StartEngine Might Have Just Gotten a $28 Million Windfall

This might have put StartEngine back on track for another record year!

Photo by Sam Pearce-Warrilow on Unsplash

Equity Crowdfunding is an incredibly competitive market, and it only seems to be heating up. The issue with Equity Crowdfunding from a competitive standpoint is that there’s no exclusionary aspect. Anyone can apply to become a registered funding portal and then find a small business, real estate, collectibles, racehorses, and just about anything else, and begin raising funds. Since the door will always be left open, there are constantly new players trying to carve out their corner of the market. While larger companies like Wefunder and StartEngine have amassed these massive investor pools, that’s realistically not enough to keep a top spot because anyone could theoretically raise funds and launch a massive marketing campaign to become a top competitor.

So, how are these top platforms supposed to keep their top spot? It’s increasingly looking like deal flow is the main way these companies will need to differentiate and likely one of the most important aspects for equity crowdfunding portals. It’s not hard to see, either. Boxabl on StartEngine brought in thousands of new investors and millions of dollars that ultimately helped jumpstart StartEngine’s current campaign.

Wefunder focuses on Reg CF, which means the majority of their offerings have a $5 million max no matter how sought after the stock is. This means you have companies like Replit, which have raised hundreds of millions from massive names like Bloomberg and A16z that sell out almost instantly. Regardless of whether everyone was able to invest, it brought in a reverse bank-run of sorts where retail investors, VCs, and anyone else looking to invest, were flocking to the site to try and reserve their stake in the company. The company maxed out its Reg CF raise almost immediately and garnered a lot of attention.

These raises garner a lot of attention for the platform, but there’s another aspect of this. Republic and StartEngine both take a stake in most companies on their site. Republic and StartEngine both take 2% of the total amount raised of nearly every company that raises on their site under the same terms as the raise. The SEC permits this under Rule 300(b):

This model, while having its pitfalls, makes a ton of sense. It aligns the financial interests of the portal with the investors on the site, and it creates massive upside for the portal if a company goes public at a significant increase in valuation.

Atlis Motors Stock IPO

One such recent example is the IPO of Atlis Motors stock on StartEngine. Atlis motors raised on StartEngine in 2018 at a post-split price of just $.145. The raise maxed out, meaning they took roughly 137,000 shares in the company. They later raised at something like $2.50 again, resulting in another 6,600 shares or so. This means they currently own as many as 144,000 shares in Atlis Motors. The stock IPO’d at $40/share, and rallied to over $200/share before since dropping to under $20/share now. Even at the current share price of $20/share, their stock is still worth $3 million dollars. They wouldn’t normally get that much revenue even if a company maxed out a $75 million Reg A raise on their platform, so that’s a massive bonus.

At the price of $200/share, the stock would be worth nearly $30 million, which would be more revenue than they made for the entirety of 2021. It’s likely instances like this that will ultimately differentiate many of the equity crowdfunding platforms. As these large and highly sought-after raises continue to bring in new investors to the platforms and portals take stakes in these companies, these massive exits will differentiate portals as they accumulate billion-dollar startup portfolios.

While it’s unclear what their strategy will be here, even on the pullback, this is a massive boost for the company and shows how these slight differentiation in things like funding models can have a massive impact. It also differentiates the companies because Wefunder and StartEngine both have their own equity crowdfunding raises, and retail investors can invest in these portals, which also have high-quality deal flow, and it's like investing in a startup fund that doubles as a funding portal.