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StartEngine is one of the largest startup investing platforms offering hundreds of different startups at any given time. With a broad range of companies to choose from, investors are able to find startups from nearly any industry or sector.
The StartEngine platform leverages the power of crowdfunding in order to make investing in startups available to the masses. As a result, non-accredited and accredited investors alike can use the service.
Minimum investments also start as low as $99 serving to make the platform even more attractive to newer investors.
To learn more about StartEngine, read our full StartEngine review.
How Does StartEngine Make Money?
Unlike many other startup investing platforms, StartEngine does not make money by charging fees to investors. This allows them to create a free service for investors to take advantage of.
Instead of charging fees to investors, companies that raise money on StartEngine will need to pay a number of fees. This allows StartEngine to continue to operate and provide one of the best Startup investing platforms on the market.
Investors should keep in mind that just because they are not footing the bill directly, the fees still impact them. This is because the companies raising money on StartEngine will factor these costs into their fundraising. As a result, it’s likely that a portion of your investment will still go towards some of these fees.
StartEngine Fees Explained
For startups, there are a variety of fees that may apply when raising money on StartEngine. These include fees that are paid in cash as well as fees that are paid in equity.
StartEngine is upfront about all of the fees investors will pay and so investors will not have to worry about any hidden fees or costs.
1. Service Fee
The first fee companies will pay when raising money on StartEngine is a 7% service fee. This fee allows StartEngine to continue to operate, market, and upgrade their platform.
Companies will pay 7% of the total fundraising amount to StartEngine once the campaign has been completed.
2. Equity Fee
In addition to the service fee, companies will also pay a 2% equity fee to StartEngine. This serves to align the interests of investors with the interests of StartEngine and provides significant upside potential for StartEngine if the company is successful.
Startups pay StartEngine 2% of the total fundraising amount in the form of equity in the company. For example, if a company raises $1,000,000 through StartEngine, they will give the platform $20,000 in equity after the campaign.
3. Deferred Revenue
On top of both the service fee and the equity fee, startups will pay an additional $10,000 in deferred revenue. This amount is collected when the offering is completed and also goes to support the operations of StartEngine.
What If The Startup Doesn’t Reach Their Goal?
Startups are only required to pay these fees to StartEngine if they successfully complete a funding round on the platform. If a startup does not reach their funding goal, no fees are paid.
For example, if a startup attempts to raise $2 million on StartEngine and only raises $1.5 million by the time the campaign ends, they will not pay any fees to StartEngine.
Additionally, all capital will be returned to investors and the investment will not go through. This is similar to most other crowdfunding platforms. If the goal is not met, the project is not funded.
StartEngine Fees: Final Thoughts
Even though investors do not directly foot the bill for any of StartEngine’s fees, it’s important that they keep these costs in mind when investing. Because the companies will be factoring these costs into their fundraise, some of investor’s capital will go towards these fees.
Compared to other startup investing platforms, StartEngine’s fees are slightly on the higher side. While this may dissuade some from using the platform, others may feel they are well worth it. This is because they are one of the most well-established startup crowdfunding platforms and provide a network of over 500,000 investors for companies to raise money from.
Although some platforms may offer lower fees, they likely do not offer many of the resources and connections that StartEngine does.