The Reputation Economy Driving Healthcare Innovation: Crowdfunding and Data

Some say that “the crowdfunding industry may be the best new tool for helping to save the U.S. economy.”

Crowdfunding started as a way to source capital for an idea from family, friends and referrals from one’s social networks. It is an option when all you have is an idea, work ethic and your reputation. In exchange for funding, startups offer a reward, donation or discount to supporters. Researchers from estimate there will be 536 crowdfunding platforms worldwide by December 2012.

With the JOBS Act signed in April 2012 crowdfunding will also be a way to sell small amounts of equity to many investors—up to a million dollars. According to Sam Hogg:

Until now, other investors had to be accredited through a process that ensures they have at least some limited knowledge of risk as well as the ability to afford the potential losses. They have to disclose things like annual income and asset levels to the SEC.

The new legislation will make this formal disclosure all but disappear in the early stages of company formation, enabling entrepreneurs to sell up to $1 million worth of equity to the general public through accredited crowdfunding platforms. That makes everyone a “friend,” and, in true web 2.0 style, enables funding portals where these friends can come together and make real investments in real companies.

Healthcare’s First Crowdfunding Platform

The JOBS Act was one reason Alex Fair decided to launch, the first crowdfunding platform for healthcare innovation. Less than seven months ago, Medstartr was just an idea itself. Officially launched in July 2012 it now boasts a 68% success rate in funding new ideas in healthcare.

MEDSTARTR healthcare innovation crowdsourcing

Fair says, “One interesting effect we are seeing on is three to 30 times the activity off the site as on the site.” Medstarter projects have raised more than $100,000 on the site with an additional $4-million raised off the site as of November 11, 2012.

“Crowdfunding sites don’t just provide landing pages, we help drive the world to your solution for maximal impact.” – Alex Fair, Co-founder, Medstartr

Doctor Social Graph: Crowdfunding a New Measure of Reputation

One of the most interesting and successfully funded Medstartr projects in healthcare technology is the Next Level Doctor Graph from Fred Trotter, founder of NotOnly Development and author of Hacking Healthcare: A Guide to Standards, Workflows and Meaningful Use.

At the StrataRX Conference Trotter released the Doctor Social Graph, a visual display of the connections between doctors, hospitals and healthcare organizations from the Medicare Referral dataset. He says there are 60 million referral relationships in the dataset, an estimated 80% of the referrals that take place between doctors in the United States. The Medicare Referral dataset is open data made available through the Freedom of Information Act and the office of U.S. CTO Todd Park.

Trotter’s goal is “to create a doctor-rating algorithm that patients find useful and doctors find fair.”

The Next Level Doctor Graph Medstartr project raised $23,720, well above its $15,000 goal, for Trotter to obtain state-level credentialling data for doctors. He has just launched a second round for the project on MedStartr to raise $35,000 for Stretch Goals, including the addition of CMS nursing home inspection data.

The Reputation Economy Is Growing in Ways You May Not Have Imagined

The reputation economy is not new in the online world and social networks. However, the reputation economy is growing and becoming increasingly important in ways many might not have imagined–how funds are raised, which companies are started, whom do you refer, who refers you, referrals from professional and personal networks—and now open data on the relationships between doctors. These are all new measures of reputation coming from new sources, becoming more and more transparent, and driving innovation and the economy.

Fred Trotter Doctor Social GraphTrotter reminds us that ethics become very important when using this type of data.

“Help me turn the world right side up.” – Fred Trotter, founder of NotOnly Development.

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HealthIsCool is a writer and trends analyst. She writes about health innovation, wearable tech, the Internet of Things (IoT), new health technologies, and future trends. Her latest trends research includes: The Rise of Wearable Technology and Google's Ambitions in Healthcare. Follow on Twitter at @HealthIsCool.

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