StartEngine Files to Crowdfund on TrueCrowd? [u]

This is a first.

StartEngine has filed a Form C with the Securities and Exchange Commission (SEC) to raise capital under Reg CF on TrueCrowd – a different crowdfunding platform. Both StartEngine and TrueCrowd are FINRA regulated funding portals. Typically, platforms self-crowdfund instead of listing on a  competitor. TrueCrowd is a securities crowdfunding platform that is more niche-focused.

To quote the Offering Memorandum:

  • “StartEngine is seeking to raise up to $855,000 in total. The company will raise the money through the sale of Common Stock. The company is offering a maximum of 114,000 shares of Common Stock on a “best efforts” basis.
  • The minimum investment is $195.
  • The cash price per share of Class A Common Stock is initially set at $7.50.
  • The minimum offering is $9,997.50.
  • If we are unable to raise at least $10,000, all investments held in escrow will be returned to investors. truCrowd has agreed to host this offering of our Common Stock on its online platform.
  • Prospective investors may subscribe for our shares in this offering only through the truCrowd website. truCrowd charges a commission of 6.5%. Oversubscriptions will be allocated at the discretion of the issuer.
  • If the company raises more than the maximum offering amount in this offering, it may conduct an offering for Common Stock under Regulation D for subscribers who are accredited investors.
  • The cash price per share in that offering will be the same as this offering. The company is also making an offering for Common Stock and Preferred Stock under Regulation A.”

StartEngine, one of the largest securities crowdfunding platforms in the US is a full-stack platform that recently received approval to operate as a Broker-Dealer. Additionally, StartEngine has received a license to operate an Alternative Trading System (ATS).

So why raise capital on TrueCrowd? That is not so clear, but I am certain there is some sort of justification. The Reg A+ self-crowdfunding offer on StartEngine is ongoing having raised almost $4 million. Perhaps, StartEngine wanted to separate the two offerings.? CI has emailed StartEngine for more information.

Update:

A StartEngine spokesperson explained why the company was using a different platform as follows:

“The reason is simple: we can’t accept Florida investors in our Reg A+ offering. We’ve gotten a lot of feedback from the Florida investors in our community that want to invest in StartEngine, participate in our bonus program, or both, so we opened a Reg CF just for them. We aren’t publicizing the TruCrowd raise; just directing any Florida investor who attempts to invest in our Reg A+ to the Reg CF. The offering terms are the same.”

So StartEngine is using a workaround for antiquated state rules. You may read more about the issue here, but, in brief, this just tends to highlight a need for more federal control over securities offerings and less from the state. Let the state regulators go big guns on any fraud but, otherwise, they should get out of the way of federal rules.


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