StartEngine works the crowd for funding

In just a year, StartEngine has helped 50-plus companies raise more than $35 million in capital. The company, headquartered at Los Angeles’s WeWork La Brea, has become one of the most active platforms for crowdfunded investment in the US. One of the first movers in the space, StartEngine remains on the leading edge of online public offerings large and small. The model has been so successful that now they’re launching a new campaign—for themselves.

“It’s hard to explain that we’re raising money for ourselves!” says StartEngine cofounder and CEO Howard Marks. The equity offering kicked off October 13 with shares starting at $500, and a goal to raise $5 million.

As recently as 2015, investing in private companies was restricted to high net-worth individuals. But as regulations in the Obama-era JOBS Act (signed in 2012) have gone into effect, these restrictions have loosened. An early mover in the space, StartEngine became one of the first approved platforms that lets anyone invest in a private company.

People who invest care. They want to understand why we’re doing this, what our past is and what our future is. There’s as much trying to make money, but also an emotional investment.

Marks refers to this as the “democratization” of capital: companies get access to funds without depending on venture capital, and the average person can tap into investment opportunities once limited to only the very wealthy.

“Getting money is hard,” Marks says. “If you’re a grad from Stanford and a white male, it’s pretty easy, frankly. We change that model upside down and say instead of these intermediates, let’s get thousands to invest in me.”

The platform launched in January 2016 with an unexpected bang: the campaign for Elio Motors (which makes three-wheeled “super-economic” commuter vehicles) amassed a whopping $17 million from 6,600 investors.

“We were shocked,” Marks says. “We got scared because how do you top that? But it also allowed us to believe that what we were doing mattered. It gave us a sense that if we stay focused and be humble, we can be significant.”

Before founding StartEngine, Marks held top positions at gaming companies, including CEO at Acclaim Games, which was bought by the Walt Disney Company.  Lacking any background in finance, Marks says his reading habit has helped him learn the language of lawyers and accountants. Lately, he’s also drawn inspiration from another book, a biography of Elon Musk: “Talk about someone who walks into an industry he has no idea about and destroys everybody!”

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FUNDING INNOVATION

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