A conversation with Howard Marks, CEO and co-founder of the premier start-up investment platform: StartEngine

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

StartEngine’s mission is to democratize fundraising. After all, 58% of startup-stage companies have less than $25,000 to spend, and only 0.5% of startups are able to secure venture capital investments. By giving individual investors access to startup investing, companies can access a whole new area of ​​financing for their business. Until 2012, only accredited investors could invest in startups. After the JOBS Act opened 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 fundraising. Founders can decide in advance how much to raise and how many shares to issue, and maintain control of their company through options such as common shares.

Venture capital firms tend to be more aggressive with their requests. Conditions can be steep and dictated, with investors potentially gaining control of a company in exchange for capital.

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

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

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

Stunned by this observation, I decided that something had to be done. Then came the JOBS Act, which allowed companies to start adapting the equity crowdfunding model, where the crowd invests directly in startups, regardless of their beliefs. This was, in my opinion, the start of a funding revolution. I co-founded StartEngine with Ron Miller in Los Angeles in 2015 as a result of these big changes in space, and we’ve grown since then.

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

How has the company performed during the pandemic?

During the pandemic, the startup space has seen a surge in activity as more people have downtime to take on new ventures and start businesses. On our platform alone, we’ve helped raise over $380 million for over 200 companies in the last two years. Additionally, we had a successful funding round in 2021 raising over $29 million, leading us to our current Reg A funding round.

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

What can you hope for the future of StartEngine?

Now that we’ve completed 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 gain access to even more investors.

Crowdfunded companies develop followers, potential customers and investor bases, which means startups can reach early audiences for their products and ideas. For example, healthcare and biotechnology companies can share their work with the public and receive support before they even go commercial.

We remain committed to our goal of raising $10 billion for startups by 2029.