StartEngine Review: A Comprehensive Guide For Investors and Startups

Here’s what you need to know about this leading equity crowdfunding site.

StartEngine wasn’t the first equity crowdfunding portal, but it’s quickly becoming one of the biggest. They have had some massive raises on their platform, with StartEngine itself raising as much as $50 million from retail investors. Here's a comprehensive review covering everything you need to know about StartEngine, the leading equity crowdfunding site.

Overview

StartEngine is the #1 equity crowdfunding platform in the U.S. This is largely due to a dedication to building out differing infrastructure in the space, an early movers advantage and a great leadership team geared towards growth. Like any startup, StartEngine certainly has its downfalls, especially in a space that involves high-risk investments. But equity crowdfunding is a new and emerging industry, so most of the players in the space are still developing.

Table of Contents

• Ratings Summary

• What is StartEngine?

• Is StartEngine Safe & Legitimate?

• StartEngine Pros and Cons

• StartEngine vs Wefunder vs Alternatives

• Ratings Breakdown

Ratings Summary:

Overall Rating: ⭐⭐⭐⭐⭐ (5/5)

• User Interface & Experience: ⭐⭐⭐⭐ (4/5)

• Investment Opportunities: ⭐⭐⭐⭐⭐ (5/5)

• Customer Support: ⭐⭐⭐⭐ (4/5)

• Fees & Pricing: ⭐⭐⭐⭐ (4/5)

• Educational Resources: ⭐⭐⭐⭐ (4/5)

• Due Diligence, Security & Trust: ⭐⭐⭐⭐ (4/5)

• Success Stories & Track Record: ⭐⭐⭐ (3/5)

• Ecosystem: ⭐⭐⭐⭐⭐ (5/5)

What Is StartEngine?

StartEngine is a U.S.-based equity crowdfunding platform that allows individuals to invest in private companies. It was founded in 2014 by Howard Marks and Ron Miller as an accelerator, then later converted to an equity crowdfunding portal in 2016. The platform gives accredited and non-accredited investors the opportunity to invest in startups and growth companies. Companies can raise capital from their community, supporters and stakeholders on StartEngine through various means such as Regulation Crowdfunding (Reg CF) and Regulation A (Reg A) offerings.

StartEngine facilitates the entire investment process online, providing a platform where companies can showcase their business and investment opportunity, and potential investors can learn about and invest in these companies. The company aims to be the go-to one stop shop for all things alternative investments and private startup investing. The company launched StartEngine Secondary and StartEngine Marketplace to facilitate liquidity on their platform. They have also launched StartEngine Collectibles and similar offerings to allow investors to art, memorabilia, watches and more.

The goal is to democratize finance by allowing a broader group of people to invest in startups, not just traditional venture capital firms and wealthy individuals.

Is StartEngine Safe and Legitimate?

Yes, StartEngine is completely safe and legitimate and not a scam in any way. The platform operates within the framework of U.S. securities laws and is registered with the Securities and Exchange Commission (SEC) to facilitate Regulation Crowdfunding (Reg CF), Regulation A (Reg A+), and other types of offerings. Furthermore, it uses secure encryption and technology to protect users' data and transactions.

However, it's essential for potential investors to understand that while the platform itself is legitimate, investing in startups inherently comes with risks. Startups can fail, and investments can lose value. Thus, while the platform provides a legitimate avenue for investment, individuals should conduct thorough due diligence and fully comprehend the risks associated with each investment opportunity.

StartEngine Pros and Cons

Due to the nature of startup investing, it's important to understand the pros and cons of investing in startups and using StartEngine.

StartEngine Pros:

1. Accessibility: Allows non-accredited investors to invest in startups.

2. Variety: Wide range of companies and sectors to choose from.

3. Transparency: Companies provide detailed information for potential investors.

4. User-Friendly: Intuitive platform design and user experience.

5. High Upside: While risky, startup investing offers substantial upside if done correctly.

StartEngine Cons:

1. Risk: Startups are inherently risky, and there's potential for loss of investment.

2. Liquidity: Investments may not be easily liquidated or sold.

3. Fees: There are fees associated with investing and raising capital.

4. Due Diligence: Investors need to conduct their own thorough research, as StartEngine doesn't endorse any offering.

StartEngine vs. Wefunder vs. Competitors

1. Overview

• StartEngine: Founded in 2014, it's one of the largest equity crowdfunding platforms in the U.S., facilitating investments in startups for both accredited and non-accredited investors.

• Wefunder: Established in 2012, Wefunder is another leading platform in the equity crowdfunding space, also serving both accredited and non-accredited investors.

• Competitors: There are several other platforms in the equity crowdfunding sector, including SeedInvest, Republic, and Crowdcube (primarily UK-based).

2. Accessibility:

• StartEngine: Open to all types of investors, with a wide range of industries represented.

• Wefunder: Similar accessibility to StartEngine, but with a strong emphasis on community-driven investments.

• Competitors: Most platforms, like Republic and SeedInvest, also allow non-accredited investors but might vary in terms of industry focus or regional availability.

3. Investment Minimums:

• StartEngine: Typically low, often starting from $100 or more.

• Wefunder: Also tends to have low investment minimums, sometimes even as low as $10.

• Competitors: Minimums vary. Some platforms might require higher minimums, especially for certain deals.

4. Fees:

• StartEngine: Charges companies raising capital. Investors may also encounter fees in certain scenarios.

• Wefunder: Takes a percentage of the raise. Investors might also see fees depending on the type of investment.

• Competitors: Fee structures differ. Some might charge upfront fees, ongoing management fees, or success-based fees.

5. Due Diligence:

• StartEngine: Provides detailed company information but emphasizes that investors should conduct their own research.

• Wefunder: Facilitates detailed company disclosures and emphasizes community involvement in due diligence.

• Competitors: Platforms like SeedInvest conduct rigorous due diligence before listing companies, while others might adopt a more hands-off approach.

6. Special Features:

• StartEngine: Has secondary market provisions, allowing for potential liquidity for certain investments.

• Wefunder: Focuses on building communities around startups and emphasizes investor involvement.

• Competitors: Some might offer unique features, like Republic's "crypto" offerings or Crowdcube's UK-centric platform.

StartEngine Review, Breakdown and Ratings

Here's a comprehensive breakdown and review of everything you need to know about StartEngine:

1. User Interface & Experience

Overall, StartEngine's user interface and experience are great. The home page consists of four lists: Most Momentum, Most Funded, Recently Launched, and Closing Soon. These give a great overview of the top companies on the site then investors looking to search more specifically can move on to their explore page. StartEngine has the best mobile app of all of the leading platforms, which includes all site features and a live-person support chat for investors.

There is limited search functionality on the site, however. Investors often want to sort by things like revenue, institutional backing, previous exit founders and more. But the only search functionality available is by the four lists above and what industry the startups are in. StartEngine is still conducting a lot of testing on their site, which can often affect user experience, cause lags and downtime and other incohesive experiences.

• Rating: ⭐⭐⭐⭐ (4/5)

• Pros: Intuitive design, easy navigation, and mobile responsiveness make it user-friendly. Informative dashboards give investors and startups a quick glance at essential metrics.

• Cons: Occasional lags are reported, the search functionality can sometimes be overwhelming for first-time users, and there is limited search functionality relative to other sites.

2. Investment Opportunities

Wefunder and StartEngine are the top two equity crowdfunding portals. This means they often receive the cream of the crop for investment opportunities on their site. StartEngine's acceptance rate on their platform is only about 1.5%, meaning they reject and filter out the overwhelming majority of companies on their site. This leaves investors with only the top investment opportunities. Previously, the company has boasted they are "more exclusive than Harvard."

• Rating: ⭐⭐⭐⭐⭐ (5/5)

• Pros: A diverse range of startups from various sectors ensures investors have ample choice. Due diligence and transparency in listings bolster investor confidence.

• Cons: Like all investment platforms, not all startups see success, so investor discretion is advised.

3. Customer Support

In my personal experience, StartEngine customer support has been phenomenal. They often reply and solve your problem within 48 hours. Especially in a high-stress area like equity crowdfunding, which involves angry investors, angry startups raising and little recourse once funds are invested, things can be brutal. Despite this, their support email consistently manages to solve my issues, and they recently launched a live support chat on their iPhone app. StartEngine is constantly hosting webinars and virtual events to market their platform, inform investors and more. These, coupled with a robust FAQ section, are a great resource for new investors.

Investors are often confused by the best email to use when requesting support. StartEngine's support email is: Contact@startengine.com. IPhone users can download their app and utilize their live chat feature as well.

• Rating: ⭐⭐⭐⭐ (4/5)

• Pros: Responsive customer service and an informative FAQ section. They also host webinars and workshops for both startups and investors.

• Cons: Limited support hours and live chat options can sometimes delay resolutions.

4. Fees & Pricing

StartEngine is typically free for investors as they primarily monetize by charging issuers to raise. Some issuers choose to often the costs by charging investors a 3.5% fee, but this is rare. StartEngine charges issuers between 5% and 12% of the total amount raised. The fee typically depends on the competitiveness of the issuer, whether it's a Reg CF raise or Reg A raise, and the amount they will likely be able to raise.

• Rating: ⭐⭐⭐⭐ (4/5)

• Pros: Transparent fee structure with no hidden costs. Startups can raise with zero upfront fees, paying only when they successfully fundraise.

• Cons: Given how exclusive StartEngine is, they often demand a large fee.

5. Educational Resources

StartEngine has a comprehensive educational help center that can help both investors and companies looking to raise funds. This can largely help answer any questions, but they also regularly host events and webinars to learn more.

• Rating: ⭐⭐⭐⭐⭐ (5/5)

• Pros: Abundant resources, including articles, videos, and webinars, provide a learning curve for novices in equity crowdfunding. Their blog section is frequently updated with industry news and insights.

• Cons: While comprehensive, some resources might be too advanced for absolute beginners.

6. Due Diligence, Security & Trust

As previously noted, StartEngine is one of the most exclusive investment platforms on the market. The company has a light due diligence document, but tends to only focus on companies that have the infrastructure for longevity and raising lots of funds. The company, like many large company, boasts strict security features focused on protecting user and investor data.

• Rating: ⭐⭐⭐⭐ (4/5)

• Pros: Robust security measures ensure user data is protected. Compliance with U.S. securities regulations adds an extra layer of trust.

• Cons: Startups are still risky, so it's impossible to 100% filter out bad actors.

7. Success Stories & Track Record

SeedInvest likely has the best track record for success of all the equity crowdfunding platforms. StartEngine purchased SeedInvest, meaning they have largely taken over the same pipeline, but that doesn't necessarily mean they take on that same success. StartEngine has had a number of IPOs, but none that have really made investors substantial amounts of money. Some exits on the platform include: Monogram Orthopedics, Knightscope, JetAI, DIgital Brands Group, Elio Motors, Solectrac, tZERO, Atlis Motor Vehicles, Innovative Eyewear, and Smoke Cartel.

It's important to understand, however, that equity crowdfunding has only been around since 2016. The industry largely used to be the 'companies that couldn't raise from venture capital' and consisted of lower quality deal flow. Now, many of the top startups in the world have opened community rounds, and the future is looking bright. But it still takes startups as much as five years or more to scale to an IPO or exit, so it's likely many of the big winners are still a couple of years out.

• Rating: ⭐⭐⭐ (3/5)

• Pros: Numerous startups have successfully fundraised on StartEngine, some even going on to become industry leaders. There have been several IPOs and acquisitions of companies that previously raised on StartEngine.

• Cons: There have not been any huge success stories from StartEngine, as the highest sustained return was Solectrac at about 70% after 12 months via acquisition. Atlis Motors Ipo'd at roughly 100,000% - 1,000,000% gains for investors, but most investors sold off immediately, causing the stock to fall and the overwhelming majority to lose money.

Satisfaction Poll

How has your experience been with StartEngine? Use the poll below to get an accurate rating of the company and it's services, then leave a comment below with your experience!

Are You Satisfied With StartEngine?

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  Results / Haven't used StartEngine

Conclusion

Ultimately, StartEngine is #1 for a reason. The company features many of the top startups in the country, and one of the largest investor bases in the industry. While it has it's issues, it's only going to keep getting better. For those looking to learn more and follow the latest news in the space, make sure to regularly visit democratizing.finance often!