Equity crowdfunding is a fast-growing category that allows anyone to invest in startups. Interestingly enough, one of the top platforms, StartEngine, is doing its own funding campaign. So far, the company has raised over $3.4 million. As for the minimum to invest in StartEngine, it is $506.25.
The founder and CEO of the company is Howard Marks, who is a serial entrepreneur. Keep in mind that he was one of the original creators of Activision Blizzard (NASDAQ:ATVI), which currently sports a market capitalization of $61 billion. He also founded Acclaim Games, which was sold to Disney (NYSE:DIS). In other words, Marks has some pretty good entrepreneurial chops.
StartEngine’s first offering came in June 2015. It was for Elio Motors, which has gone on to raise $17 million.
Since then, StartEngine has seen considerable growth. Consider the following metrics:
- There have been more than 350 companies funded for a total of over $150 million.
- 51% of companies return to StartEngine to make further offerings.
- The platform has over 100,000 investors and 48% of them have made repeat investments.
- In 2019, the StartEngine reported a 67% increase in the total amount invested to $43.7 million and the average investment per company spiked by 4X. There was also a doubling of the number of investors.
At any given time, StartEngine has diverse list of companies to invest in. Here’s a look at what’s on the site now:
- Knightscope: The company is a developer of next-generation robots that provide 24/7/365 security such as for hospitals, manufacturing plants, company offices and schools.
- Jet Token: This company provides a private jet membership service that allows for booking from a mobile app.
- Innovative Eyewear: The company develops affordable high-quality glasses that have high-tech features like Bluetooth. Thus, you can listen to music, talk on your phone or use a voice assistant.
One of the main criticisms with investing in early-stage companies is liquidity. Often this could take five to ten years. This is because an exit may be an IPO or an acquisition.
But StartEngine wants to solve this problem. To this end, the company will soon launch an ATS (alternative trading system), which is a private exchange where you can trade your shares.
Developing this is more than just about the technology. An ATS also has extensive regulations. But the good news is that StartEngine has already been granted approval. No doubt, the ATS will be a key differentiator.
Invest in StartEngine?
A key for long-term growth for crowdfunding will be to get more visibility and exposure. Simply put, many people still do not know that the industry exists!
But StartEngine is working to evangelize the benefits of crowdfunding by hiring Kevin O’Leary as an advisor. He is a well-known investor and host of the popular TV show, Shark Tank. In other words, he will be ideal in ginning up interest in StartEngine as well as the industry.
OK then, so what are the terms of the crowdfunding round? Well, there are some perks when you invest in StartEngine. If you commit to the minimum, then you get a 20% discount on the shares so long as you have invested in at least another deal on the platform. Or, if you invest over $1,000, then there is an additional 10% for other investments.
Yes, StartEngine has its risks and the company does disclose these. The market is competitive and there is potential legal exposure, such as if a string of deals goes bad.
But on the positive side, you get diversification across numerous companies but also have exposure to the growth in the crowdfunding space. It is also important that StartInvest has a fairly good track record.
However, as is the case with any startup investment, it is still important for all investors to do their own research and analysis.
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.