I have not done crowdfunding before and signed up to launch a campaign with startengine. The platform is very easy to use and they have internal legal team that review the filings with the SEC. It's all done very proper and buttoned up, they need a CPA review, bank statements, proof of company good standing and more. I looked at the other available platforms such as WeFunder and SeedInvest and found StartEngine to be the most friendly support staff and easiest to use platform. Will update the review after my raise ends.
Investor beware, business owner beware, do your research. Company needs a new president and senior leadership
Is Start Engine.com a SCAM?? Crowdfunding platforms are one of the newer hyper financial hysterias with little insight. Here is the experience Overland ATS LLC had with Start Engine. A word of caution for both investors and start-ups raising capital.
Investors, be careful, many if not most Start Engine investment offerings are NON-VOTING common stock, many start-ups have operating losses and negative equity, financial disclosures can disguise the reality, the stock offering is often also so small compared to the enormous number of shares founders have given themselves that your equity is unconscionably diluted (I.e., it will have little value even if the company is very successful.) Convertible bonds are occasionally offered at minimal interest rates. Some appear to have no intention of ever paying cash interest. Instead interest is accrued, and the mature bonds and interest are then converted in a confusing formula that can have a substantial built-in loss before they are even purchased. One start-up reserves the right to buy back its bonds at a heavily discounted rate, presumably, if the company succeeds. Of course, investing in start-ups, is inherently a risk but these shenanigans throw investors in the dumpster before they even write the check. These are not illegal, but I consider them unethical.
Investors must be wary of the way Start Engine does rolling closings. In a rolling closing the investor must write a non-refundable check, Start Engine gets its 6% commission, and the start-up gets the rest of your money. However, the funding in a rolling closing is only a small part of the capital raise the company needs. Can this be considered a scam? That is open for discussion.
The most important information is in a link at the bottom of the Overview called Offering Detail. Investors should read this. Most offerings provide very little financial details.
Investors may want to invest in start-ups with services and products they personally find appealing. At Start Engine a start-up is going to offer bottled water despite the billions of gallons of bottled water sold by giant beverage companies at prices below what it would cost a start-up to make. Another Start Engine start-up was accountants who had spent years generating notes about defects in existing accounting software despite thousands of accounting programs in existence. They were raising funds to hire a programmer to write a program so exceptional that it would become a global product. Frequently start-ups do not have a working prototype, but they should have a concept. Their market should not be saturated with competition. This judgment is up to the investor.
Start-ups trying to select a Crowdfunding Platform should recognize the differences. Overland ATS LLC was disappointed in its experience with Start Engine. Start-ups should look at the typical size of individual investor investments. Look for crowdfunding platforms that have substantial individual investments. This can indicate their audience includes some real potential investors. The Start Engine platform audience and investments are typically small, starting at just a couple hundred dollars. These investors, it seems, have to crack open their piggy bank for money earned cutting grass. These are not affluent individuals.
The Overland ATS LLC experience with Start Engine was a lack of responsiveness and a lack of communication. Overland ATS LLC paid $5,000 for extra support, but there was no additional contract, and minimal support.
A word of caution to start-ups, in our experience the Start Engine contracts are vague about what they are to do, they will not even respond to questions or even consider making modifications before contracts are signed, they will just wait you out. After contracts are signed and the fees paid Start Engine, in our experience, seems lax in performing obligations.
Overland ATS LLC contracted with Start Engine Promote to manage its advertising. Start Engine immediately started spending our money, ignored terms of the contract, diverted our respondents to their own website. Designated contacts would not answer phone calls or respond to E-mails directed directly to that department. Our singular contact would promise a return call or e-mail, but they never did. After running up over $5,000 in Facebook ads, and after we blocked continued charging I received a call and I could tell them the contract was terminated and they stopped.
Start Engine is a company that hides behind the anonymity provided by the web. They respond only when it is something they need. There is no way to know who you are really working with, what qualifications they have, if any, or who is making the decisions or why they decide. Start Engine does not care if you complain or are dissatisfied. This was our experience.
The most serious issue we had with Start Engine was the Form C and the Overview presentation. After our entire application was finalized we were told our attorney must sign a statement certifying everything was true and correct and complied with all applicable SEC regulations. This is really asking a lot because they had screened all our information and not our attorney. He was unable to look at the Start Engine website to see what they had. He could not download a copy of Form C for himself and they blocked him (and us) from the Overview and Form C. We had a copy of what Start Engine referred to us as Form C (about 50 pages) and our attorney hesitantly signed off with their assurance they had made no changes.
After our attorney signed off Start Engine allowed our campaign to go live. However, it had been substantially stripped of what we considered our best features.
Without getting into lengthy detail these included significant calculations, and application of funds.
Overland ATS LLC offering was Closed End with a NON-DILUTION commitment that fixed the proposed raising to equity ownership equal to the founder, first round investors were allowed first right to buy up to 10 times more units at a 10% discount in a continuing and final equity offering, first round investors would receive a preferred distribution of the value of their initial investment if/when the company became profitable before profits were distributed to the founders and later investors. All of this was removed.
Full disclosure, the Overland ATS LLC offering was not a success, or Investors simply did not find our offering sufficiently attractive. Overland ATS LLC does not place any blame for our failure on Start Engine.
Overland ATS LLC notified our contact person that significant portions of our campaign had been deleted. The Response was to ask for $1,000 and they would look at it. We felt there should be no charge because items deleted had been in the original campaign approved by our attorney and he had a copy of it as we also did. As requested, we sent a draft of what needed to be added. This is when the "COMMITTEE" became involved. The committee is a mysterious and final arbiter of what can be placed on the website. The committee has high ground because it is simply making sure the campaigns comply with SEC regulations. This committee appeared to be one person with non-disclosed qualifications. For brevity purposes we will just say the "committee" repeatedly rejected our drafts but would not explain why in a straight forward manner. Each time it would take a week to get a reply and usually it was emailed late on a Friday evening. When finally, our restoration of information was completed more than a month of our campaign had been consumed and we decided it was too late and pointless to pay the $1,000 fee. Overland ATS LLC allowed the campaign clock to run out.
Overland ATS LLC emphasizes that this was only our experience. Perhaps somewhere along the way we antagonized someone. Other start-ups using Start Engine may have a wonderful experience.
Start-ups are encouraged to make fair offers to investors. There are many good crowdfunding platforms out there and they are not all equal. Perhaps you should shop around.
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