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Is StartEngine a Scam? A Comprehensive Examination


Kevin O'Leary standing in front of a StartEngine Logo
Photo by StartEngine

Many upset investors call StartEngine a scam, but is it actually? No, StartEngine is not a scam. The platform is regulated, completely legitimate and a great way to diversify into startup investing.


In an era where online fraud is increasingly sophisticated, skepticism around digital platforms—especially those dealing with money—is understandable. This article will take a detailed look at StartEngine, examining its credibility, operations, and regulation to help investors make an informed decision.


Table of Contents

Background of StartEngine

StartEngine is an equity crowdfunding platform founded in 2014. It originally started as a startup accelerator program but transitioned into an equity crowdfunding platform in 2016. The platform allows startups to raise capital by selling equity to both accredited and non-accredited investors. With a diverse portfolio ranging from tech companies to consumer brands, it has become one of the leading platforms in the equity crowdfunding space.


Key Points

  • Founded in 2014

  • Headquartered in Burbank, California

  • Operates under U.S. SEC and FINRA guidelines

  • Over $1.1 billion raised for startups as of 2023 and over

  • Over 1 million users

Regulatory Oversight

StartEngine operates under strict regulations defined by the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA).


Security Measures

  • "Gate Keeps" Fraud and Compliance with Regulation Crowdfunding (Reg CF) and Regulation A (Reg A) on it's platform

  • Regulated as a registered funding portal, broker-dealer, transfer agent and more.

  • Strict Anti-Money Laundering (AML) protocols

  • Investor identity verification procedures

  • Due Diligence of startups on platform

Transparency and Due Diligence

StartEngine places a high priority on transparency. Each startup listed on the platform must undergo an extensive due diligence process.


What You Can Expect

  • Financial audits

  • Business plan disclosures

  • Team background checks

  • Regular updates on fundraising progress

  • SEC-Qualified offering circulars for every raise

User Reviews and Feedback

User feedback is a critical metric in assessing the credibility of any platform. StartEngine has received largely mixed reviews on sites like Trustpilot and the Better Business Bureau. Most complaints are related to the high-risk nature of startup investing—a universal trait in this type of investment.

Can You Make Money on StartEngine?

Yes, you can make money with StartEngine, but it will take a while. Unlike the overall stock market, startups are not publicly traded and the companies need to scale to an exit before investors see a return. Most startups ultimately fail, but those that do scale to an exit result in substantial gains for investors.


Are StartEngine Investments Guaranteed?

No investment platform can guarantee returns, and this is explicitly stated in StartEngine's terms and conditions. Before any investor makes an investment in any startup on the platform, there are disclosures about the companies being speculative, illiquid and involve a high degree of risk.


Are There Hidden Fees on StartEngine?

StartEngine is transparent about its fees, which vary between 5 and 12% for issuers and between 0 and 3% for investors.


Can StartEngine Disappear with My Money?

Given the SEC and FINRA oversight, disappearing with investor money would be illegal and highly unlikely. However, StartEngine cannot fully prevent bad actors from using its platform, so it's possible bad actors could use the platform. Similarly, startups are very risky and often go out of business so there is a possibility you lose the entirety of your investment.


Conclusion: Is StartEngine A Scam?

While no investment is without risk, StartEngine is completely legitimate and is not a scam. Operating under stringent regulatory oversight and emphasizing transparency and due diligence, StartEngine provides a legitimate avenue for startup investing. However, investors should conduct their own research and consider their risk tolerance before investing in any startup.

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