Looking into equity crowdfunding for your next round of fundraising? Get your questions answered here.
StartEngine is the largest equity crowdfunding platform in the US and the first mover in the industry. We have raised over $90M for over 265 businesses on our platform to date, and we have helped more companies raise capital than any other platform.
With the passage of the JOBS Act in 2012, the Obama administration made it possible for every US citizen to invest in startups, regardless of wealth or status. For the first time, anyone could invest in private businesses and buy shares of stock, debt, revenue share, and more.
Entrepreneurs no longer needed traditional sources of capital, such as private equity or venture capital firms, to bring their ideas to life; they just needed other like-minded visionaries willing to take a chance on something novel.
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.
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% 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.
In essence, the difference can be distilled down to the wealthy vs. everyone else. The real definition is that accredited investors are individuals with a networth greater than $1M (excluding their primary residence) or an annual income exceeding $200K per year for two years ($300K if combined with a spouse). With equity crowdfunding, both accredited and non-accredited investors can invest in your business.
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.
– Save on upfront cost and self-certify your financials to raise up to 107K.
– Use one of our low-cost, preferred CPA vendors and get a 2-year independent financial review done in order to raise up to $1.07M from the start.
On average campaigns last 60-90 days. Anything less than 60 days tends to not be enough time to garner widespread awareness. Anything over 90 days tends to be too long, and you lose a sense of urgency.
We require that companies set a minimum funding goal of $10,000 for their campaign. This way if a company raises less than their maximum funding goal, they can still collect the investments they raised as long as it is more than $10,000.
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.
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.