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StartEngine Is Anticipating the SEC’s Next Moves

StartEngine Is Anticipating the SEC’s Next Moves
By Andy Gordon
Date November 19, 2018

Of the dozens of old friends I bumped into at the Crypto Invest Summit in Los Angeles last month, one of the ones I was happiest to see was Howard Marks.

Howard is the dynamic leader of StartEngine. He founded StartEngine in 2014 and has developed it into one of the country’s leading equity crowdfunding platforms.

We chatted for only a few moments. He was on his way to a meeting, as was I. We promised to catch up at a more leisurely pace after the conference, which we did last week by phone. (Howard’s based in LA, and I’m in Baltimore.)

Howard had some big news for me. His company, StartEngine, is raising again.

Last December, we advised our members to invest in StartEngine’s Regulation A+ raise. At the time, it had a valuation of $65 million.

Now it’s doing another raise. This time the valuation is $119 million. The current raise is for accredited investors only. He plans to immediately follow this raise with a Reg. A+ raise at a higher valuation of $170 million (160% more than our price last December).

A substantial record of progress is driving the higher valuation, Howard says. StartEngine has helped startups raise more than $60 million through 150 funding campaigns. It has grown its user base to 150,000. Around 38,000 of them have made at least one investment in a StartEngine-listed company.

The company generated $2.4 million in revenue over the first half of the year, a 214% year-over-year increase. Not surprisingly, the number of employees has expanded from 13 to 30 in the last year.

But Howard is much more excited about what’s to come. “There’s so much going on right now, Andy, it’s unbelievable,” he tells me.

OK, so here’s a rundown of what else he told me.

Howard is building a blockchain-based secondary marketplace where users will be able to trade and clear their securities (startup investments) instantly. How? Their securities will be tokenized, recorded and stored on the blockchain using LDGR, a decentralized app.

LDGR is ethereum-based. It not only digitizes your shares, but also provides you with a “digital stock certificate.” Howard says it harkens back to the days when people used to buy stock and get physical stock certificates in the mail.

He says that will fix the “lost keys” problem (keys being an integral part of buying and selling cryptocurrencies): “I’ve already tokenized all of StartEngine’s investors. They now have tokenized securities. They no longer have to worry about losing their keys.”

That’s a big step forward. I’ve heard numerous horror stories about crypto owners misplacing or losing the keys they had written down (in one case, I recall, the maid threw it away!).

Howard is still waiting for the SEC to approve these new services. He’s confident he’ll get the green light. But I know enough about the SEC not to assume anything.

But I sure hope that he’s right.

The best thing about Howard is he can keep it real and grounded. But he also loves to go big. He keeps mentioning his longstanding aim to “democratize access to capital.” We like that kind of talk, because we feel exactly the same way.

And he’s good at putting his words into action. In 2019, Howard says, expect more growth… more revenue (especially from his newly operating secondary trading marketplace)… and continued leadership in blazing a path forward in security token offerings, which he believes could be his most important endeavor.

Howard sees the SEC cracking down on non-compliant token sales.

“Our trading platform is in a position to replace all the other digital asset platforms that are coming under the increasing scrutiny of the SEC,” Howard says. “We’re 100% legal. Who knows what will happen to the others?”

Howard has a point, especially as it relates to the unregistered exchanges. Instead of fighting or ignoring the SEC, he’s anticipating its next moves and setting up his portal to be completely compliant.

And that’s very smart.

By the way, we’ll let you know more details on StartEngine’s A+ raise when it goes live.

Invest early and well,

Andy Gordon

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