Recapping the (Virtual) StartEngine Annual Shareholder Meeting
This week, StartEngine CEO Howard Marks and Chairman of the Board Ron Miller addressed the many owners of StartEngine via teleconference to recap the company’s 2019 growth and discuss what’s in store for the future.
You can watch the webinar in full right here, or read our summary recap below:
Ron kicked things off by reminding StartEngine investors just why we exist in the first place – to help entrepreneurs achieve their dreams. It’s this simple but powerful mission, and in order to do that, we adopted a set of core values:
- Own the mission
- Exceed expectations
- Be a team player
- Stay curious
- Do the right thing
- Care about others
These values guide the culture of StartEngine. “It drives us day by day… we do everything we can, day in and day out, for our entrepreneurs” Howard said.
A Year for the Books
Reviewing StartEngine’s 2019 financial results, Howard pointed out that “the main difference is our mix of revenue.”
In 2019, we shifted our focus away from non-core revenue sources to concentrate on our core business – earning fees from raising capital. Revenues from these platform fees increased a whopping 86%, from $1.4M to $2.6M. “Where we were successful in 2019 was changing the revenue mix toward raising capital,” Howard noted. “That will help us get to profitability, because we are now raising more capital for companies, which is what we should be doing. And at the same time we’re seeing a lot more interest from investors to invest in these startups.”
Premium revenue – the flat fee we charge when companies sign – decreased in 2019 due to a lower number of companies launched, yet the average amount raised by companies on the platform nearly doubled. In 2018, we also had significant revenue from events. However, in 2019 we decided to scale back the size of those events in order to focus on our core business.
Rather than hosting large-scale events, we used events as a tool to help us meet founders in person in a series of roundtable discussions in different cities. The focus of these events was not driving revenue but meeting quality founders with high potential and building relationships with these companies. These have proven to be very successful.
Since we began working remotely due to COVID-19, we’ve switched these roundtable discussions to virtual events with an emphasis on educating founders and creating dialogue. Take our first webinar with Mr. Wonderful for example, which was free to view for over 1,000 companies who attended to learn about how equity crowdfunding can help them raise capital in the middle of Coronavirus.
As a result of these changes:
- Our revenue costs decreased 20%, from $2.6M to $2.1
- Our gross margins increased from 44% to 51%, a trend we expect to continue into the future.
- Overall, our net loss decreased 12% year-over-year, and we are positioned to continue that momentum toward profitability into 2020.
What’s Next for StartEngine?
After looking back on a successful 2019, Howard shifted focus to some trends we are seeing for the future.
Since StartEngine established a wholly-owned broker-dealer subsidiary, StartEngine Primary LLC, we’ve been able to increase our revenue from Reg A+ offerings, which tend to be much larger than Reg CF. “We’ve seen month-to-month increases in revenue from Regulation A+” Howard said. “This is an area that we believe will be a significant revenue driver for us.”
StatEngine is the leader in Regulation A+ offerings. In fact, we launched the first-ever Regulation A+ offering in 2015. Growing our Reg A business will be an important part of scaling the StartEngine platform because we encourage companies to always be raising and the higher raise amounts of Regulation A+ are an important part of that pitch.
We are extremely excited about our new partnership with Kevin O’Leary, one of the most recognizable businesspeople in the country. We wanted a spokesperson that could help increase awareness, and with his millions of followers, Mr. Wonderful brings a very large potential audience to StartEngine. “You’ll see a lot more videos with Kevin,” Howard promised. “This has been a very big opportunity for our marketing and brand awareness.”
Alternative Trading System
During the webinar Howard mentioned it will be launching in the near future, and we hope to announce more concrete news about our secondary trading platform soon. Our ATS will give investors the ability to trade shares after they invest in companies on StartEngine. Howard put it best when he said, “that liquidity was the missing piece to the whole puzzle.” Watch the video to find out more!
Howard and Ron then opened the floor to questions. First, they discussed how we continue to differentiate ourselves and gain market share from competitive platforms. Key differentiators are our new partnership with Kevin O’Leary as well as our upcoming ATS (which does not exist on the market at all yet). “At the end of the day, we believe our product offering is stronger,” Ron said. He then pointed out
As far as how we plan to use the proceeds of our last raise, Howard pointed out that the financial marketplace has not adequately addressed the capital needs of small businesses. We plan to grow the company by increasing awareness among investors and entrepreneurs. We also need to expand our team to provide better service to more companies, as well as put some capital aside to maintain a very strong balance sheet – the importance of which our current crisis has demonstrated.
We are very excited about our path to profitability and the promising trends we’re seeing in the equity crowdfunding space. If you are not yet a StartEngine shareholder, you can be a part of our growth story and reserve shares in StartEngine.