Interested in investing in startups and early-growth companies on StartEngine? Get your questions answered here.
On StartEngine, you support startups and early-growth companies that you are passionate about. This is different from helping a company raise money on Kickstarter. You aren’t buying products or merch. You are buying a piece of a company and helping it grow. In time, you may make a profit on your investment if the company grows and becomes more successful, and your investment holdings become worth more
The majority of offerings on StartEngine are common stock, but some companies raise capital through convertible note, debt, and revenue share. You can invest in companies from all kinds of industries, from green tech to professional ultimate frisbee leagues.
With Regulation A+, a non-accredited investor can only invest a maximum of 10% of their annual income or 10% of their net worth per year, whichever is greater. There are no restrictions for accredited investors.
With Regulation Crowdfunding, non-accredited investors with an annual income or net worth less than $107,000, are limited to invest a maximum of 5% of the lesser of the two amounts. For those with an annual income and net worth greater than $107,000, he/she is limited to investing 10% of the lesser of the two amounts.
An accredited investor is a person who has a networth of at least $1 million (excluding their primary residence) or earns at least $200,000 in income each year – $300,000 if combined with a spouse. A non-accredited investor is everyone else!
Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth.
For examples, and more information about how to calculate your net worth, feel free to reference this SEC investor bulletin.
Anyone over 18 years of age can invest on StartEngine. However, if you are younger, a parent could invest in your name by setting up a UTMA or trust. To learn more about how much you can invest, please review the SEC Investor Bulletin.
Secondly, while we do not market in UK or Canada, or solicit investments from UK or Canada, we are aware that regulators from certain UK countries or Canadian provinces have raised questions with respect to sales to UK or Canadian investors, and are taking the view that merely accepting money from UK or Canadian investors is a transaction that they have jurisdiction over, and that such offerings have to comply with the UK or Canadian equivalent of registration of the offering, or find an available exemption. In light of this position, and in order to protect the companies who post their offering with us, we are not currently accepting investments from UK or Canadian investors.
StartEngine assists companies in raising capital, and once the offering is closed, we are no longer involved with whether the company chooses to list shares on a secondary market, or what occurs thereafter. Therefore, StartEngine has no control or insight into your investment after the close of the live offering. In addition, we are not permitted to provide financial advice. You may want to contact a financial professional to discuss possible investment outcomes.
Once the live offering has closed, you may choose how to handle your shares. You will be introduced to the company’s selected transfer agent, which is the cap table management service, who will be responsible for the transfer of your shares after the close of the offering.
Companies may choose to apply to quote their securities on our trading marketplace StartEngine Secondary. StartEngine Secondary is one of the first markets in the US where non-accredited investors can publicly trade investments that have raised capital via Regulation Crowdfunding and Regulation A+. StartEngine Secondary is an alternative trading system regulated by the SEC and operated by StartEngine Primary, LLC, a broker dealer registered with the SEC and FINRA.
The shares sold via Regulation A+ offerings are unrestricted and can be sold freely immediately after purchase. However, the shares sold via Regulation Crowdfunding offerings have a one-year lock up period before those shares become unrestricted and can be sold freely.
Investors are generally restricted from reselling shares for a one-year period after they were issued, unless the shares are transferred:
A company which intends to apply to list its securities on StartEngine Secondary will be subject to certain requirements, including state laws. Even if a company is qualified to quote its securities on StartEngine Secondary, there is no guarantee that a demand for these securities will exist. Even if a company does meet the requirements for quoting its securities, we do not know the extent to which investor interest will lead to the development and maintenance of a liquid trading market. An investor should assume that he or she may not be able to liquidate the investment for some time or be able to pledge these shares as collateral.
Both Title III (Regulation Crowdfunding) and Title IV (Reg A+) help entrepreneurs crowdfund capital investments from unaccredited and accredited investors. The differences between these regulations are related to the investor limitations, the differing amounts of money companies are permitted to raise, and differing disclosure and filing requirements. To learn more about Regulation Crowdfunding, click here, and for Regulation A+, click here.
All available financial information can be found on the campaign pages for both Regulation Crowdfunding and Regulation A+ offerings. For companies raising capital with Regulation Crowdfunding, you can find that information under the “Terms” tab.
For Reg A+ offerings, their financial information can be found in their offering circular, which will be linked on their campaign page. Campaigns that are currently Testing the Waters are not required to display their finances until they go into live offering mode. If you have questions for a company, feel free to submit a comment in the “Comment” tab of their campaign page, and they will respond to you directly.
The majority of our offerings are completely free for investors, as StartEngine makes its money by charging fees to the company raising money. That being said, companies can opt to offset those costs by having investors pay a percentage in the form of a processing fee. This fee will be charged to investors on top of the price of shares. Your total amount charged and shares will be stated clearly on the investment form as a 3.5% processing fee.
If you are paying via a wire transfer, there may be additional fees charged by your bank related to the transfer of funds. In the event that you make a wire transfer, please be sure to talk to your banking institution about the fees involved, so that you can pay any additional transfer fees needed. ACH and credit card investments do not include additional fees but are still subject to the 3.5% fee above when applicable.
We understand your concern regarding the security of your Social Security Number. We ask for your SSN due to anti-money laundering regulations and fraud checks.
Our applications communicate with our servers using Transport Layer Security (TLS) protocol issued by DigiCert.
If a company does not reach their minimum funding goal, all funds will be returned to the investors within 10 business days after the closing of their offering.
If a company has reached their maximum funding goal, you can submit an “indication of interest.” An indication of interest is similar to a reservation. It’s a non-binding commitment that allows you to be placed on a waitlist for any offerings that are oversubscribed, meaning they have raised more than their maximum funding goal. This is not an investment and does not guarantee a place in the offering.
If your indication of interest is accepted, you will be notified to sign your binding agreement. You will have only 72 hours to sign the approved indication of interest. If you do not sign the agreement within 72 hours of being notified, you will be bumped to the bottom of the waitlist. If your binding agreement is pre-signed, the investment will automatically get pushed through once off the waitlist.
Can I cancel my indication of interest?
You can cancel your indication of interest at any time up until 48 hours before the target deadline. If you cancel your indication of interest, you will lose your place on the waitlist.
When will I become an investor in this offering?
You will not become an investor in this offering unless your indication of interest is accepted and pushed off the waitlist, and you sign your binding subscription agreement via email, within 72 hours of notification. There is not a defined timeframe, as to when/if your indication of interest will be accepted. StartEngine will only push investor’s through to the next phase if space becomes available in the round.
On StartEngine, you can invest in four ways: Individually; as a self-directed IRA; as a Trust, or as an entity like a corporation or Limited Liability Company. If you are interested in learning more about what a self -directed IRA is, or how to convert your IRA to a self -directed IRA, click here.
We currently accept four forms of payment: Automated Clearing House (ACH), Bitcoin (Btc), Credit Cards, and Wire Transfer. As is true with all payment methods, investments made by credit card are only charged if a company reaches its minimum funding goal.
ACH is an electronic network for financial transactions in the United States. An ACH transfer may be completed on the StartEngine website. In order to complete a wire, you need to bring the given wire instructions to your bank. Bitcoin is payment through cryptocurrency and is only available for Regulation Crowdfunding campaigns. Please note: international investors can only pay through Credit Cards or Wire Transfer.
Credit card investments are captured immediately after submission of the investment. Your credit card investment will be marked as “received” once the funds have been successfully received and credited to your investment (usually a few days after capture).
ACH (E-check) investments
Funds are only withdrawn from an investor’s account once a company has exceeded their minimum funding goal and escrow has been opened. Therefore, until this happens, the status of the investment will remain “not received.” Once the escrow account has been opened, the funds committed via ACH investments can take up to 3-4 business days for them to reach a company’s escrow account, and 10 days to clear once received.
If an ACH investment fails, you will be notified immediately with a link to update your payment information with a follow up email a few days later to confirm your payment information.
Wire transfers are completed outside of the StartEngine platform, meaning you will need to contact your bank independently to execute the transfer. We send three separate emails reminding you to execute a wire transfer. The emails are sent: after 1 week, after 10 days, and a final email after 14 days. Each email includes a link to view the wire transfer instructions to execute the wire transfer. Until you contact your bank and wire the funds, the status of your investment will remain “not received.”
BTC instructions will be sent to you via email immediately following submission of the investment. Once BTC funds are sent and received, you will receive an email confirmation. It normally takes approximately 5 days for the BTC to be converted to USD. Once converted, you will receive an email for the total BTC to USD conversion amount.
All Bitcoin investments, regardless of the amount, must have both Know Your Customer (“KYC”) and Anti Money Laundering (“AML”) checks completed. In the event, you do not enter in the information correctly, or there is a delay conducting the AML or KYC checks, it may take longer for the Bitcoin to be converted to dollars.
It’s at the discretion of each company as to whether or not it accepts credit cards. You can always find out if a company accepts credit card payments by simply clicking “Invest Now” on a campaign and then clicking “Payment Method” to see if “Credit Card” is available.
Here are some important things to know about investing with a credit or debit card on StartEngine:
If you have submitted an investment and funds have not yet been pulled from your account, there are a couple reasons that this might be the case:
If the company has exceeded their minimum funding goal, you should have already received the wire instructions in your email. You can also find the instructions to complete your wire transfer by logging into your StartEngine account, clicking your name in the top right corner and selecting “View Current” under “My Investments”. You can now simply select the “View Investment” button next to the appropriate investment, and you will be able to view all of the required wire instructions.
If you have received an email that says “Error with your investment,” then that means there is information that needs to be verified before the investment can be processed. The link in the email will redirect you to a StartEngine page asking you to input some additional information. Once you submit the required information, the system will begin processing your investment. We will reach out to you directly if we require any further information.
Note: Please click the link when you are already logged into your StartEngine account.
You can also update this information by following the steps below:
You can view your signed subscription agreement by logging into your StartEngine account. Click your name in the top right hand corner, and select “View Investments”. You should see a list of all of your investments that have the option to view your signed Subscription Agreement.
Note: You will not be able to view your signed subscription agreement until the company closes on your funds, and your status changes from “received” to “invested”.
Once the company closes on your funds, you will receive a confirmation email from the company with details about your investment, along with a copy of your subscription agreement with a record of your shares. Depending on when the company requests a disbursement (close on funds), this could be a few weeks, or months, after the original investment was submitted.
Your shares are owned as “book-entry,” which is how most stocks are issued today. It means that you do not get a physical stock certificate, and instead, shares are held via electronic record by the issuing company’s transfer agent. The benefit of electronic book-entry shares is that it minimizes the costs and problems of lost or missing certificates, which can be overwhelming for companies to manage.
For Regulation Crowdfunding, investors are able to cancel their investment at any point throughout the campaign up until 48 hours before the closing of the offering. Note: If the company does a rolling close, they will post an update to their current investors, giving them the opportunity to cancel during this timeframe. If you do not cancel within this 5-day timeframe, your funds will be invested in the company, and you will no longer be able to cancel the investment. If your funds show as ‘Invested’ on your account dashboard, your investment can no longer be cancelled.
For Regulation A+, StartEngine allows for a four-hour cancellation period. Once the four-hour window has passed, it is up to each company to set their own cancellation policy. You may find the company’s cancellation policy in the company’s offering circular.
Once your investment is canceled, there is a 10-day clearing period (from the date your investment was submitted). After your funds have cleared the bank, you will receive your refund within 10 business days.
Refunds that are made through ACH payments can take up to 10 business days to clear. Unfortunately, we are at the mercy of the bank, but we will do everything we can to get you your refund as soon as possible. However, every investment needs to go through the clearing process in order to get sent back to the account associated with the investment.
In order to change your reservation amount, you will have to cancel your reservation and re-submit a new reservation. To cancel your reservation, please follow the steps below:
To view your investment status follow these steps:
Different stages of your investment
Incomplete – You have begun the investment process but have not completed all of the steps to finalize your investment. Make sure that you click the green “Submit” button after clicking “Invest Now” on the campaign home page. Once you have submitted your investment, you will receive a confirmation email immediately following submission. If you elected to pay by wire, instructions will be emailed to you.
Submitted – You have successfully submitted your investment, and it is currently pending. It could be pending because the offering has not yet reached their minimum funding goal, the funds have not yet left reached the escrow account, or are still undergoing the necessary checks. If there is any problem with your investment, you will be notified by StartEngine.
Cleared – StartEngine has received your payment for your investment, and we have successfully verified all of the required investor checks. There is nothing else that you need to do at this time.
Invested – After the company has conducted a close on their offering, those investments that have cleared will be then moved to “Invested.” This means your funds have been disbursed to the company you have chosen to invest in, and you can no longer get a refund on your investment.
At the close of an offering, all investors whose funds have “cleared” by this time will be included in the disbursement. At this time, each investor will receive an email from StartEngine with their Countersigned Subscription Agreement, which will serve as their proof of purchase moving forward.
Please keep in mind that a company can conduct a series of “closes” or withdrawals of funds throughout the duration of the campaign. If you are included in that withdrawal period, you will be emailed your countersigned subscription agreement and proof of purchase immediately following that withdrawal.
If you are getting this error message, it means that you have exceeded the amount that you are allowed to invest during a 12-month period.
StartEngine allows both accredited and non-accredited investors to invest. However, for non-accredited investors, those whose annual income or net worth is less than $107,000, are limited to the greater of $2,200 or 5% of the lesser, of his or her annual income or net worth.
If the annual income and net worth of the investor are both greater than $107,000, the investor is limited to 10% of the lesser of his or her annual income or net worth, to an annual maximum of $107,000.
To learn more about your investing limitations and the regulations, please refer to the SEC Investor Bulletin here.
To contact the company directly, please leave a comment for them on their campaign via the comments section and a member of their team will respond to you shortly. Please note that you cannot use or leave your personal email address as the company can only communicate with investors through the StartEngine platform.
StartEngine cannot give you any tax or investment advice. You may want to consult a tax advisor regarding your investment and any questions regarding your taxes as an investor. However, we can provide you with some useful information on how it may affect you for the upcoming tax year.
Tax liability is largely determined by what type of entity you invested in. There are two times of entities, which you may have invested in. You invested in either a C corporation or an LLC. You can find the specific entity type on each company’s Form C, which is accessible through the companies “terms” section on their campaign page.
What happens if you invested in a C-corporation?
Generally speaking, U.S. investors investing in C-corporations on StartEngine will only need to report income when they realize a gain or loss for tax purposes. In these instances, no K-1 is owed to you. You would however need a K-1 if you are obtaining liquidity such as through selling a position or earning interest. In these cases, the company you invested in will provide you with the required documents. StartEngine will not be sending any of these tax forms to you.
What if the company you invested in goes bankrupt?
The company or its trustee is responsible for providing tax documents directly to their investors, to reflect any loss.
What if I sold the security I acquired on StartEngine in a private transaction and realized a gain?
Once an investor sells a capital asset, and realizes a gain, the capital gain is taxable.
What if I sold the security I acquired on StartEngine in a private transaction and realized a loss?
Once you sell a capital asset, at a loss, this qualifies as a capital loss and can be used to offset capital gains.
You can reset your password by clicking “Forgot Password”, which is located on the Login page below “Password.” Once you click “Forgot Password,” you will be asked to enter your email. After you enter your email and click “Submit,” we will send you further instructions.
Once the email arrives, please open it and click on the “Reset your password” link provided. You will then be prompted to enter a new password and confirm that password. After you do so, you will be logged in and redirected to the main StartEngine page. Once logged in, you will be able to reserve shares, follow companies, and/or invest.
The StartEngine Owner’s Bonus is a bonus granted to certain StartEngine shareholders that allows them to earn a 10% bonus when investing in companies on StartEngine. Learn more about the Owner’s Bonus here.
All StartEngine users are automatically subscribed to our newsletter. If you would like to sign up to be a part of the StartEngine community, please go to startengine.com/signup to receive our newsletters, reserve shares and invest!
It is very easy to unsubscribe from any emails or company updates, that you no longer want to receive. Every email that we send out has an unsubscribe link under the signature of the email. Simply click the link, and you will automatically be unsubscribed from these sorts of emails.
If you have questions that have not been answered in the FAQ, feel free to email us at email@example.com or use our green chat icon found in the lower right hand corner of all of our StartEngine pages. We will do our best to answer your questions within 24 hours.