Amazing growth for StartEngine, and signal the continued strength of equity crowdfunding.
StartEngine recently released its Q1 financials showing an overall 36% increase in revenue YoY. The company brought in revenue of $7,760,806 compared to $5,699,274 during the same time last year. While platform fees did grow, the main driver of growth was actually sales of the Owner's bonus, with a whopping 531% YoY growth in Owner's Bonus Revenue. Revenues from the Owners bonus grew to $1,365,952 vs $281,516 the same time last year. This means roughly 5000 people purchased the Owners bonus in Q1 of 2022 alone.
The owner's bonus is an incredibly popular service from StartEngine that costs $275 per year, with the primary benefit being investors receiving 10% bonus shares in the majority of the raises on the site. Meaning that if you purchased 100 shares from a company on StartEngine for $1000, you would receive an additional 10 shares. In theory, this means you make an additional $100, and as long as you invest $2500 or more on StartEngine, then you make your money back. There are a few other perks like first dibs on investing in Collectibles, as many of the earliest collectibles offerings would sell out instantly, so this is a great low-cost perk to give those that own it. Now, that is rarely the case with many larger offerings, but this could be a much larger selling point in the future. Another perk is that StartEngine emails you every time a new offering launches so that people don’t miss things like friends and family discounts. Lastly, there is a 20% discount on fees on StartEngine Secondary. Secondary is not currently operating, but once it is up and running, it does actually save you a couple of dollars a trade if you use the platform.
Obviously, most investors are worried about investor fees more than anything. That's the most competitive aspect of this, and it’s what I personally watch for. Once they relaunch StartEngine Secondary, personally, I will be watching for growth on that platform because I think that actually has more potential than pure money raises over the long term. That isn’t to say there isn’t massive opportunity within Reg CF and Reg A raises, but there are only so many startups and businesses that can raise money every year, and the only real barrier to entry within this system is deal flow.
They grew platform fees only about 13% YoY, but honestly, it’s still really solid growth given many of the hurdles they recently have had to overcome. Obviously, I would like for it to be much higher, but they have doubled several years in a row now, so the party has to slow down sometime, and seeing them slow down but still hitting 33% YoY growth is great.
Some other notable metrics I found were 256,000 users of their 750,000+ users who have made investments on the platform. I think that’s a great metric to know because total accounts really aren’t that important because it only takes a second to make an account. However, in order to invest, you have to provide verifiable information like your Social Security Number. Knowing that roughly 1 in 3 people that make an account will translate to an investment is valuable to know, and the total number of people making investments for future reference is important.
They have 107 employees as of March 31. While this doesn’t really translate to much, it shows just how big of an operation this is. StartEngine is continually hiring while many large companies like Google and Apple are slowing hiring is promising for the company. As well, they have $15 million on hand, so they aren’t in danger of going under any time soon either.
Lastly, they operated at a $2 million loss for this quarter, likely due to the issues surrounding getting Secondary and SE accounts up and running. It’s unclear exactly when that will launch, but it’s not something I find particularly concerning. I know part of that is also due to spending a LOT of money on CNBC ads, which ultimately didn’t do much for StartEngine.
If you want to read over the full report, here’s the relevant link: