A Chat with Howard Marks, CEO and Co-Founder at Premier Start-Up Investment Platform: StartEngine

StartEngine is one of the leading alternative investment platforms in the United States, giving early-growth startups of all sizes, backgrounds and industries access to a community of people eager to invest in them. To date, StartEngine has helped more than 500 companies raise $600M+ from a community of over 760,000 prospective investors.

StartEngine’s mission is to democratize fundraising. After all, 58% of companies have less than $25,000 at their disposal during the startup phase, and only 0.5% of startups are able to secure venture capital investments. By giving retail investors access to startup investments, companies are able to access a completely new realm of funding for their business. Until 2012, only accredited investors could invest in startups. Once the JOBS Act open the doors to retail investors, StartEngine has been pushing to bring the industry to life.

The other significant value of crowdfunding from an entrepreneur’s perspective is that it gives companies more control over the terms of their capital raise. Founders can decide up front how much they want to raise and how many shares they want to issue, maintaining control of their business through options like common shares.

Venture Capital firms tend to be more aggressive with their asks. Terms can be steep and dictated, with investors potentially gaining control over a business in return for capital.
 
 
StartEngine: Invest in Startups Online
 

How did you come up with the idea for the company?

 
Back in April 2012, the JOBS Act was signed by President Obama. Until then, only accredited investors and venture capitalists could invest in exciting startups. This was due to how the SEC had implemented the investment rules, leaving entrepreneurs to follow them or risk investor lawsuits.

I’ve been investing in early stage companies for years. What became clear was that traditional startup investors, in this case angels and VCs, did not end up investing much money into women and minority-founded companies.

Baffled by this observation, I decided something needed to be done. In came the JOBS Act, allowing companies to begin adapting the equity crowdfunding model where the crowd would invest directly into startups regardless of their creed. This, in my opinion, was the beginning of a financing revolution. I launched StartEngine as a result of these major changes in the space in 2015 alongside Ron Miller in Los Angeles, and we have grown ever since.

Today, our model is critical for entrepreneurs who traditionally struggle to access capital. Across the equity crowdfunding sector as a whole, 32.4% of funds invested went to businesses with women and minority founders. This is because crowdfunding gives startups access to everyday retail investors who in turn can make investment decisions based on the idea and the founder’s passion and purpose – not on gender and race.
 

 

How has the company evolved during the pandemic?

 
Throughout the pandemic, the startup space saw a sharp increase in activity, as more people had downtime to take on new endeavors and launch businesses. On our platform alone, we helped raise over $380M for over 200 companies in the past two years. Additionally, we had a successful funding round in 2021, raising over $29M, leading us to our current Reg A funding round.

Further, for retail investors looking to diversify their portfolios during an uncertain time of inflation, international conflict and Covid-19, options have only grown in terms of new companies – and even collectibles – to invest in.
 

What can you hope to see from StartEngine in the future?

 
After we complete our own funding process, we’re looking to expand our reach to put ourselves on the radar of even more startups. We’re also focused on helping growing companies access even more investors.

Crowdfunded companies develop followers, potential customers and investor bases, meaning startups can access an early audience for their products and ideas. For example, health and biotechnology companies can share what they’re working on with the public, and gain support before they are even commercial.

We continue to strive towards our goal of raising $10 billion for startups by 2029.