Should You Crowdfund Your Healthcare Startup?

For early-stage healthcare startups, raising capital often means juggling credibility, control and efficiencies. Crowdfunding can be a compelling choice, especially for founders seeking to maintain ownership and build community for their mission-driven products. However, because trust, regulation, and long-term vision matter in the healthcare space, whether or not to embrace crowdfunding is not always clear-cut.

Some healthcare startups such as Cue Health, iBreastExam, and Beddr have found success launching crowdfunding campaigns. Others have faced skepticism from traditional investors. For founders navigating this choice, here are a few considerations for weighing your options.

Crowdfunding and connection go hand in hand

In the experience of Navin Goyal, MD, co-founder of OFFOR Health and founder of LOUD Capital, crowdfunding is most successful when there’s a product that contributors can physically receive or experience. Crowdfunding makes the most sense when the startup is creating "something that significantly connects with a consumer and a purpose, or something they can relate to or align with."

In short, when a company has a deep purpose or offers a product people can touch, feel, and get excited about, crowdfunding tends to be a better fit.

Crowdfunding is a starting point, not the finish line

While investors sometimes see crowdfunding as a less sophisticated method for raising capital, Goyal adopts a pragmatic stance: companies should do whatever it takes to get their company off the ground. He shared, "Sometimes I've seen successful crowdfunding campaigns where they needed it early on, they got traction and started building a community, and then they were able to continue growing the company."

As long as founders understand the perception challenges, crowdfunding remains a viable option to move a project forward.

"It's more just realizing what it looks like externally, and the last thing we want to do is give any investors kind of an excuse to say, 'No, this might not be for me,'" he added.

Weigh the Tradeoffs of Crowdfunding

Even for startups with a compelling product or mission, founders should prepare for some challenges. For starters, the process can be slow.

As Goyal explained, "It can be a decent amount of work upfront to get it set up for crowdfunding."

There are also fees to account for, both from the platform and, in some cases, from giving away small pieces of equity.

"Sometimes parts of some equity to the platform that you will use, and or you will also give it to, you know, the people who contribute," Goyal noted. Occasionally (though not always), this can lead to a slightly messy cap table.

On the flip side, some startups may prefer the autonomy that crowdfunding allows. The team at Tily Blooms, a company that sells patent-pending rounded tip syringes and complete insemination kits, hasn’t ruled out crowdfunding but is currently exploring all options.

Laura Allen, COO at Tily Blooms, explained, “My personal take, from being involved in different startups and small businesses, is that it comes down to how much autonomy you want over running your business and how much money you need.”

Investors may have an opinion, and that’s okay

Another consideration is how future investors might perceive your funding path. "Many times, it is seen as not as a serious pathway for investment," shared Goyal. If a startup raises successfully through crowdfunding and later approaches traditional VCs, some firms may view the campaign as a signal that angel or institutional capital wasn't accessible.

"They might ask themselves questions like, 'Couldn't you have gotten it from a more traditional route of angel investors?'" Goyal explained. While he doesn't hold that view personally, he encourages founders to be aware that this mindset exists among some investors.

"In the end, it's really about solving a problem of getting capital without causing harm to your company, or, you know, selling a big chunk, where you're losing control—and that would be a risk for a future investor. So those are a few things to think about," he added.

How you use the funds matters

On the flip side, crowdfunding can demonstrate a founder's ability to execute. "If you have the ability to build trust and get angel investors in, that already showcases to me that you're capable of raising capital, as well as seeing where that money went to and how you used it to grow," said Goyal.

In other words, what you do with the money you raise—regardless of the source—can build credibility and serve as a test run for future investment.

Be ready for questions and own your narrative

Founders should anticipate questions about why they chose crowdfunding and be ready to explain their rationale. The assumption is often that the founder couldn't find traditional investors, but as Goyal points out, that's not always a fair assumption.

Being transparent and strategic about how and why you used crowdfunding can help you build stronger relationships with investors down the line.

Crowdfunding as a values-driven choice

While it’s important to consider how investors might perceive crowdfunding, it can still be a smart path, especially for founders who are mission-driven and value autonomy.

Allen shared that she considers herself relatively risk-averse when it comes to bringing on investors. For her, any investor would need to genuinely support the company’s mission, not just seek a strong return. “From that point of view, crowdfunding can seem like a great idea,” she added.