StartEngine Review – Your Chance to Invest in an Early-Stage Startup

Shark Tank has brought the world of private equity investing into our living rooms, and if you have always wondered how to be a part of the ever-expanding start-up culture, you might want to consider StartEngine. In the show and in many cases, venture capital or private equity deals are only open to accredited investors or hedge funds but StartEngine makes it possible for people like you and me.
As against the common notion that you need to invest billions in a startup, StartEngine has a minimum investment amount as low as $500, and you do not need to be an accredited investor. It is open to the general public across the U.S. Our StartEngine review explains everything about the investment platform and if it is worth using.

What is StartEngine?

StartEngine is an opportunity for you to invest in an early-stage company, and it is known as the largest equity crowdfunding platform based on the investment volume. It was launched in 2015 and operates out of California. Investor and Shark Tank guest Kevin O’Leary joined as a strategic advisor in 2020 following a funding round of $8 million.
StartEngine aims to open investing for all and has already helped more than 750 startups raise money. In 2020, it was named the 10th fastest-growing private company in California and is entirely funded by investors on the platform. The company acquired competitor SeedInvest in 2022. It has more than 1 million users and has raised over $1.1 billion for startups.‍

How does StartEngine work?

To invest in StartEngine, you first need to create an account which is a simple and quick process. Provide your name, and a username, and create a password. You will then have to provide your mobile number, address, birth date, country of citizenship, marital status, employment status, Social Security Number, investment experience, annual income, total net worth, and investment objective.
StartEngine Review – Your Chance to Invest in an Early-Stage Startup
Once you create an account and log in, you will see all the startups raising capital. Click on "Explore investments" to learn more about them.
StartEngine Review – Your Chance to Invest in an Early-Stage Startup
Simply browse through the investment opportunities to find the one you are interested in, and you will see a snapshot of the amount the issuer has raised so far, the minimum investment needed, and the number of investors.
StartEngine Review – Your Chance to Invest in an Early-Stage Startup
If you find a company you want to invest in, you will have to do your due diligence. The company will have an investor campaign page with a video in addition to the SEC filings including the financial documents, valuation, and what the company does. Once you are ready to invest, you will see a green button that says” Invest Now”.
StartEngine Review – Your Chance to Invest in an Early-Stage Startup
Click on it and choose from the available payment methods to invest. It accepts credit cards, ACH transfers, and wire transfers. You can also cancel an investment for any reason within 48 hours before the funds are closed. There are times when the company is unable to meet the funding goal, and if it doesn’t, the money will be returned to you in 10 business days after the offering closes.

Who can invest in StartEngine?

U.S. investors above 18 years can invest in StartEngine. It is open to accredited and non-accredited investors. It is not open for investors in Canada or the U.K. and your income, net worth, and accreditation status will determine how much you can invest in the opportunities.

StartEngine fees

StartEngine does not have any additional fees besides the investment amount. However, many startups listed on StartEngine require the investors to pay a 3.5% fee. StartEngine charges entrepreneurs to fundraise through the platform.

StartEngine Features

StartEngine Secondary

The company has an investment trading platform, StartEngine Secondary which allows investors to trade the privately held shares bought through Regulation D, Regulation A+, and Regulation CF with the other investors. However, you will have to open a separate account to hold funds and trade.
You can buy and sell the shares of companies listed on the platform, and it is registered with the Securities and Exchange Commission, so it is just like trading on a brokerage. One thing to keep in mind is that not every company that lists with StartEngine will enable trading on the secondary marketplace, and liquidity is not guaranteed. While buying on the secondary marketplace is free, sellers need to pay a transaction fee of 5%.

Owner Bonus Program

This is a unique program offered by StartEngine where you get to earn a 10% bonus for the shares you buy in the participating offerings. You also enjoy early access to the newly launched campaigns, have lower trading fees when you sell in the secondary market, and have priority in case of a waitlist for the investment. But the perks don’t come for free. You need to pay $275 annually to enroll in the program, and you can cancel the membership at any time. There are 28,000+ owner’s bonus holders today.

Investing options

There are more than 150 available startups for you to invest in through StartEngine. It includes a range of sectors like Artificial Intelligence, real estate, solar energy, trading platforms, and more. Most of the investments are for common stock, but companies do raise money with convertible notes, and debt. There are two main classes of investments on StartEngine.
One is the Regulation A+ investment, and the other is Regulation Crowdfunding. As an accredited investor, you do not have any regulations, but if you are a non-accredited investor, you will have to follow the regulation rules. When you invest in StartEngine, you get to choose from Regulation D, Reg A+, and Reg CF on the platform. The type of offering will decide who can participate and set the investment limits for the investor.
Some offerings like Regulation D are only available to accredited investors. Those with Regulation A+ restrict non-accredited investors to invest only 10% of their annual income or 10% of their net worth, whichever is higher, annually. On the other hand, Regulation Crowdfunding will limit those with an annual income or net worth of less than $107,000 to invest a maximum of 5% of the larger of the numbers. If your annual income is higher than $107,000, you can invest up to 10% of your net worth.

Collectibles

Having purchased Seed Invest in 2022, StartEngine now offers a wide range of collectibles to invest in like comic books, and artworks, sports cards, prints, wine, and watches.

Different investment structures

StartEngine has a mix of equity and debt offerings. The companies on StartEngine can also elect to offer common stock, preferred stock, promissory notes, convertible notes, revenue share, or revenue participation rights.

Referral program

The Scout Program is StartEngine’s referral program that allows you to earn up to $4,000 if you refer a company to raise funds on the platform. You will earn when the referred company signs the posting agreement of the company, and it is verified that they are eligible to raise on the platform.

Pros and cons

Pros
  • Invest with $500
  • No minimum amount is needed to sign
  • Choose from a wide range of investment options
  • Open to non-accredited investors
Cons
  • No way to see the present value of your investment
  • High risk
  • Lack of adequate financial information on the startups

Who should invest in StartEngine?

  • Investors looking to support early-stage startup companies. If you are looking to invest in an early-stage startup and want to make the most of its growth, StartEngine is a good platform to begin with.
  • Risk tolerant investors. Investing in start-ups can be risky, and you may or may not make money. However, if you can take high risks, you might want to consider StartEngine.
  • Investors looking for diversification. Investing in a startup can bring diversification to your portfolio.
  • Long-term investors. The investments are highly illiquid, and the returns on a startup investment can take as much as 10 years you should invest in a startup only if you have a long-term investment horizon and do not need the funds anytime soon.

Who shouldn’t invest in StartEngine?

  • Beginner investors. If you have just embarked upon your investment journey, it is best to avoid a high-risk investment where you could lose all your money.
  • Short-term investors. If you need high liquidity and are looking to generate quick returns on your investment, StartEngine isn’t for you.
  • Risk-averse investors. Investing in early-stage startups can be risky since you do not have any information about the company’s past performance or a projection about its future. If you cannot tolerate risk, it is not for you.

StartEngine vs Competitors


Open for Non-accredited investors
Fees
Alternative investments 
StartEngine
Yes
3.5%
Yes
Yes
2% of the investment, with a cap of $300. 
No
AngelList 
No
0.75% to 0.2% of the fund size 
No

Republic.com

Republic.com is another crowdfunding platform that connects institutional investors and individuals to various investment opportunities. It charges 2% of the investment as a fee with a maximum cap of $300. It is a trademarked Crowd SAFE (Simple Agreement for Future Equity) platform which sets it apart from other crowdfunding investment platforms. This trademark also adds to the authenticity of Republic.com. It has low minimum, making it ideal for people who are just getting started and also offers automated investing. 

AngelList

AngelList is slightly different from StartEngine, in that it only offers venture funds, demo day funds, rolling funds and allows investors to invest in a start up through a deal-by-deal basis. It is only open for accredited investors which means you need to have access to a significant amount of money to invest in a startup and its fees vary based on the type of fund you choose. You can build your own portfolio through deal by deal investing but it doesn’t offer automated investing. 

FAQs

Is investing in StartEngine safe?
Equity crowdfunding sites remain regulated by SEC and FINRA so you will get some protection as an investor on StartEngine. For cash and securities, you can get up to $500,000 in SIPC insurance. Even if StartEngine goes bankrupt, your money and investments remain safe. But the performance of your investments cannot be guaranteed. It is a high-risk investment and one you should make after due diligence.
Is StartEngine legit?
Yes, StartEngine is a legitimate crowdfunding platform and has more than 1,700,000 investors. It has raised over $1.1 billion for startups and funded over 1000 offerings.
Has anyone ever made money through StartEngine?
Several companies have raised money on StartEngine and have now become available for over-the-counter market trades. While these aren’t the traditional stock markets, they still follow the same rules as a traditional stock exchange. However, information about the company's performance is difficult to find, and one cannot know about the potential returns either.

The bottom line

While StartEngine simplifies investing in startups and opens it for everyone, it does carry some amount of risk. You can choose to invest in any startup ranging from a local brewery to an AI company but there could be a possible loss of your entire investment. Hence, only invest the amount you can afford to lose. It does offer a chance to invest in businesses you care about, like a cure for cancer, a local ice cream shop, or a movie studio, but the investment will take a few years to make you money.
If you can tolerate the risk and have a long investment horizon, StartEngine offers a good way to diversify your investment portfolio while getting your feet wet in a different asset class. Ultimately, consider the risks and potential returns before you dive in.

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