says up to one in three adults is incapable, for a variety of reasons, of clotting in the typical two to five minutes. Millions of Americans take aspirin and blood thinners. Small cuts can range from a nuisance to a serious medical problem.
And a small percentage of “bleeders” go to emergency rooms in panic or frustration, and the visit typically costs about $800 for a simple administration of the institutional version of AllaQuix or something similar. AllaQuix, the founders say, is based on natural chitosan fibers that have been proven effective for activating the body’s clotting mechanism and used successfully by the military and hospitals.
Co-founder Patrick Donohue, 36, a onetime Twin Cities securities analyst and investment banker, said the feedback so far has led the fledgling company to conclude that prospective customers will pay up to $25 for a kit that will include several patches to stop bleeding, as well as bandages and gauze.
The founders hope to avoid raising money from venture capitalists who would want majority control. They also will avoid going to retail shelves, at least initially, because of the marketing expense and the likelihood of the product getting lost amid myriad others. Instead, AllaQuix will be marketed primarily through low-cost social media.
Donohue, who spent 15 years watching private and public companies try to raise money, says there is a crisis. There’s plenty of capital. But most banks, venture capitalists and private-equity players have become increasingly conservative and won’t take chances on start-ups and promising small businesses.
“While most entrepreneurs think of crowdfunding with dollar signs in their eyes, a smarter way is to look at the crowd is to envision them as future customers or investors ready to help in the early stage,” Donohue said in 21-page paper he’s written on the subject titled “The New Fundraising Reality for Entrepreneurs.”
“Those individuals who actually spend time on your crowdfunding site are the people who are interested enough to tell you what they like and dislike about your concept.”