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StartEngine’s Vision: 10,000 Companies,
$10 Billion in 10 years

Expert Interview


 
Howard Marks of Securitize

Howard Marks

Howard Marks is the co-founder and CEO of StartEngine, the leader in Security Token Offerings and Online Public Offerings. Marks founded StartEngine with the mission to help entrepreneurs achieve their dreams. Marks was the founder and CEO of Acclaim Games, a publisher of online games now part of The Walt Disney Company. Before Acclaim, Marks was the co-founder of Activision Blizzard and Chairman of Activision Studios from 1991 until 1997. As co-founder, former Board Member, and Executive Vice-President of video game giant Activision, he and a partner took control in 1991 and turned the ailing company into the $50B market cap video game industry leader. As a games industry expert, Marks built one of the largest and most successful games studios in the industry selling millions of games.

Marks is the 2015 "Treasure of Los Angeles" recipient awarded for his work to transform Los Angeles into a leading technology city. Marks is also named one of the 500 most influential people in Los Angeles by the Los Angeles Business Journal. Marks is a member of Mayor Eric Garcetti's technology council. Marks has a Bachelor of Science in Computer Engineering from the University of Michigan. He is bilingual and is a triple national of the U.S., United Kingdom, and France.

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StartEngine is a leading security offering platform that tokenizes securities for more efficient issuance and trading. Utilizing its expertise in regulated exempt offerings under the Securities Act, StartEngine has helped more than 160 companies raise capital and has over 150,000 registered prospective investors. Based in Los Angeles, the company was created in 2014 by Howard Marks, co-founder of Activision, and Ron Miller. StartEngine is committed to revolutionizing the ways companies raise capital and to helping entrepreneurs achieve their dreams. StartEngine Crowdfunding is a not a broker-dealer, funding portal or investment adviser. StartEngine Capital, LLC is a funding portal registered with the US Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA).

Transcript


 

Adam Chapnick:

Hey there. I’m Adam Chapnick with the Security Token Academy. Today we are pleased to bring you a corporate member interview with StartEngine. The company is a gold corporate member of the Security Token Academy. StartEngine is the largest equity crowdfunding platform in the United States. The company is also a FINRA approved broker dealer and ATS. In this corporate member interview, we’ll be speaking with the one and only Howard Marks, the cofounder and CEO of StartEngine. Howard actually joins me now in the studio. It’s great to have you back.

Howard Marks:

Thank you, Adam.

Adam Chapnick:

Welcome. You’re like our returning champion. I feel you’ve been here maybe as many times as anyone. We love having you. So, for everybody who is a little bit late to the party, can you share with everybody what is StartEngine and why you guys decided to make it happen and why did you get into this game in the first place?

Howard Marks:

Well, here’s how it happened. I’m from the game industry as you know.

Adam Chapnick:

Yes.

Howard Marks:

As co-founder of Activision and been in that industry for a long time and felt strongly that I wanted to be helpful to entrepreneurs. So StartEngine initially was created as an accelerator school for entrepreneurs. We helped them achieve their dreams by giving them ... by investing money in their very early stage. And this was an amazing opportunity. We met hundreds of entrepreneurs, we’ve invested in 59 companies. However, in many cases they couldn’t raise any more capital and they would not continue the business, they would shut down, and it was very distressing for the entrepreneurs, discouraging and capital became a very important thing.

Howard Marks:

So just then as we were thinking about how do we solve this capital problem, the Jobs Act was voted in, Obama signed it in April, 2012, and we looked at it and we said, wow, this is going to be a game changing, because for now, for the first time you have ordinary investors can invest in highly risky startups. And we felt, well if we could put together a solution for that, that would be amazing. So we looked at the crowdfunding industry and we looked at Indiegogo and Kickstarter and wanting to be inspired, by what they did, so we decided to build something similar, but instead of sending someone a tee shirt, we actually issue shares and securities and that’s how StartEngine just got started.

Adam Chapnick:

Yeah. And you guys really were one of the pioneers in the space of transforming how founders are able to generate new sources of capital and you continue to lead in that way. I recall last time we spoke you were entering the process of becoming a broker dealer. So can you describe why you decided that that was an evolution that you guys needed to undertake and what benefit does that present and does it have any challenges that go with it.

Howard Marks:

Well, I’m glad you asked the question. So a broker dealer in this country is a very big deal. You have to become ... You have to have ... The SEC has to review your application. FINRA, which is the regulator is going to have to approve your business plan. It’s a lot of work. It took us two years, costs quite a lot of money in legal fees and all the effort and time we have to spend. I had to do a lot of exams myself and other people in our group had to take exams. And all of this for what? It turns out that being a broker dealer gives us an elevated status. It allows us to work with customers, help them structure their offerings, we get now a commission, but we can also work with more states. There are a lot of things that we saw as a benefit to the customer.

Howard Marks:

More importantly they know now there is an entity, a financial entity that broker dealer, that actually stands side-by-side them in figuring out the best way to raise the capital that they need, using Regulation A+. That’s the main, I would say regulation that we’re going to be working with.

Adam Chapnick:

So for those who for some reason maybe haven’t been following our show closely enough, can you summarize why is Regulation A+ an important one to look at and how does a broker dealer relate there?

Howard Marks:

Well Regulation A+ initially was simply created for companies who want to raise capital. So, what they do is they file with the SEC, an offering memoranda, the SEC reviews it and once they’re qualified, they’re technically allowed to put together a website, with an invest button and say, “Hey, come invest in my company.” And they have to do the marketing. They have to go out and figure out the strategy, how to do it, how to bring people to the page. And then once someone clicks the invest button, they have to figure out how to capture, banking information or the credit card information, whatever that is. That’s a lot of work. That’s a lot of work to put on a company whose business is not in the business of raising money, whose business is running their company. And so, Regulation A allows a company to raise up to 50 million a year.

Howard Marks:

And we did the first one, it was a company called Elio Motors. We were not a broken dealer then, we just did it as a fixed fee kind of deal. But we couldn’t structure the deal, we couldn’t offer any advice, that was a whole different world. However it was very successful. We raised $17 million, close to 17 million from close to 7,000 people, it was interesting.

Adam Chapnick:

The talk of the town. I remember, it was a big deal.

Howard Marks:

And as a broker dealer now, things are a lot different because now we can sit down with our customers and we can talk about not only their business but also about the marketplace and about the best way to go about with the offering. It’s a big difference and the downside you know, this regulation, you have to ... everyone in the company has to abide by a lot of different rules and there are about 3,000 of them and it’s hard.

Adam Chapnick:

So you set yourself up now to be sort of a destination where an issue or let’s say, whether you’re a company or whatever you want to call yourself, if you’re an issuer you can come to StartEngine and you guys are enabled to help kind of all across the board with the process of getting from, I need money to, I have money, basically. Correct?

Howard Marks:

That, yes, that’s correct. So from the time you say, okay look, I want to raise several million dollars, okay, let’s look at what this race would look like. Let’s look at your company, let’s structure it, let’s figure out the best terms. And then we go ... then they file with, we’ll help them with the filing, we can even help them hire an attorney, they need a CPA for the audit. All of these moving parts are important. And we look at ourselves as really the ones who can organize that whole structure, to make sure that the company doesn’t waste any time, to make sure that the decisions that they’re making make sense, so we can provide that advice. We have the ability to do that. And once the offering is live, we help them with the marketing. We have a lot of experience, we’ve done hundreds of offerings. So we can help them understand what are the best things to do for the marketing.

Howard Marks:

Now, and on top of that we have our own audience of 200,000 plus registered users who many of them are investors and they can come in as well. So we’ve combined the two together. This whole concept of being a broker dealer, but was that modern touch.

Adam Chapnick:

Yeah.

Howard Marks:

The modern touch of having the ability to have a huge audience that we already have.

Adam Chapnick:

Yeah. That is sort of what everybody has thought would be the inevitable kind of Holy Grail is that app ... the Reg A+ structure that lets you generally solicit, but with someone who’s allowed to go out and help you get the money, who also is allowed to help you do other things you don’t understand. It’s a big corner to have turned for you guys, so I congratulate you on that.

Adam Chapnick:

Now, as far as, you know, here we’re called the Security Token Academy. So we love to talk about specifically how security tokens can be used in these kinds of situations. But maybe you can share, there’s some interesting wrinkles in the fact that you’re a broker dealer and that a lot of people want to use broker dealers, but also want to use security tokens. How do those two mesh or not mesh?

Howard Marks:

Well, here’s the reality is as a broker dealer, FINRA reviews our business plan and they have to approve it, and we cannot just go out and do anything we want. You know, now that they’ve approved our broker dealer, we can’t go out and say, “Oh, you know what? We’re going to also be offering national market securities.” No, that’s not part of our product line. That’s not what we’ve been approved. And so far we’ve approved to build, to do Regulation A offerings. Great. We’re so happy about it. There’s some other things we’re doing that I’m sure you’re going to be asking questions about, that we’ll be enhancing our broker dealer.

Howard Marks:

But one of them that we don’t have right now is the ability to issue securities as tokens on the blockchain. That is not part of our product line. Will it be in the future? I think it could and we will certainly work with FINRA and of course the SEC to talk about best practices, best ways to do it. I think when you look at the Facebook challenge that came recently in front of Congress, I think that illustrates the disconnect. You got a major corporation in our country that touches 2 billion people that says, look, we’re going to be doing crypto. We’re going to have it housed in Switzerland as an association. We’re just a member, we’re not part of it, it’s not a big deal. What do you say? And the reaction was pretty, pretty negative, but what it did illustrate is the disconnect. You got business that wants to use crypto and you got Congress, you got the regulators, the SEC who are thinking about it, but nothing has been really finalized.

Adam Chapnick:

So, what about that with the SEC and the regulators? What is your opinion having, maybe, you have maybe the best seat for to view the evolution of regulations on this subject of anybody who’s been there since like day minus one to today and you’ve been in there. Is it proceeding appropriately? Is it too harsh? Do we need more, do we need less? Are they off the reservation? Where do you think the ... what’s the state of regulations right now?

Howard Marks:

Well, the regulators on the basis of communication are very friendly. Say, look, we put together a unit just to deal with digital securities and tokens and cryptocurrencies, come and talk to us, which I think is great.

Adam Chapnick:

Yeah.

Howard Marks:

So they have an open ear. But there’s a difference between, hey, come and talk to us and here’s a regulation you need to follow. And that regulation that you need to follow is not quite there yet. There are ways to get things done, but for a broker dealer it’s different. We again, have to abide by what we’ve been approved. And so if you haven’t been approved to issue security tokens, we can’t issue security orders. There’s nothing, there’s no way around it. And so yes, we will go back and talk about it and there’s absolutely a lot of interest in it. And I think, you know, even with the Facebook illustration, that shows how big enterprise, small enterprise, they both have different interests and the government is going to help figure out a solution.

Howard Marks:

And we’re part of the solution of course, because we’re a member of FINRA. So we can put in our interests, our desire and we will do that. But until we are approved, we’re not doing it. So it’s basically an ongoing process.

Adam Chapnick:

Yeah. And obviously we’re going to have you back frequently to keep us updated on that. But meanwhile, tell us how you do work with an issuer of a young company that’s looking to raise money. What’s the process? How can they work with you?

Howard Marks:

Well, the process is pretty simple. We have two product lines, really that are important. The one is what we call the $1 million rule is regulation, crowdfunding. And you can raise $1 million from the crowd. The good news with that is you don’t need an audit. So you just need your financials to be reviewed by a CPA. That’s really inexpensive, we file the offering, it’s called Form C, we file it with the SEC, we do all the review, check due diligence, make sure it’s okay, and then it goes live on our platform and the company can raise up to a million dollars. And we helped them with the marketing. We helped them figure out how to engage their community, advertising, all the different elements. As soon as the offering is live and it goes over $45,000, an email goes out to the entire StartEngine community so they can be aware of it as well. That’s working great. We’ve done a lot of them-

Adam Chapnick:

Oh really.

Howard Marks:

And we’re pretty excited. We’ve raised actually between regulation crowdfunding and Regulation A, over a hundred million dollars for companies.

Adam Chapnick:

Tremendous.

Howard Marks:

So Regulation A, as we discussed it is you know, $50 million but you know, you need the two year audit and you have to have the attorneys and you have to have-

Adam Chapnick:

It’s expensive, yeah.

Howard Marks:

The SEC qualification. But regulation crowdfunding is actually very accessible and very well put in place by the SEC. So we’re very happy about that and our customers are happy. But however, once they get to that million or close to that number, they need more capital. So they have to switch over to the Regulation A+, which is now where the broker dealer fits.

Adam Chapnick:

Sure.

Howard Marks:

So for the regulation crowdfunding, that’s the funding portal StartEngine Capital LLC. And then once you want to go to Regulation A+, that’s the broker dealer which is StartEngine Primary LLC.

Adam Chapnick:

Got it. And is that a ... how does that appear, like is that a seamless transition that as far as the investor community understand it’s just more as available or is there a whole new offering? How does that ... what’s the experience to an investor of an offering that shifts from Reg CF into an A+?

Howard Marks:

Right. So there are two different offerings. That’s the answer. So it’s same company, two different offerings and we explain clearly on the screen where this offering is being issued. Is it StartEngine Capital? So it’s basically a $1 million maximum or it’s actually StartEngine Primary, you have that 50 million or whatever the company chooses to raise.

Adam Chapnick:

Got it.

Howard Marks:

And we’re very clear and we want to make sure that the investor understands, when they put their money in which company they’re working with.

Adam Chapnick:

Yeah, that makes sense. So from where you’re sitting, how difficult is it now for early stage companies to raise money in any of these sort of methodologies?

Howard Marks:

Well, my opinion is this. So we look for three things for a company and you know, everybody’s welcome to come and raise money, but we look for three things.

Adam Chapnick:

Okay.

Howard Marks:

The first thing is we want a CEO that’s willing to put themselves out there. That really engage.

Adam Chapnick:

Front man.

Howard Marks:

Front man or woman, but really engage, really willing to go out there, no barriers. The second thing is we want a compelling offering and compelling offering doesn’t mean the company is necessarily compelling, the offering is compelling. You have to offer something that is really unique, interesting to investors. And the third one is they need a well-defined audience. Really clear who the audience is, because that’s how you do the marketing, right?

Adam Chapnick:

Yeah.

Howard Marks:

Once we have those three things in place, we believe they will be successful.

Howard Marks:

The first one, the CEO willing to put themselves out there is probably the most important one, because it really drives the energy and the day-to-day actions that a company’s going to undertake to raise the money.

Adam Chapnick:

Sure. So what are the steps now? Now people have heard what you’re talking about. I’m sure they’re all getting excited because it sounds possible and a lot of people in the early stage community that we talk to a lot or kind of throw their hands up. It’s like this alchemy that they can’t figure out how to get from here to there to get to raising the money they need. What are the actual steps if someone is working with you to get started launching a campaign?

Howard Marks:

Well, we believe it’s pretty simple. However, it’s not easy. But the process is they contact us, they go on our website, let’s say startengine.com, they fill-in some questions, we have a conversation. And once it looks like they’re interested, they sign an agreement with us and then we onboard them.

Howard Marks:

The onboarding is where it’s not that simple. That means legal documents, financial documents, quite a lot of information needs to be given to us. We try to make it easy with a beautiful website. Onboarding, it’s simple, but ... and yet it’s the first time they’re doing it. They need handholding and we offer that with our account managers, they get a lot of handholding. Once they’re kind of ready to raise the money, we have a crowdfunding specialist, strategists, the crowdfunding strategist, who’s going to go in and work with the company to figure out the strategy. What are the steps from communication? The working with their existing audience, building an audience, finding an audience, advertising, PR, all those components are part of a campaign. And the campaign strategist would put it together and work with the company.

Adam Chapnick:

Amazing.

Howard Marks:

Once it goes live, it gets implemented. As they raised the money, let’s say they are successful, they raise the capital they we’re looking for, at that point we’re done.

Adam Chapnick:

That’s amazing. I didn’t realize you guys have that hands-on sort of intermediate approach where you kind of mentor them through the entire strategy process. That’s fantastic.

Howard Marks:

The companies need the expertise. It’s the same way as if I said, “Hey, this new thing called social media, let’s work together on it.” Well, for many people at the beginning when Facebook was early on, they did not understand how to use it and some, I would say companies came out very quickly into the marketplace with expertise on how to help companies get up-to-date with it.

Adam Chapnick:

Yes.

Howard Marks:

And in a way, our role here and expertise is to help companies understand how to raise capital for their company, which is pretty important, directly from the public using equity crowdfunding, which is what StartEngine is doing.

Adam Chapnick:

Got it. Okay. So what about from the other side? What’s the experience from the investor’s point of view? Let’s ... countless people I know who want to get into early stage companies but don’t know how, where, what or what to trust. How would they get involved as an investor through StartEngine? Is it an easy process? Do you recommend a slow process? How does that go?

Howard Marks:

So typically a potential investor will hear from us, from the company. The company’s going to do the marketing and they will get to the campaign page on StartEngine.

Adam Chapnick:

The company, you mean the issuer or the company.

Howard Marks:

Issuer.

Adam Chapnick:

Okay, got it.

Howard Marks:

The issuer will ... I call them companies-

Adam Chapnick:

The company.

Howard Marks:

Because it’s a little less technical.

Adam Chapnick:

Yes.

Howard Marks:

And they will market themselves on Facebook, on Instagram, on public relations, Google, all those different channels, email, mailing lists. And these investors will come to our page and there’ll be introduced to the company’s offering, but also to StartEngine. And they click, let’s say invest. And now, starts a process where they have to put in their information and they can use their bank account, they can use a credit card for the smaller offerings, the $1 million rule, they can use also crypto, Bitcoin Ethereum to the extent that the company is willing to accept it.

Adam Chapnick:

Got it. That’s great.

Howard Marks:

And all of this we designed to make it really easy, very easy for an investor. And once they complete the process, then the money goes into escrow, and there’s a whole process for understanding if it’s the right investment, if you know, all the different details.

Adam Chapnick:

And in both your Reg CF and Reg A+, there’s no accredited requirement. It’s main street retail. Anybody can invest that’s interested. Correct?

Howard Marks:

That’s correct. So the reason I wanted to do it and decided to go forward and do what we’re doing here with StartEngine, is only, only because now ordinary people are able to invest. So think about this, before the Jobs Act, first of all, you couldn’t publicize online any of this stuff. Okay, so what? Only wealthy people or experienced investors were able to access those interesting companies. That’s great, that was then. The new is now everybody can, and that’s what made me really interested in doing this. The democratization of capital, the idea that anyone can go in and make an investment, it feels great. Now we also understand it’s highly risky, it’s very speculative, the risk of loss of the investment is there. And yet, people want in.

Howard Marks:

They want it because the journey, because the perks, because what the company is trying to achieve, they want in, and we want to help that happen.

Adam Chapnick:

Yeah. That’s great. So what happens? You say sometimes it’s risky. Well it’s always risky, but sometimes obviously the risks, it doesn’t pan out. What happens if a ... well, I guess before it doesn’t pan out, what happens if a company doesn’t reach their funding goal? What’s the mechanism then? Do they keep the money that they did raise, do they return it?

Howard Marks:

Well, if a company doesn’t meet the minimum goal, then the campaign ends and the investors get their money back.

Adam Chapnick:

They get it back. Got it. And so, what happens in the end to people who ... have there been any positive outcomes with companies that maybe it didn’t work out in the end where they took investment, they went as far as they could and it didn’t work out. Are there any ... is there anything beyond, Oh well everybody’s, you’re just out of luck. Do you find any repeat users that people come back and raise for another company? How has that been panning out in the marketplace?

Howard Marks:

Well, typically if they failed a campaign, there is a moment of retrospection, sorry. Trying to say, okay, what happened? Why wasn’t I successful when so many others are successful? That’s really on the entrepreneur to figure out.

Adam Chapnick:

Sure, absolutely.

Howard Marks:

We don’t provide advice on the business in general. We help them with the capital needs to the extent they want to come back and try again, fine.

Adam Chapnick:

Great.

Howard Marks:

That’s great.

Adam Chapnick:

So back on the investor side, is there a minimum or a maximum that an investor is allowed to invest, either because of your rule, the issuer’s rules or the SEC?

Howard Marks:

So the company will decide what the minimum is. So some are saying $100 some 500 some $1,000, it’s kind of that range. In terms of the investor ability to invest more, it depends on their profile. So for the $1 million rule, the rule is very simple. It’s 5% of your income or assets with a minimum of $2,000, so whatever is greater, $2,000 or 5%, but that’s across all the deals in one year. So if you invest in two deals-

Adam Chapnick:

Oh is it?

Howard Marks:

Your 5% let’s say is $5,000 so you can put up to $5,000 in multiple deals, but that’s it, per year. And that’s the investor will say to us, where are they at in their process? And they have to disclose it. Under Regulation A+, it’s 10% and it’s in that deal. So 10% of the income, 10% of their assets in that one deal. Now, for those ... and then for the $1 million rule, the maximum is $100,000 investment, no one can invest more. And the way it works is if you’re an accredited, which means you’re wealthy, you have a lot of assets, you have a lot of cash, you still are limited to $100,000 with the regulation crowdfunding, the $1 million rule. But with the Regulation A+, there’s no limit, at that point for those wealthy investors.

Adam Chapnick:

Got it. And then how can they transact? You had mentioned that in the Reg CF, they could use crypto, in Reg A+ that’s not allowed. Correct? Was it credit cards or people wire transferring? Is it all of the above?

Howard Marks:

Most people are choosing credit cards to invest. It’s convenient.

Adam Chapnick:

They get the points.

Howard Marks:

They get the points. It’s very simple.

Adam Chapnick:

Interesting. And so are the ... is the crypto allowed in Reg A+ or not? You can-

Howard Marks:

Well, that’s the broker dealer, that we have, we don’t have their permission to accept crypto. But a company can have their own offering on their own website and accept crypto to the extent maybe another broker dealer was able to get that approval, then they could do it too.

Adam Chapnick:

Got it. So how about some of the campaigns? Can you discuss any of the success stories? How many of you guys helped get funded?

Howard Marks:

So we’ve helped over 200 companies.

Adam Chapnick:

200?

Howard Marks:

Over 200.

Adam Chapnick:

Amazing.

Howard Marks:

Successfully.

Adam Chapnick:

Wow.

Howard Marks:

Raise capital, over a hundred million dollars was raised. We’re trying to instill in our company’s behavior, and the behavior we call is always be raising, ABR.

Adam Chapnick:

ABR.

Howard Marks:

And why ABR? It’s very simple. We feel that companies have capital needs on an ongoing basis. And the old school, the old ways of doing it, is you raise let’s say a million dollars and then you have to build, build, build, build, make metrics, get metrics, go back and raise more. And by the time you go back, maybe you’re down the line or you’re about to end your capital, your cash. And we see that all the time. And then you raise another let’s say 5 million and you repeat the same behavior, and then you get to a point where you only have a few months of cash and you’re desperate to raise more money. We think that’s not a good idea.

Howard Marks:

The best idea is you put your first million dollar raise on StartEngine, you raise as much as you can, you continually raise. If you don’t get to a million, keep raising, keep raising. Even it takes you a year, so what? Keep raising, keep engaging the customers. Keep getting more capital. And then when you get to the Regulation A, same behavior, keep raising, don’t stop, never stop, keep raising. Your company’s doing great, the price of the share is going to be higher. Keep raising.

Adam Chapnick:

Interesting.

Howard Marks:

Don’t stop. And we believe that’s a formula that will give the companies more success.

Adam Chapnick:

I love it. I love also that it goes to, I think David Mammet, you know, the always be closing for their Glengarry Glen Ross, I think. But so what about any, do you have any favorite? I hate to say favorites, but do you have any notable sort of success stories, any the clients that have been successful you can share that you thought were interesting?

Howard Marks:

Absolutely. One of my favorite one is Procom. They are run by a woman called Dawn Dixon and she’s fantastic, and they went on our platform and they raised $1 million. They went to the maximum, she was so engaged, she put herself out there, she went the whole way. She went on radio shows, she got PR, she really engaged the community. And yet, you know, for a woman-driven company it’s not easy to raise capital. We know what the statistics look like. You know, the venture capital market is about 2%-

Adam Chapnick:

That’s horrendous.

Howard Marks:

Of the capital goes to women-led companies is not great. And then she’s a woman of color, so she, you know, add all of that to it, it’s just hard.

Adam Chapnick:

Yeah. Fantastic.

Howard Marks:

Really hard. Really, really hard.

Adam Chapnick:

Yeah.

Howard Marks:

You know what? I love it.

Adam Chapnick:

It’s great.

Howard Marks:

Democratization of capital, allowing anyone, regardless of their age, their gender, their race, whatever their beliefs are, whatever that is, regardless of the person, what counts most is their mission, the ability to communicate their mission, what they’re trying to achieve, and enroll these amazing investors who are going to participate. And that really is fundamental to what we do.

Howard Marks:

Preach Howard, preach, I love it. Well, how about news or product announcements from StartEngine? Anything you’d like to share?

Howard Marks:

Absolutely. So what we’re going to be launching next, we’ve announced those plans quite a long time ago, is a trading platform. So we’re in the midst of getting approval for alternative trading system. It’s basically ability to, once you bought the shares, to have a way to trade them.

Adam Chapnick:

Yeah. Liquidity. Amazing.

Howard Marks:

Right. People call this liquidity. It’s very important.

Adam Chapnick:

Very.

Howard Marks:

Why? Because investors who participate, may not have five or seven years to wait for the company to get sold or to go on the public markets like the NASDAQ. It takes quite a long time for companies to do it and usually you have to become a very, very big company. For investors who want access early stage new ideas, they need also liquidity. It actually enhances the offering, it allows the offering to be even more exciting for an investor, because they know the liquidity is not just an if, it’s more certain, right? Doesn’t mean it’s going to be a higher price for share than you paid for.

Adam Chapnick:

Right.

Howard Marks:

There’s no guarantee on price.

Adam Chapnick:

There might be a price, is a nice thing. That’s good.

Howard Marks:

There might be a price. There’ll be a demand, there’ll be supply demand curve on the shares, but there is something and so we call it Secondary. That’s the name of our trading platform and we are launching it hopefully in the next few months, and we’re very excited about it and we think it’s a game changer.

Adam Chapnick:

That is. And it also, having all this infrastructure set up, should you ever cross into the world of STOs that’s going to be just as exciting in that world to have this ATS set up that could possibly provide liquidity there. Should you ever venture into that world and we would definitely be interested in following you into that world at Security Token Academy. So what’s next for the StartEngine? Any goals for 2019 that are sort of out there that you want to share? Beyond obviously you have your ATS coming that’s got to consume a lot of your time. Anything else you want to share about that?

Howard Marks:

Well, we’re pretty ambitious, right?

Adam Chapnick:

Yes you are.

Howard Marks:

So we’re re-raise our own money on StartEngine by the way. So we’re financing ourselves with our own company.

Adam Chapnick:

Terrific.

Howard Marks:

We believe it’s important because we want our companies to know that that’s leadership, that we’re doing the same as they are. We are ourselves, our own customer. We go out there and we talk about our company. So, we have an offering right now that is really ... that’s open since February. Last year we raised $5 million in our offering using a Regulation A+. And this year the goal is $10 million. So we’re pretty excited about it.

Howard Marks:

We believe that the capital is going to be used for growth, helping the company go through further steps, the secondary marketplace. Pretty exciting.

Adam Chapnick:

Very, yeah.

Howard Marks:

We’re going to be announcing soon, probably the ability to allow investors to use their investment retirement accounts, which is the IRAs, which a lot of people have. We’re trying to innovate constantly. We’re also are trying to find more companies to come on StartEngine. All of this is a tremendous amount of effort and our team is dedicated. And we’ve announced, you know, our mission, which is to help entrepreneurs achieve their dreams. But we’ve also announced our vision, our vision is to help 10,000 companies raise $10 billion in the next 10 years. And that’s basically driving us forward.

Adam Chapnick:

I love that. Say that again. 10,000 companies, $10 billion in the next 10 years.

Howard Marks:

Yes.

Adam Chapnick:

All right, we’re going to hold you to that. We like that. So how about in the ecosystem, we love to kind of learn about who else, you know, it’s easy to hear about successful visionary companies like StartEngine, because you guys are out in the front, always have been. What other companies do you guys rely on and in making what you do possible?

Howard Marks:

So one of the companies we work with closely with is FundAmerica. They also own Prime Trust, which is a bank and we’ve worked with them since the beginning and they’re great to work. And Scott Purcell.

Adam Chapnick:

Yep. Also a gold corporate member of the security token Academy.

Howard Marks:

Which is great.

Adam Chapnick:

Yep.

Howard Marks:

We’re happy to hear that. And we also have great attorneys that we work with. One of them is Sarah Hanks. She runs a company called Crowd Check. Fantastic. And another one is Jeff Marks, unrelated to me, same last name. He’s a corporate attorney, securities, understands this whole world and many other attorneys as well we work with, who are helping their customers raise capital.

Adam Chapnick:

Terrific. So now it’s time to look into the Marks’ crystal ball. We always love to kind of peer into the future and hear predictions from people who are positioned to have something to predict. So looking, say through the end of 2019 into maybe even the end of 2020, what do you see coming around the bend, either in your world, in related worlds, in having to do with the democratization of finance, whether it’s in the security token or strictly in the equity crowdfunding area. What do you think? What are your predictions?

Howard Marks:

So, I think the prediction here in the next five years is equity crowdfunding goes mainstream. So it’s no longer viewed as an alternative, kind of quiet, on the fringe, on the edge, it’s actually mainstream. And that means millions of Americans are going to take some of their capital, whether it’s through their retirement accounts, through their checking account, some form of capital, they’ll invest it directly in young companies, early stage companies, real estate, exciting opportunities, well-diversified opportunities for them, between their current account, their retirement account. And that to them is an important form of their capital portfolio. At the same time, they still will own ETFs and they will own mutual funds and they’ll own other things. But we believe that there will be a movement to have some form of capital in that world and we want to be the leading company to provide that form of capital investment.

Adam Chapnick:

I love it. Well reminder, 10,000 companies, $10 billion, 10 years, right? So Howard marks, cofounder and CEO of StartEngine, was great having you back, thanks for joining us again.

Howard Marks:

Thank you Adam.

Adam Chapnick:

We wish Howard and the whole team, the best of luck as usual. StartEngine is a gold corporate member of the Security Token Academy. To learn more, go to our website securitytokenacademy.com and click on the directory tab and select corporate members. For everyone here at the Security Token Academy. I’m Adam Chapnick, thanks so much for watching.