What Types of Offerings Does StartEngine Allow?
Because we are an SEC-regulated crowdfunding platform, we are restricted to certain offering types. Beyond those restrictions, we also strive to offer the best possible campaigns for both our companies and investors.
In order to achieve this goal, and clarify the offering types we allow, we have put together a list of structures we permit, along with the requirements for each below. Please note that StartEngine has standard investment templates for each offering type below and does not accept customized investment documents.
For traditional securities offerings, we accept the following types:
- Equity: This is our most common offering type, typically consisting of either stock for corporations or membership units for LLC’s.
- NOTE: Any class of equity you would like to offer must be authorized in your corporate documents (articles of incorporation or operating agreement)
- NOTE: Any class of security a corporation is offering must be authorized in articles of incorporation that have already been filed with the state.
- NOTE: Some LLC structures are not conducive to equity crowdfunding. In this case, you may want to consider converting into a C-Corp.
- Convertible Notes: This is our second most common offering type. This is a debt offering, that has the opportunity to turn into equity if the company meets certain criteria set in their terms.
- NOTE: Convertible Note offerings must identify the class of security they will convert into. This must either be a class of security already authorized in the company's corporate documents or if not, all terms must be specifically defined so that the investors know all rights and preferences they will have when the notes convert.
- NOTE: The StartEngine note template generally requires an interest rate, valuation cap, discount rate, and a term of 2 years or less. If they reach the maturity date without converting, the principal and interest are due back to investors.
- Debt (Promissory Note): This is a debt offering that is typically structured to pay interest to investors throughout the course of the loan, plus repay any accrued, unpaid interest and principal back to investors at the maturity date.
- Revenue Share: This is a revenue sharing offering that is typically structured to pay back investors a certain multiple on their investment (i.e. 1.5x, 2x, etc.) out of the company’s gross revenue after a certain period of time.
- Revenue Participation Rights: This is similar to a revenue sharing offering but is specialized for use with individual entertainment properties such as a movie or play. These typically, repay investors 100% of net revenue up to a certain multiple of their investment (i.e. 1.2x) and then split revenue in excess of that amount with 50% going to investors, and 50% going to the company (and any other participants the company has negotiated with).