Start Engine is one of the top equity crowdfunding platforms out there that you can use to either raise money from the crowd or invest in cool new startups.
The website was started in 2011 and has gone on to amass more than 80,000 users, of which more than 15,000 have made investments on their platform. In total, the company has helped startups raise more than $35 million from the public.
I’ve had the team behind this platform on my podcast several times to discuss crowdfunding. They’ve been very helpful when it comes to educating investors, entrepreneurs, and the media.
This is sorely needed in the crowdfunding space .
With this article, I want to go into the pros and cons of raising money on StartEngine, along with some of the details that you’ll need to know and costs that you’ll incur. No matter what stage your startup is in, I hope that you find this article to be helpful!
How StartEngine Works
StartEngine allows both accredited and non-accredited investors to discover startups on their platform. If you’re an entrepreneur, you can do a Reg CF (small public offering), Reg A+ (large public offering) campaign, or an ICO using their software and marketplace.
Under a Reg CF campaign, you can raise upwards of $1.07 million in a 12 month period and under Reg A+, you can raise upwards of $50 million in a 12 month period.
You must be a US-based company to be able to raise funds on the site. You must also fit these requirements.
For the most part, the companies that have raised money fall into tech, food & beverage, medical, hospitality, communications, and other industries.
Depending on which funding type you choose, the process will be different. In general, you must create a campaign page, meet the compliance requirements (which may or may not require a lawyer/accountant), and then set up a marketing strategy to get the word out.
Fees and Costs
StartEngine charges a variety of fees for equity crowdfunding campaigns, which depends on the type of crowdfunding that you go with. These fees help to finance the cost of running the platform and market it to more investors.
Small online offerings: 6% fee of the capital raised for a Small OPO (also known as Reg CF campaign). The entrepreneur will pay this fee.
Large online offering: $50/unique investor + warrants OR a $20,000/month + warrants hosting fee. A large OPO is the same as a Reg A+ offering.
Full Service Support (consulting, creative services, onboarding): $5,000/campaign. This includes access to more support infrastructure that will help your company be more successful.
Investor Management: $3,000/year to enroll in the investor management system, StartEngine Secure.
As you can see, there are platform-related costs associated with doing an equity crowdfunding campaign, which vary based on the level of support and assistance that you’re seeking.
If you’re raising under $100,000, you can get away with minimal costs for the campaign, because you only need to provide the financial information from your tax returns, which is certified by the principal executive officer.
Who Can Invest on StartEngine?
Both accredited and non-accredited investors can invest in the offerings on the StartEngine marketplace. This is because the startups are doing Reg CF or Reg A+ financial raises.
You can look around at the various companies that are raising money, watch their videos, get access to their pitch deck, learn about their background, and get into the details of the actual offering.
You can see one example campaign below, which has raised over $900,000 under Title III of the Jobs Act (Reg CF) and has 32 days left in the fundraising period. The minimum investment is $400.
When you put this project up there, you are inviting people from around the world to discover what your product is, who your management team is, and learn about your overarching mission. You should expect public comments from the investment community.
Some of these comments will be related to your product or people looking to help your startup, like the examples below. Some will be from investors or potential investors.
Naturally, as a byproduct of being public with your company, you might also get criticism. People might questions your decisions.
You’re going to have to communicate the steps related to your business and business-related customer service.
Going into your project, you should have a plan for investor management and how you’re going to approach questions, concerns, and inquiries.
Who Can Raise Money on StartEngine?
In order to raise funds on StartEngine, your company must be based in the United States and be a legal entity (LLC, C Corp). You must also meet the standard requirements for doing a Reg CF or Reg A+ raise.
The website has a variety of forbidden company categories, some of which include weaponry, marijuana, and tobacco. You can check out a complete list here.
Lastly, to be listed on the website, you gotta pass a Bad Actor background check and the standard review process for the crowdfunding platform.
Some of the industries that have raised money on the website include:
- Food and beverage
- Technology
- Health and beauty
- Sports and fitness
- Education
- Mobile app
- Automotive
- Medical, and more.
StartEngine’s Size and Popularity
In 2017, StartEngine did $2.1 million in annual revenue, which was generated from success fees, events, sponsorships, StartEngine Secure/Premium, and more. The company also hosted 61 successful campaigns (as opposed to 6 in 2016).
A lot of their revenue in 2017 came from their ancillary services that are there to help entrepreneurs with the fundraising process.
The reason why StartEngine is sharing all of this information is because they are actually in the middle of a live offering under Title IV of the Jobs Act. Basically, you can own equity in the platform if you’d like. You can learn more about the offering here.
In 2017, WeFunder was the clear leader when it came to the volume of equity crowdfunding campaigns launched under Regulation CF. Now, StartEngine has hosted more than 160 offerings, putting it on part with WeFunder when it comes to the volume of offerings (this is different from total funds raised).
Would I Recommend StartEngine?
There are many different equity crowdfunding websites out there. To speak intelligently about this subject, I think that entrepreneurs should learn how this new financial raise works.
Otherwise, you’re not going to be able to easily discern the differences between websites.
Next, I would start to compare the top 3 platforms that you’re thinking of going with. Look at their funding amounts, which types of raises they do, and the information that’s out there.
I did a podcast episode with StartEngine that you can listen to here.
I’m also putting together a book called Equity Crowdfunding Explained which will go in-depth into this subject, along with sharing everything that you need to know to have an explosive launch. This is a good weapon in your arsenal when venturing into these waters.
If you’ve done all your research, then I think it’s time to start to consider your platform. Personally, I like that StartEngine has a nice design, a high quality team, and also has some support functionality.
From an objective standard, they historically have not done as much in funding as other competitors. This might say something about their deal flow. Its hard to say.
I think we’re really early in the game, so we’re really going to see in the next 2 years how these guys compare.
Overall, I like their website, functionality, and support. I think you’ll have a good experience. Make sure you do your communication correctly to avoid any misunderstandings by your investors about the details of your raise.
