United States: The Catch 22 Of Crowdfunding For Medical Devices: Is It Pre-Selling?

Article by Dawn Norman

Inventors and companies are always looking for alternative ways to raise capital for the development of their products, and crowdfunding is becoming a hot trend. But when it comes to medical devices, FDA does not generally allow for the marketing of a device prior to its clearance or approval. This article will walk you through the basics of crowdfunding, advertising and promotional requirements of the FDA and when the two paths cross.


Crowdfunding is the practice of asking for money to fund a specific goal, generally through a website dedicated to crowdfunding, from the general public. An individual or company seeking to utilize crowdfunding ("crowdfunder") must first have a project or product for which to raise money and will choose a crowdfunding website (CF platform), which will host the crowdfunding campaign.1


  1. Donation-based crowdfunding, where money is given with no expectation of anything in return.
  2. Debt-based or lending model funding is a loan where contributors may receive a rate of return on their investment.
  3. Equity-based funding, which is currently only available to "accredited" investors. Investors in this group must prove a yearly income in excess of $200,000 (or $300,000 when combined with a spouse's income) or have a net worth of over $1 million (excluding the value of their residence) and must have had that level of income or net worth for three years running. These investors receive equity in the company raising the capital in exchange for their contributions. The equity model is heavily regulated by the SEC and is not frequently used, either inside or outside the United States.
  4. Reward-based/pre-sell funding where the donor receives something in return for the donation (a prototype, access to the final finished products at an earlier date, better price, a non-medical device gift, the naming of a project/product after them, or some other special benefit).

Crowdfunding of medical devices is still a gray area for FDA as many in the industry question if the practice of crowdfunding with reward-based returns is considered 'pre-selling' or 'marketing' the device in advance of clearance or approval. FDA considers any products that are distributed (interstate commerce) prior to clearance or approval as 'adulterated'. Marketing activities prior to clearance without appropriate disclaimers (e.g., investigational or regulatory submission status) is considered misbranding and false or misleading labelling. Yet, several start-up companies have engaged in crowdfunding, using donation-based and reward-based methods, as a way to pay for the cost of developing medical devices and of conducting clinical or usability studies to support the remaining development activities and regulatory submission activities.

A 2015 review by STATnews noted "...16 crowdfunded campaigns have been launched over the past few years by entrepreneurs who essentially took advance orders for medical devices that they said they planned to get OK'd by the FDA."4 One of the ways the fundraising was justified was by clearly stating the development and regulatory status of the device. Information regarding the status of the company's project with FDA would be included on the website, including statements related to the timing of planned submissions to the FDA or confirmation that the application was under review.


For this article we took a quick look at some of the companies, past and present, that have crowdfunded development of medical devices, as reported in public sources.

Cur (Pronounced "Cure")

Cur is an over-the-counter, wearable medical device transcutaneous electrical nerve stimulation (TENS) unit which is indicated for the symptomatic relief and management of chronic intractable pain, and for temporary relief of pain associated with sore and aching muscles in the shoulder, waist, back, neck, upper extremities (arms) and lower extremities (legs) due to strain from exercise or normal household work activities.5 It has powered muscle stimulation (PMS) mode which is indicated to improve and facilitate muscle performance in healthy muscles. Cur was cleared in May 2016 (K160052), but received industry attention in 2015 for attempting to raise $50,000 on its own website by asking for a $149 donation in order to receive the device after FDA clearance.6 After scrutiny, Cur updated its website to clarify that the crowdfunding campaign was to support the continuing development operations and the 510(k) notification, and that the device would not be shipped before FDA clearance.7

Scanadu Scout

Scanadu has a couple of products in the pipeline, one for vitals and the other for urine testing. However, it is probably more well-known for its fast paced Indiegogo campaign in 2013 which raised $1,661,988 USD from 8509 backers for its Scanadu Scout". The Scout", still not yet FDA cleared, is a small device that records a person's vitals by placing the device on the forehead and transmitting the data to an app on a smart phone. It is intended to measure heart rate, skin temperature, oximeter, blood pressure, temperature, heart rate, and pulse oxymetry—all cuffless, wireless and in seconds.8 Scanadu offered several levels of donation and investment, where backers could merely 'stay informed' or receive products after FDA clearance. Interestingly, Scanadu actually consented backers to be part of a usability study and receive an investigational device. With this, early adopters were able to receive products, before FDA clearance, and Scanadu could receive customer feedback and usability data. It was made clear that if a backer did not participate in the study, the device would be shipped post-clearance or investment funds returned.9 Scanadu continues to have it noted on their company website and on their closed Indiegogo site, that they are not yet FDA cleared.


Airing is a company that is currently raising funds for the development of a hoseless, maskless, cordless micro- CPAP device for the treatment of apnea. Airing had raised $1,624,136 as of July 2015 and is still taking investments. Investments range from receiving an update on the progress, to product vouchers that can be exchanged once the product is FDA cleared (and a doctor's prescription provided), to becoming part of the research panel or Skyping with the inventor. Airing is very clear on their Indiegogo website that product availability is subject to FDA clearance and doctor's prescription.10

Snore Circle

Devices like Snore Circle, by VVFLY Electronics, ride the crest of 'are they a medical device or not?' Most FDA cleared anti-snoring devices are intraoral devices or devices that create expiratory resistance to maintain upper airway pressure.11 However, Snore Circle identifies snoring sounds with bone conduction and sound recognition technologies, and then "intervenes physically with micro sounds and micro vibrations at 54 levels to stop snoring and make you sleep better." At this time, VVFLY Electronics does not have any disclaimers about awaiting FDA clearance, but had raised over $200,000 as of September 2016.12

Medical Devices And Their Promotion

So, what is a medtech company to do to pursue crowdfunding and stay within regulations? First, a thorough regulatory assessment of the device, its intended use and clinical claims should be performed to understand if the product is a medical device and if so, what its classification is.

Per section 201(h) of the Federal Food Drug & Cosmetic (FD&C)13, a medical device is:

  • "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is:

    • recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them,
    • intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or
    • intended to affect the structure or any function of the body of man or other animals, and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes."

Medical devices are categorized into one of three classes, based on the degree of risk they present. These classes are as follows:

Class I – Lowest Risk

These devices pose the lowest risk, such as elastic bandages, manual toothbrushes and general instruments. Class I devices are subject to general controls.

Class II – Moderate Risk

Examples of Class II devices are syringes, IV catheters and non-invasive blood pressure monitors. Class II devices, which pose incrementally greater risk and for which general controls are not sufficient to provide reasonable assurance of safety and effectiveness, are subject to "special controls" in addition to general controls. Special controls may include labeling requirements, performance standards, post-market surveillance studies, or other controls the FDA deems necessary to provide reasonable assurance of the safety and effectiveness of the device.

Class III – Highest Risk

The riskiest devices, such as some implants and life-supporting or life-sustaining devices, are placed in Class III and generally are subject to premarket approval (PMA), which means that an application must be submitted to and approved by FDA before the device may be legally marketed. PMA applications must contain information that provides a reasonable assurance of the safety and effectiveness of the device for its intended use and generally include pre-clinical testing and clinical study data. An example of Class III device is a heart valve.

FDA does allow for companies to advertise or display devices subject to 510(k) with appropriate disclaimer, in the hope that FDA will conclude that the device is substantially equivalent to a pre-amendments device. However per FDA's Compliance Policy Guide Sec. 300.600, "...a firm may not take orders, or be prepared to take orders, that might result in contracts of sale for the device unless limited to research or investigational use."14 So here is the Catch 22: How can crowdfunding with the reward-based model of the device be acceptable, and what does the device have to be used for? This policy does not discuss Class III devices and therefore advertising or display of Class III products in advance of FDA approval should be avoided.

From a regulatory compliance perspective, the lowest risk models for crowdfunding are the donation, debt and equity investment models; donation being the easiest. These models do not provide the promise of a product voucher or the product itself after clearance. Scanadu and Airing have donation models that just 'keep you updated' about product development. Debt and equity investment models surely provide their own hurdles when conducting such transactions online, but will not be discussed here.

In the case of the reward-based model where the 'reward' is the actual device or a voucher for the device, this is higher risk as it could be interpreted as taking an order for a device that is not yet cleared or approved for distribution. There are some non-product rewards that were offered by the above groups that ranged from t-shirts to dinner with the inventor, but did not include a product. Others have considered a 'pay it forward' model, where the product would not be received by the backer but the product could be donated to a hospital/ clinic of their choice after FDA clearance. At this time, FDA has not made written statement regarding crowdfunding, issued any warning letters to companies who have raised money through this process or taken any action to stop the practice. In an interview with the Boston Globe, William Maisel (acting director of the FDA's Office of Device Evaluation) said through a spokesman that medical device companies must follow the agency's marketing and advertising regulations regardless of how they raise funds, but he did not respond to questions about the legality of specific crowdfunding practices. Some postulate that FDA will not focus resources on regulating this practice unless it appears that patients are harmed.15

As noted earlier, some medical device companies have used the pre-selling model and FDA has not taken action; however this model is still considered to be a higher risk for products that have not yet been cleared. Risk must be evaluated on an individual basis for every device, in order for a company to determine if crowdfunding is an option. If a company concludes the risk is worth the benefit, the company still must assure clear disclosure of how funded dollars will be used (e.g., research, investigations, product development, etc.), apply appropriate disclaimers as to the status of the device, ensure diligent record keeping of funding transactions and keep a close eye on regulations as the landscape can change quickly.


1 Colleen Smith, Scouting for Approval: Lessons on Medical Device Regulation in an Era of Crowdfunding from Scanadu's "Scout", 70 Food & Drug L.J. 209, 212–13 (2015).

2 Id.

3 Deirdre Sullivan, Crowdfunding for Medical Technology Development, Farm Blog (July 31, 2014), http://www.farmpd.com/Farm-Blog/bid/103510/Crowdfunding-for-Medical-Technology-Development (last visited Oct. 17, 2016).

4 Rebecca Robbins, Crowdfunding of medical devices raises money — and questions, Boston Globe (Sept. 8, 2015), https://www.bostonglobe.com/business/2015/09/07/crowdfunding-medical-devices-raises-money-online-questions-the-fda-hasn-reviewed-these-medical-devices-yet-but-you-can-buy-them/RoVuxMgfefPufzuEKYzA4I/story.html (last visited Oct. 17, 2016).

5 K160052 510(k) Clearance Letter, www.fda.gov; accessed October 17, 2016.

6 Chris Newmarker, Startup Tests FDA Limits with Crowdfunding Campaign, Qmed (May 15, 2015), http://www.qmed.com/news/startup-tests-fda-limits-crowdfunding-campaign (last visited Oct. 17, 2016).

7 Arielle Duhaime-Ross, Medical device maker Cur adds disclaimers to crowdfunding site after questions about FDA rules, The Verge (May 14, 2015), http://www.theverge.com/2015/5/14/8609201/cur-fda-regulations-disclaimers-changes-website (last visited Oct. 17, 2016).

8 Scanadu, Indiegogo, https://www.indiegogo.com/projects/scanadu-scout#/ (last visited Oct. 17, 2016).

9 Brian Dolan, Scanadu production backed up, but FDA loophole ready to go, Mobi Health News (Apr. 7, 2014), http://www.mobihealthnews.com/31790/scanadu-production-backed-up-but-fda-loophole-ready-to-go/ (last visited Oct. 17, 2016).

10 Airing, Indiegogo, https://www.indiegogo.com/projects/airing-the-first-hoseless-maskless-micro-cpap-sleep-technology#/ (last visited Oct. 17, 2016).

11 FDA product codes LRK and OHP; www.fda.gov; accessed October 17, 2016.

12 Snore Circle, Indiegogo, https://www.indiegogo.com/projects/the-world-s-smartest-anti-snoring-device-sleep#/ (last visited Oct. 17, 2016).

13 Is The Product A Medical Device?, FDA, http://www.fda.gov/medicaldevices/deviceregulationandguidance/overview/classifyyourdevice/ucm051512.htm (last visited Oct. 17, 2016).

14 ICPG Sec. 300.600, Issued 7/28/27, Reissued 10/1/80, 09/24/87; http://www.fda.gov/ICECI/ComplianceManuals/CompliancePolicyGuidanceManual/ucm073888.htm; accessed October 17, 2016.

15 Deirdre Sullivan, Crowdfunding for Medical Technology Development, Farm Blog (July 31, 2014), http://www.farmpd.com/Farm-Blog/bid/103510/Crowdfundingfor-Medical-Technology-Development (last visited Oct. 17, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
McDermott Will & Emery
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
McDermott Will & Emery
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions