StartEngine Review: Invest in Startups With Only $100

StartEngine is a top crowdfunding platform that lets you invest in a wide selection of startups with only $100.

Anna Ng   Updated February 2nd, 2022

Summary

  • Investment Type: venture
  • Minimum Investment: from $100
  • Fees: none, but some startups may charge a 3.5% fee
  • Open to non-accredited investors

Pros

  • Over 200 available investments, including many green options
  • Secondary market for some offerings
  • Screens let you filter investments
  • Low minimum
  • StartEngine doesn’t charge fees
  • Open to non-accredited investors

Cons

  • Investment opportunities are not vetted or curated
  • StartEngine doesn’t co-invest with you
  • High startup failure rate
  • No secondary market for many investments
  • 5% fee to sell shares in the secondary market

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What is StartEngine?

StartEngine is a leading U.S. crowdfunding platform. Crowdfunding platforms let you buy pieces of a company, giving it capital to grow. This is different from sites like Kickstarter, which usually give you products or merch in return for your dollars. In contrast, owning equity in a company can help you make a profit if it succeeds and becomes more valuable.

The Los-Angeles based company was launched in 2014 by Howard Marks, the co-founder of Activision. StartEngine’s Strategic Advisor is Shark Tank’s Kevin O’Leary. Leading the way, StartEngine funded itself by raising $30 million from the crowd.

To date, over $450 million has been invested through the platform in over 500 offerings. The investor community includes over 600,000 people, of whom around 15,000 are power users, on average making six investments each.

StartEngine lists both Regulation A+ and Regulation Crowdfunding offerings, which let non-accredited investors participate. Regulation A+ lets companies raise more money than Regulation Crowdfunding, but the paperwork is more extensive.

How does StartEngine choose the investments on its platform?

Like WeFunder, StartEngine has an open approach to listing investments. Beyond weeding out “bad actors,” they let the market decide what should and shouldn’t get funded. StartEngine does perform background and anti-fraud checks, but they don’t do due diligence on the offerings or co-invest with you.

Other crowdfunding platforms have a more comprehensive vetting process. For example, Mainvest approves only 5% of the businesses that apply.

This relaxed approach lets StartEngine list more investments than its competitors. In February 2022, StartEngine offered over 200 opportunities.

StartEngine Alternatives

Invest in impact startups

Fees

2.0%+

Minimum

$5,000

Invest in local businesses

Fees

None

Minimum

$100

Buy sustainable farmland

Fees

0.75%+

Minimum

$15,000

How to find green investments on StartEngine

StartEngine lists investments in all industries, from tequila and candy to green tech.

We like that StartEngine lets you filter offerings by industry, including “environment” and “clean technology” filters. For example, you can find the following companies:

  • WeatherFlow-Tempest, a weather technology company that uses AI to model climate
  • GoSun, a solar company for outdoor consumer products like portable ovens and fridges
  • Aquipor, a green stormwater infrastructure company

What do you get if you invest?

Most offerings let you invest in common stock, though some startups raise through convertible notes, debt, or revenue share.

How much does StartEngine cost?

Although StartEngine doesn’t charge investors any fees (they make money by charging companies that raise money), some companies charge a 3.5% processing fee to offset their listing costs.

StartEngine Secondary

Unlike most crowdfunding sites, StartEngine offers a secondary trading marketplace, StartEngine Secondary. The marketplace is regulated by the Securities and Exchange Commission (SEC). 

Companies may choose to apply to have their securities listed, so you may be able to resell your investment. But not every company that raises money on StartEngine will trade on the Secondary market. StartEngine Secondary is a peer-to-peer marketplace, so to sell your investment, there need to be buyers. If the startup is heading in the wrong direction, buyers may not be there.

Also, shares sold under Regulation Crowdfunding have a one-year lockup before you can sell them. There is no such lockup for Regulation A+ offerings.

And while buying shares in the Secondary market is free, there is a 5% fee to sell shares.

How to start investing with StartEngine

Any U.S. investor over 18 can invest. The sign-up process is free and quick, generally taking just a few minutes. You can fund your investments through a bank account (ACH), credit card (only for some companies and up to $10,000), or wire transfer.

You can invest in four ways:

  • Individually
  • Through a self-directed IRA (you can open one through a service like Rocket Dollar)
  • As a trust
  • As an entity like an LLC

Limitations on how much you can invest

However, there may be limits on how much you can invest if you are a non-accredited investor. To be an accredited investor, you generally must earn $200,000 ($300,000 if combined with a spouse) a year for two years and expect the same this year, or your net worth must exceed $1 million, excluding your primary residence. If you are accredited, you can invest as much as you like.

Offerings on the platform can be classified as Regulation A+ or Regulation Crowdfunding. If you are not an accredited investor, here are your investment limits:

  • Regulation A+ offerings: you can invest up to 10% of your annual income or 10% of your net worth per year, whichever is greater
  • Regulation Crowdfunding offerings: if your annual income or net worth is less than $107,000, you can invest up to 5% of the greater of those two amounts. If your annual income and net worth are greater than $107,000, you can invest 10% of the greater of the two amounts

StartEngine Alternatives

Invest in impact startups

Fees

2.0%+

Minimum

$5,000

Invest in local businesses

Fees

None

Minimum

$100

Buy sustainable farmland

Fees

0.75%+

Minimum

$15,000

StartEngine Owner’s Bonus

StartEngine offers the Owner’s Bonus that lets you earn a 10% bonus in shares when investing in participating companies. (Not all launches are bonus-eligible). You also get a 20% discount on the 5% seller fee when trading on StartEngine Secondary. Other perks include exclusive 7-day access to new launches from StartEngine Collectibles and priority on waitlists for oversubscribed companies.

This sounds good, though the bonus costs $275 annually. So it’s best if you are already an active StartEngine investor.

Is StartEngine safe?

StartEngine is a broker-dealer registered with the SEC and FINRA/SIPC. It is the largest U.S. crowdfunding platform.

However, alternative investments on crowdfunding platforms are not insured by the FDIC like cash in bank accounts. No one will protect you if your bet goes sour. StartEngine is no longer involved once the offering has taken place, and they don’t provide financial advice.

At the same time, most startups fail, so it’s best to diversify your investment among several startups and not invest any money you can’t afford to lose.

StartEngine is not Better Business Bureau (BBB)-accredited, though it has been trying to resolve customer complaints filed through the BBB. It currently has a D+ rating and 18 complaints in total. A few complaints relate to issues like cash settlements. Other users complained that the businesses they invested in were not very responsive to investors. StartEngine is not responsible for how startups communicate with investors after the offering is done.

💰 Should you invest with StartEngine?

  • StartEngine is the leading U.S. crowdfunding platform with tons of investment options. We like that you can filter the opportunities by sector and invest in cleantech or sustainable companies
  • However, because StartEngine does minimal diligence on the offerings and startup investing is very risky, don’t invest more than you can afford to lose

StartEngine Alternatives

Invest in impact startups

Fees

2.0%+

Minimum

$5,000

Invest in local businesses

Fees

None

Minimum

$100

Buy sustainable farmland

Fees

0.75%+

Minimum

$15,000

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

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