Are you an entrepreneur looking to learn more about StartEngine? We’ve got your questions covered.
StartEngine Crowdfunding, Inc. is the largest equity crowdfunding platform in the US and the first mover in the industry. StartEngine has raised over $450M via Reg A+ and Reg. CF combined through its subsidiaries StartEngine Primary and StartEngine Capital, for over 500 company offerings on our platform to date.
With the passage of the JOBS Act in 2012, the Obama administration made it possible for every US resident to invest in startups, regardless of wealth or status. On StartEngine, anyone can invest in private businesses that offer shares of stock, debt, revenue share securities and more.
Entrepreneurs are no longer dependent on traditional sources of capital, such as private equity or venture capital firms, to bring their ideas to life; they just need other like-minded visionaries willing to take a chance on something novel.
Regulation Crowdfunding and Regulation A+ are the two exemptions companies use to raise capital on StartEngine. The most significant differences are the amount of money you can raise and the speed at which you can launch.
For Regulation Crowdfunding offerings, you can raise up to $5M annually, and you can launch a campaign within 30 days. For Regulation A+, you can raise up to $75M annually, but your offering has to be qualified by the SEC (a process which can take around 6 months).
StartEngine specializes in two regulations under the JOBS Act: Regulation Crowdfunding (Reg CF) and Regulation A+.
Under Reg CF, you can raise a maximum of $5M from both accredited and non accredited investors every 12 months.
Under Reg A+, you can raise up to $75M every 12 months.
The cost of launching a Regulation Crowdfunding campaign varies on a case-by-case basis, but generally speaking it costs between $4,000-$10,000 for the financial review and legal documentation required to launch a Reg CF campaign. If you are looking to raise more than $1.07M, you will need a full financial audit, which will bring an additional cost.
However, it is possible to launch at no cost upfront if you meet a few criteria: 1) the company is incorporated as a Corporation and 2) the maximum raise limit is set to $107,000 to start, which allows you to self-certify the company’s financials and save on the financial review cost.
Regulation A+ costs a good deal more, ranging anywhere between $50,000-$100,000. It takes longer to launch as well. Per a report from the SEC, it takes an average of 110 days to be qualified.
Given the cost and time of becoming qualified for a Regulation A+ offering, we recommend that companies begin with Regulation Crowdfunding if they are interested in raising capital through equity crowdfunding. If you want to learn more about Regulation A+, click here, as the rest of this FAQ is devoted to Reg CF.
In terms of fees, StartEngine only makes money when you raise money. We charge 7%* of total capital raised for Regulation Crowdfunding offerings, an additional 2% of what you raise in equity, as well as $10K in deferred revenue that we collect when the offering is complete.
*The % charged may fluctuate between 7-12% based on the method of investment and fees associated.
Generally, companies finish onboarding in 4-6 weeks. We’re with you every step of the way and are on your timeline. Onboarding can be done more quickly if you’re on top of things and responsive to our team.
Companies must meet a basic set of criteria (such as being a US-based operating company, the founder is at least 18 years old, etc), and there is a list of prohibited types of companies that we do not work with at StartEngine.
We also analyze every company that comes to StartEngine’s platform in order to determine whether they are the right fit for our platform and audience as well as for equity crowdfunding in general. You can read more about StartEngine’s prohibited types of companies and eligibility requirements here.
Story: Tell your story in your own words. Build and design your campaign page to attract investors. Our creative team will help you!
Set your own terms: What’s your valuation? What kind of security do you want to sell and how much of it? It’s all up to you.
Legal: We request corporate documents like Articles of Incorporation and Board Resolutions to approve your fundraise.
Financial: You have a few options:
Don’t worry — if you start with self-certified financials, you can always commission the financial review during your offering in order to raise more than 107K. Similarly, if you start with a financial review, you can commission a financial audit during your offering in order to raise more than $1.07M.
It’s impossible to predict which companies will resonate with StartEngine’s community of investors and raise significant amounts of capital. Companies from 40 different industries have successfully raised capital on StartEngine, and those companies have ranged from pre-prototype startups to companies with 8-figure annual revenue.
That being said, there are some trends we have identified among successful raises. Learn more about those trends here.
On StartEngine, the entrepreneur is in control. You get to decide which securities you want to offer to investors and on what terms. Our compliance team will then review your proposed offering terms, as well as all the supporting documentation.
StartEngine has over 400,000 prospective investors in our community, and our community will account 65% of what you raise over the course of your campaign, on average. Throughout your raise, we will offer periodic email promotions to our community as you reach new funding milestones.
We will also provide you with a dedicated fundraising strategist that will work closely with you for the duration of your campaign. Your fundraising strategist will help you create a marketing strategy to your audience and customers as well as run digital advertising campaigns.
For your raise, you will need to disclose key information about your company and the offering, such as the background on the founders, the company’s business model, the price of shares, the goal amount the company seeks to raise, other basic financial information about the company, and risks associated with the investment opportunity. This information will be available to the public. To learn more about the disclosures of Regulation Crowdfunding, click here.
If you have a successful raise, your cap table may have thousands of new investors on it, but we don’t believe that’s a bad thing. StartEngine itself has over 35,000 investors on our cap table, and that has only assisted our growth.
In order to collect capital on StartEngine as it comes in, you have to raise at least 120% of your minimum funding goal. Once you have raised $12,000 (120% of the $10,000 minimum funding goal) and the SEC-mandated 3 week cooling-period has expired, you can disburse funds raised as your campaign continues accepting new investments.
We require that companies set a minimum funding goal of $10,000 for their campaign. This way if you raise less than your maximum funding goal, you can still collect the investments you raised as long as your campaign has raised more than $10,000.
After your campaign ends, StartEngine will file a Form C/U (a Form C update) with the SEC, disclosing the amount raised during your campaign. The final investors will receive an email with their countersigned subscription agreement, which will serve as their proof of purchase.
You will have access to your updated cap table through StartEngine Secure. This will allow you to communicate directly with your investors, field questions and comments, and post updates to your community. StartEngine will help you file your annual report as long as you continue to use StartEngine Secure.
StartEngine Secondary (“Secondary”) is our investor trading platform. StartEngine Secondary is an Alternative Trading System (ATS) registered with the SEC and operated by StartEngine Primary, LLC (our wholly owned broker-dealer subsidiary).
An ATS is an electronic trading system that matches orders for buyers and sellers of securities. It allows investors to trade shares originally purchased through Regulation A+, Regulation Crowdfunding or Regulation D after the company is successfully quoted on Secondary.
Secondary allows investors to trade with each other in a peer-to-peer marketplace. Sellers can post offers to sell a specific number of shares by setting a minimum price. Buyers can post offers to buy a specific number of shares by setting maximum price. If a match is made, then the trade is executed. See below for more details.
Subject to our suitability analysis, U.S. residents over 18 years old can open an Investment Account. Individuals are required to provide information, such as a U.S. bank account, a U.S. address, and a U.S. phone number as part of his/her Investment Account application in order to access StartEngine Secondary.
At this time, employees of any company quoted on StartEngine Secondary are ineligible to trade as they are considered “insiders”, as defined by the SEC. An “insider” is an individual that is a director, senior officer, entity, or individual that owns more than 10% of the publicly available shares.
Individuals must not be, nor have an immediate family member residing in the same household, employed by or associated with any of the following: a broker-dealer, stock exchange, the Financial Industry Regulatory Authority (FINRA) or other financial institution.
We plan to add functionality that will allow earlier investors to trade on StartEngine Secondary in the future, but we do not offer that functionality today. In the event that we add that functionality, there would also be additional legal costs (that can cost $10-20K) to enable investors in previous Regulation D 506(c) offerings to trade.
To learn more about the costs associated with listing on StartEngine Secondary, please contact firstname.lastname@example.org.
StartEngine’s quotation requirements include having a share price greater than $1 per share. Only common stock is tradeable on StartEngine Secondary at this time. Eligibility for quotation on Secondary will be determined by StartEngine on a case by case basis. To learn more about eligibility and our requirements, reach out to us at email@example.com.
Securities purchased in a Regulation Crowdfunding transaction cannot be resold for one year. This means that investors cannot sell shares purchased in a Regulation Crowdfunding offering on Secondary for one full year from the time of the initial investment.
Companies that have raised capital through Regulation Crowdfunding can allow investors to offer to buy or sell shares on StartEngine Secondary 1 year after their initial offering, provided such companies are accepted by StartEngine Secondary.
Securities issued through Regulation A+ do not have the same limitations as securities sold through Regulation Crowdfunding. Securities sold through Regulation A+ are eligible to be bought and sold immediately after the securities have been issued, provided the related companies are accepted by StartEngine Secondary.
StartEngine does not allow you to conduct a Regulation Crowdfunding or Regulation A+ offering at the same time that your shares are quoted on StartEngine Secondary. However, it is possible to let your investors trade in between funding rounds on StartEngine. Companies must trade on StartEngine Secondary for a minimum of 12 months.
Companies are required to trade for a minimum of 12 months on StartEngine Secondary. If after that period, you decide to remove your company from Secondary, we do not provide refunds for any quotation fees that have already been paid. When you decide to remove your company from Secondary, you are required to give us a 2-week notice period.
Companies that wish to be quoted on StartEngine Secondary have the following reporting obligations:
Under our current policy, there are no protections against your share price dropping. StartEngine Secondary is a public market with no market makers. We also do not have short selling in our marketplace. However, we do monitor the market for any sign of market manipulation.
You can reach us anytime at firstname.lastname@example.org!
Investors can place orders on StartEngine Secondary at any time. However, each stock trading on StartEngine Secondary will have individual market hours. Market hours are the times at which our matching engine will match orders with each other. For example, your market hours could be 11am-1pm PT Monday-Friday.
Investors can place limit orders 24/7, and clearing (matching limit orders) will only occur during market hours. We plan to add market orders at a future date, as well as other order types.
Submitting a buy or a sell order is straightforward. Investors select whether they want to buy or sell.
If they’re buying, they enter the number of shares they’d like to purchase, and the maximum price they’re willing to pay.
If they’re selling, enter the number of shares they’d like to sell, and the minimum price they’re willing to accept for the shares.
To view the current buy/sell orders on the market, investors can scroll down to the “Order Book” which will show the current buy/sell orders. Investors can enter a buy order above the lowest sell order, or a sell order below the lowest buy order to increase their chances of the trade being executed.
Trade orders will only be executed during market hours. Trade orders expire after 24 hours. If an order is not cleared in that window, then the investor will need to resubmit their trade order again.
Trade orders are executed in real time. There is no delay in settlement time as there are in public markets today.
On StartEngine Secondary, investors can have part of their trade order filled. If there isn’t enough demand to meet their entire order before it expires, then we will match the part of the order we are able to fill. Trade orders are filled based on a few criteria. In order of priority, those are the asking price, the time the order was submitted, and then finally the size of the order.
Investors can cancel their order at any time before the order is matched by Secondary. After an order is matched, there is no possibility of a cancellation or a refund.
There are no market makers on StartEngine Secondary. A market maker is a participant or a company that actively buys and sells securities (in a National Market System) on both sides of the market in order to provide liquidity while profiting from the difference in the buy (“bid”) and sell (“ask”) spread.
You can reach us anytime at email@example.com!
A company which intends to apply to list its securities on the marketplace will be subject to certain requirements which it may or may not be able to satisfy in a timely manner. Even if a company is qualified to list its securities on the market, there is no guarantee that a demand for these securities will exist. Even if a company does meet the requirements for listing its securities, we do not know the extent to which investor interest will lead to the development and maintenance of a liquid trading market. You should assume that you may not be able to liquidate your investment for some time or be able to pledge these shares as collateral.