May 21, 2021

How to Use StartEngine to Raise Up To $5.0 Million in Capital


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Need Capital for Your Startup? Just StartEngine!

Nine out of ten startups fail. Lack of funding is the major culprit. If you have ever tried raising capital for your business, you know it’s not easy. It’s a long and difficult process that may include:

  • Pitching your business idea to friends and family 
  • Pitching to a Venture Capitalist if you’re lucky enough to get an appointment
  • Deciding which bank offers financing at the most favorable terms
  • Maxing out on your credit cards
  • Selling your upcoming product on a crowdfunding platform such as KickStarter
  • Selling your car or property

Even after exhausting all of these options, you may find yourself looking for additional sources of capital to give yourself the time and money to create a successful business. Luckily for you, there’s a new option available to raise the capital they need.

It’s called Equity Crowdfunding—and StartEngine is one of the best platforms to take advantage of this option.

What is Equity Crowdfunding?

Equity Crowdfunding, also known as Regulation Crowdfunding, is a legal way to raise capital for your business in America. Since the Jumpstart Our Business Startups Act (JOBS) was enacted in 2016, private companies can now raise funds from the general public by selling securities (such as shares, convertible notes, debt, revenue share, and more). They don’t need to be listed on stock exchanges. 

This new option is a quantum shift from the traditional crowdfunding raised on Kickstarter, Indiegogo, and other similar platforms. These popular platforms help raise billions of dollars, but none of them is built for raising long-term capital for an entire business. 

How Equity Crowdfunding is Different from Regular Crowdfunding

Funding a startup is unlike funding a Kickstarter project. The investor is not buying a product, but a share in a potentially high-growth company. If the company is successful, the investor expects to earn a return on their investment. In other words, equity crowdfunding helps you find long-term business partners that believe in your vision and are willing to support your business.

Equity crowdfunding offers significant advantages over other options of funding a business. 

  1. You are selling stakes in your business: The major difference between a crowdfunding site and an equity crowdfunding portal is the offer. With a site like Kickstarter, you can raise funds by pre-selling your product at a discount and/or offering different perks to your potential customers. But with an equity crowdfunding platform like StartEngine, you can sell shares, debt, notes, and other types of securities. 
  2. You can have a broad investor base: Instead of depending on one or a handful of big investors, you can raise money from anyone. Your prospective investors include millions of online users that subscribe to equity crowdfunding platforms such as StartEngine.
  3. You call the shots: The company raising the capital has total control of the business, including what to sell and at what price. There are no Venture Capitalists or banks that can dictate certain terms.
  4. You can raise capital as a private company: Previously, the general public could only buy shares in public companies whose stocks are traded on stock exchanges. Now, with the legalization of equity crowdfunding, anyone can invest in a private company. 

The only condition is that your company must sell its offers through StartEngine or any of the other SEC registered and FINRA member funding portals that are authorized to act as intermediaries for equity crowdfunding.

What is StartEngine?

StartEngine was one of the first equity crowdfunding portals that registered with the SEC and became a member of FINRA after the JOBS act was signed into law. The platform allows companies and startups to raise capital by selling stocks or other securities to anyone who would like to invest in their business. 

Since it was founded in 2015, StartEngine has helped businesses raise over $350 million in capital. With an army of more than 400,000 prospective investors, StartEngine may just be the best place for you to fund your business. Let’s learn more about this exciting platform and see how you can use it to raise capital for your business.

How to Raise Equity Crowdfunding on StartEngine?

To get started, you’ll have to file an application by clicking Get Funding. StartEngine would like you to tell them a little about your company. The information that you need to provide includes your name, your business name, email, website, and phone number. 

You’ll also have to disclose how much funding you’re looking to raise and the amount of money you have raised in the past. Finally, you’ll share the top three reasons why an investor would think your company was a great investment.

You can also attach your pitch deck, share your marketing plan, your current revenue, and attach other relevant documents that you want to provide. After you finish your application, it will be reviewed by StartEngine’s fundraising team. You can start your campaign after your application is approved. Once you’re approved, StartEngine works like any other crowdfunding website. Businesses that want to get funding can launch and promote their offers on StartEngine. 

Types of Funding You Can Raise on StartEngine

Companies can raise capital on StartEngine under two exemptions—Regulation Crowdfunding and Regulation A+. The amount of money you can raise is the most major difference between the two. 

Regulation Crowdfunding: This is the easier way to go and allows companies to launch a campaign within 30 days of getting approved by StartEngine. You can raise up to $5M annually using this exemption. 

Regulation A+ Crowdfunding: This exemption allows you to raise up to $75M annually. Your offering has to be qualified by the SEC to raise funding under Regulation A+. The qualification process can take around 6 months.

How Much Does it Cost to Raise Capital on StartEngine

  • Starting a Regulation Crowdfunding campaign on StartEngine may cost you anywhere between $4,000-$10,000 for the financial review and legal documentation. 
  • The cost will increase if you’re looking to raise more than $1.07 million because you’ll need a full financial audit in that case. Additionally, there’s the cost of promoting your campaign, which varies from case to case. A full audit will make your company eligible to raise up to $5 million in capital.
  • You can launch a Regulation Crowdfunding campaign on StartEngine with no upfront cost if your company is a Corporation and you are looking to raise less than $107,000. Meeting these criteria allows you to self-certify your company’s financials and save on the financial review cost.
  • Regulation A+ Crowdfunding costs more—anywhere between $50,000-$100,000. An A+ campaign also takes longer to launch, an average of 110 days to be qualified per a report from the SEC. StarEngine recommends that companies looking to raise capital through equity crowdfunding should start with Regulation CF.
  • StartEngine takes 7% to 12% of the amount of money you raise on its platform, plus an additional 2% of what you raise in equity. When the offering is complete, StartEngine collects $10,000 in deferred revenue.

How to Launch Your StartEngine Regulation Campaign

Your Story: Tell your story in your own words. Build and design your campaign page to attract investors. Explain your business model and tell prospective investors how the business will make money and how it’s better than its competitors. On your fundraising page, start with a brief overview of your idea or business, followed by three convincing reasons to invest in your business. Explanations of your business and business plan can follow. StartEngine’s creative team will help you create a professional campaign page!

Your Terms: What’s your valuation? What kind of security do you want to sell and how much of it? StartEngine gives you complete freedom to choose your strategy and method for raising capital.

Legal Documents: You’ll need to provide corporate documents like Articles of Incorporation and Board Resolutions to approve equity crowdfunding.

Financial: You can save on upfront cost by raising up to $107,000 in the first round and self-certifying your financials. But if you want to raise more than $107K, StartEngine can connect you with low-cost, preferred CPA vendors for conducting a 2-year independent financial review, after which you can raise up to $1.07 million from the start. You’ll need to get a full financial audit done if you want to raise up to $5M from the start.

Rewards: As an incentive for investment, your StartEngine page must describe the rewards that your investors stand to gain -- over and above any anticipated return on investment. A reward can be anything from a free tee-shirt to bonus shares. The platform allows you to create different tiers of rewards. You should brainstorm with your team and come up with attractive rewards that appeal to your prospective investors.

Examples: There are several highly innovative, heavily funded business offerings currently listed on the platform that you can look at for inspiration and ideas. For example, Piestro is conceived to be a robotic pizza shop with the ability to deliver artisan pizzas within three minutes. The Company is currently has raised more than $657,000 selling ordinary shares currently priced at $2.56 per share.

Parallel Flight Technologies claims to have created a technology that will allow drones to carry heavy payloads for over two hours. The Company has so far raised over $3.7 million by selling common shares on StartEngine.

Promoting Your StartEngine Crowdfunding Campaign

StartEngine has a built-in promotion platform and can manage your equity crowdfunding campaign on your behalf. StartEngine Promote integrates right into your ad accounts and runs automated, targeted advertising campaigns that drive traffic to your campaign page and deliver investors. It’s a limited capacity program and will cost you a 5% success fee on the amount you raise if you qualify for the program.

You also have the option to work with an independent digital media agency such as Josh Meah & Co. We are experienced in running highly successful multichannel digital marketing campaigns and can help you raise the capital you need through equity crowdfunding on StartEngine. Interested? Let’s talk!

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