by David Drake
#startengine Crowdfunding Inc, a leading technology accelerator in Los Angeles that provides tech startups with mentorship and resources, officially launch Friday, 19th June 2015. StartEngine is set to offer users real crowdfunding. Founded in 2011, StartEngine focuses on media and digital technology market. By 2014, this company had invested in 57 new businesses and looks forward to helping thousands of entrepreneurs realize the American Dream.
The launch of StartEngine crowdfunding engine comes just a few months after the Securities and Exchange Commission (SEC) approved changes to Regulation A+ as required by the Jumpstart Our Business Startups Act or JOBS Act’s Title IV rules that allow entrepreneurs to raise a maximum of 50 million dollars in capital through crowdfunding. These changes are often referred to as “Regulation A+.” According to Ron Miller, CEO at StartEngine, ‘Investing through crowdfunding is one of the greatest entrepreneurship advancement happening in our generation and we are happy to be part of this revolution.’
Matching Fundraised Amounts
StartEngine’s ability to tap into a broad mentor network gives it a competitive advantage over other crowdfunding platforms. This platform has more than 230 mentors who commit themselves to help young entrepreneurs create and refine their business plans. Mentors use their experience to offer entrepreneurs specific guidance in technology, marketing, finance, distribution and strategy support. StartEngine uses a state-of-the-art crowdfunding portal to help startups access seed capital for their companies. The platform has a team of experienced network affiliates and customer service that help entrepreneurs raise capital under the revised regulation A+ crowdfunding rules. StartEngine applicants are expected to raise capital on the portal first. The StartEngine team then selects companies that display highest potential, and co-invests in these companies to match the amount raised before accepting them into its accelerator program.
Testing the Waters
Through StartEngine, entrepreneurs will be able to launch their crowdfunding campaigns without incurring upfront costs, just like they do on platforms like Kickstarter. Most importantly, entrepreneurs can now invite investors who are interested in their ventures and test the waters before making offerings. The StartEngine platform allows users to request for “interest of money to invest” as they launch their campaigns without having to make an offering. Having tested the waters, entrepreneurs can then proceed to file Form 1-A and seek SEC’s review of their filing as required under Regulation A+.
Upon completion of SEC review, entrepreneurs proceed to make official offerings and receive investments from any person that expresses interest in their projects. This is an important feature. This is how StartEngine differ from all other crowd funding platform in the US as it allows entrepreneurs to offer stock in private offerings to non-accredited investors from anywhere in the US.
Accredited investor, in the context of a natural person, includes anyone who:
- earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR
- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
FundAmerica’s Founder and CEO, Scott Purcell says, “StartEngine is a high class crowdfunding platform that features talent, industry and management expertise necessary to provide users the best shot at getting funding successfully. We are looking to partner with StartEngine because they are absolute leaders in front-end management and marketing of online based offerings.”
Zero Campaign Launch Fees
StartEngine charges entrepreneurs zero fees to test the waters. However, as funds trickles into escrow accounts, a 20 dollar administration fee is charged after the money is released from escrow. No money can be accepted, escrowed or not, until after SEC qualification of the offering.
StartEngine CEO, Ron Miller says, “payment of our 20 dollar investor admin fee is deducted from the proceeds and released directly to StartEngine from escrow. This is definitely disclosed to each investor. We also request for warrants that equal the admin fee amount. These warrants accord us the right to buy shares for the same price that they were offered to other investors on our platform.”
CrowdCheck offers users complete legal and compliance service, and the fixed fee package covers all other costs other than accounting fees. Generally, the costs for professional services should amount to less than 2 percent of the entire offering amount.
Sara Hanks, a former SEC lawyer who now handles SEC applications at CrowdCheck says, “CrowdCheck believes that though Regulation A offerings cannot be done without engaging a well experienced securities lawyer, who understands how the process of filing works, a lot of compliance work isn’t purely legal and entrepreneurs do not have to incur high legal costs. We offer smaller companies a high quality product that addresses both legal and compliance needs at a fixed price.”
FundAthena, Offerboard and Venerato are doing this too and we will follow up with articles about them shortly as we review and analyze them next.
Image credits (in order of appearance): Crowdfundingbiz.com, StartEngine.com, and RealityCrowdTV.com. Featured image credit to bypolaropposite.com
David Drake, Contributing Journalist.
Reach him directly at David@LDJCapital.com.