Using a nontraditional, but certainly effective, funding method, Atlanta-based healthcare startup Patientory used a token sale to raise $7.2 million from over 1700 individual investors in 3 days, without giving up any equity at all. Token sales, increasingly common amongst blockchain platforms, are a democratized form of funding where individual investors purchase “tokens”, tradeable for utility in the company’s actual platform, using cryptocurrency.
Patientory, founded by healthcare and telemedicine veteran Chrissa McFarlane, stores and connects health records for patients and providers, making them easy to access and distribute — while ensuring this vital and sensitive information is completely blocked from hackers. It does this by employing the cybersecurity technology blockchain, the technology which also powers cryptocurrencies like Bitcoin. Blockchain is a decentralized, cloud-based ledger with a list of nodes, called blocks. The distributed nature of the data makes it fully secure— and for the healthcare industry, HIPAA-compliant.
“It’s virtually impossible for a cyber criminal to hack one block in the chain without simultaneously hacking every other block in the chain’s chronology,” McFarlane said. “This makes Patientory incredibly appealing to not only store a patient’s entire health history, but determining who should have access to it.”
Now, blockchain companies like Patientory are using the same technology to power crowd funding. Patientory announced in April that it would sell 100 million “Patientory Tokens” (PTOY), which can be used to purchase storage space and services using the Patientory platform.
Opened on April 31, the crowd sale closed on June 3 after 1728 participants purchased future Patientory services.
According to McFarlane, token sales are now the primary method of funding for blockchain-based startups. “It helps bring greater support from the community and awareness on how these companies execute,” she said.
McFarlane said she set up her sale based on advice and learnings of advisor Shawn Wilkinson, CTO of Storj Labs, another Atlanta-Based blockchain startup. Storj uses the secure network derived from blockchain to provide encrypted cloud storage, competing with the likes of Amazon Web Services and Google Cloud. Storj also financed their product with a token sale.
“Based on (Shawn’s) own experience, he was able to advise and point us in the right direction in terms of resources needed to execute a successful crowd sale,” McFarlane said.
McFarlane said the majority of participants in the sale were experienced investors in cryptocurrency, with current and former healthcare providers and executives contributing as well.
Despite the previous successes seen with other token sales, McFarlane said she was surprised by how quickly the company reached their goal. They anticipated a close date on June 28, approximately one month after launch. “We are very enthusiastic that it sold out in only three days,” she said.
Though the sale is over, individuals can continue to purchase PTOY on the market via cryptocyrrency exchanges.
Fully funded, the company will now turn their focus to finalizing the blockchain infrastructure for their product.
“This is where the fun truly begins!” said McFarlane.