StartEngine Files New Reg A+ and Concurrent Reg CF, Seeks $41+ Million

StartEngine, a leading US-based investment crowdfunding platform offering securities under the full stack of available exemptions (Reg CF, Reg A+, Reg D) has filed for another funding round

Filed with the Securities and Exchange Commission (SEC), StartEngine has posted a Reg A+ offering seeking $41 million. Concurrently, StartEngine has filed a Reg CF offering to be hosted on truCrowd.

StartEngine closed a self-crowdfunding round just last March raising $8.6 million under Reg A+, according to the offering page, at a per-share price of $7.50.

The most recent Offering Circular affiliated with the Reg A+ offering provides some interesting information.

According to the filing, StartEngine will be selling shares at $11.25/share.

The Reg A+ is split between $40 million for common shares and $1 million preferred shares with a $200,000 minimum investment. The Reg CF offering is for a smaller amount.

Having just closed the most recent round, StartEngine is showing a dramatic increase in the share price for this upcoming offering. Existing shareholders may benefit from discounts though thus possibly mitigating dilution, according to the documents.

StartEngine also recently filed its Annual Report with the SEC providing a glimpse into site operations.

As of December 31, 2020, StartEngine has raised the following amounts:

  • Since its launch on May 16, 2016, StartEngine estimates that as of December 31, 2019, 304 companies have raised over $57.5 million on StartEngine.
  • As of December 31, 2019, StartEngine has hosted the Regulation A (Reg A+) offerings of 24 companies, who have raised a total of $49.7 million on StartEngine’s platforms
  • Reg D is currently a small portion of StartEngine’s business but the company sees an opportunity here

Of note, is StartEngine’s desire to launch StartEngine Secondary. No US-based traditional online capital formation platform has yet launched a marketplace to provide liquidity in exempt securities. StartEngine has been approved as a broker-dealer, a requirement to be able to operate an alternative trading system (ATS). It is not exactly clear how soon StartEngine may launch a secondary marketplace but this alone could drive value for the platform. Being able to host offerings, manage shareholders, and provide liquidity in a single stop simply makes sense. This simplifies things for the issuer as well as the investor.

Currently, the SEC is reviewing the exempt securities ecosystem and several material issues are being addressed. The funding cap under Reg CF may rise to $5 million from the current limit of just $1.07 million. Additionally, a change in the definition of an accredited investor may Reg D a far more attractive securities exemption. Depending on final rules, these changes should help all platforms including StartEngine.

StartEngine generated over $4 million in top-line revenue last year but it lost about the same and thus needs ongoing growth capital which is typical of early-stage firms.


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