StartEngine Review 2024: Pros, Cons, and How It Compares
StartEngine is a platform that allows the general public to invest as little as $10 in early-stage startups and small businesses they believe in.
My Take
Platform rating: 2/5
The bottom line: Start Engine simplifies investing in startup offerings ranging from local breweries to bionic hand technology by joining an open investment platform. Investing in early-stage companies is inherently risky, and you should only invest what you’re willing to lose.
Pros & Cons
Pros
- No minimum to sign up on the platform
- Wide range of offerings
- Investment opportunities for as little as $10 to participate
Cons
- High risk.
- No track record of startups on the platform making investors money.
- No way to see how much your investments are worth.
- High valuations limit your return upside.
- Startups are raising large amounts of money on the platform with limited traction.
- Financial information is often obscured from the profile and can only be found in SEC filings and other legal documents.
- Information on StartEngine company profiles is often projections and assumptions but not fact-checked for accuracy.
StartEngine is best for:
- Investors wanting to support local businesses and startups
- Investors seeking impact more than just financial returns
- Risk-tolerant investors
- Investors willing to wait 10s of years for a possible return
Full Review
Billed as the largest equity crowdfunding platform based on investment volume from Regulation Crowdfunding (Reg CF) and Regulation A+ (Reg A+) offerings for 2021-2022, StartEngine democratizes access to capital and opens up startup investing for all. To date, StartEngine has helped 750+ startups raise $650 million since the rules of the JOBS Act went live on May 16, 2016.
Leading by example, StartEngine is almost entirely funded by investors on its platform. They have raised $70 million+ through the crowd. Its most recent campaign valued the company at $1.32 billion. In Q1 2023, StartEngine helped startups raise $35 million, made $5.2 million in revenue and had 34,579 new investors sign up on the platform.
StartEngine has been named the 10th fastest-growing private company in California (2020), paid Shark Tank Judge Kevin O’Leary to join the company as a strategic advisor to help market the platform and specific offerings, and acquired competitor SeedInvest ($465 million raised for startups) in 2022.
StartEngine by the Numbers
Raised for startups: $650 million
Number of startups funded: 750+
Users: 1 million+
StartEngine Basics
Platform minimum: There is no minimum to sign up for or to maintain on the platform.
Minimum investment: $10. However, each startup picks its investment minimum.
The number of companies to invest in: 80 (as of May 2023)
StartEngine Investor Fees & FAQ
Fees: Most offerings on StartEngine charge no additional fees on top of the investment amount. However, some startups may individually elect for investors to pay a 3.5% fee to offset their cost to StartEngine.
Who can invest: US investors who are 18+ years old. StartEngine does not accept UK or Canadian investors.
How to invest:
- Create a StartEngine account.
- Click on a company’s campaign page.
- Click the green “Invest Now” button on the right-hand side.
Payment methods:
- Credit Card
- ACH
- Wire (only available for investments greater than $750)
Refunds: An investor may cancel an investment for any reason until 48 hours before a close on funds.
StartEngine Features to Know About
StartEngine Secondary: StartEngine Secondary is the company’s investment trading platform. It allows StartEngine investors to trade privately held shares purchased through Regulation CF, Regulation A+, and Regulation D with other individual investors. You need to open an Investment Account, separate from a StartEngine account, to hold funds and trade. As of January 2023, only four companies are trading on StartEngine Secondary.
StartEngine Owner Bonus Program: For $275/year, StartEngine investors can join its owner bonus program, where you’ll earn a 10% bonus for any shares you purchase in participating offerings. In addition, members of its owner bonus program receive early access regarding newly launched campaigns, lower trading fees when selling on StartEngines secondary market, and have priority if they are waitlisted for an investment. As of March 2023, 28,000+ people have signed up for StartEngine’s owner bonus program.
Perks: While equity or debt is the primary incentive for someone to invest, startups on StartEngine may offer perks to investors as a secondary incentive. Similar to Kickstarter, the investment amount dictates the structure of the perks. For example, a startup may offer company swag, early access to products, a chance to meet the team, and more.
Various offering types: StartEngine conducts Regulation CF (Reg CF), Regulation A+ (Reg A+), and Regulation D (Reg D) offerings on its platform—the type of offering dictates who may participate and the investment limits for each investor. For example, Regulation D offerings are only available to accredited investors.
Various investment structures: StartEngine has a mix of equity and debt offerings. Companies on StartEngine may elect to offer preferred stock, common stock, convertible notes, promissory notes, a revenue share, or revenue participation rights. It’s important to read the investment structure on each company’s offering page before deciding whether to invest, and you can learn more about what each of these offerings means here.
Referral program: StartEngine’s referral program, called the Scout Program, allows you to earn $4,000 if you refer a company to raise on the platform. As of May 2023, StartEngine has paid out $700K in bonuses for 8,500 companies referred through its Scout Program. Please note that the referred company needs to sign StartEngine’s posting agreement and be verified that they are eligible to raise on the platform before the $4,000 is paid out.
Discussion & Updates: Each StartEngine offering has a discussion section where potential investors may ask questions to the company to learn more information before investing. In addition, each company may post updates during and after its campaign.
Is StartEngine right for you?
People should treat their investments in offerings on Start Engine as a “socially good lottery ticket,” as investing in early-stage companies is inherently risky. You should not invest more than you want to lose. Instead, invest in things you care about, like a local ice cream shop, cures for cancer, and movie studios, and consider yourself fortunate if any of your investments return money in 10+ years.
StartEngine is a simple way to diversify your investment portfolio into startups and small businesses. It can be a great way to get your feet wet with this asset class because of its low investment minimum and articles on investor education.
