StartEngine "going on offense" with SeedInvest acquisition

It's been a big week for StartEngine. On Wednesday, StartEngine announced the acquisition of SeedInvest, noting that SeedInvest was one of the "genuine pioneers" of the equity crowdfunding market.

While neither SeedInvest or StartEngine shared terms, the acquisition is reported to cost StartEngine nothing in cash, instead exchanging 960k shares @ $25/each ($24m value) for SeedInvest. The deal is noted to be for the platform only, excluding any equity or other security interest SeedInvest has acquired over the course of business. This valuation ends up somewhere in the ~6x revenue range, estimated from an average cash fee of 7.5% on SeedInvest's 2021 funding dollars. Given that StartEngine is currently raising somewhere in the ~48x revenue range, given their last publicly reported revenue run rate.

Howard Mark's, StartEngine's CEO stated that the acquisition "will vastly increase the number of potential investment opportunities we can host on our platform, including some of the industry’s top fundraising companies" (you can read his comments here). It's not immediately clear what specific advantage SeedInvest may have to enable this, but StartEngine has been making progress in launching a secondary market, something SeedInvest was looking into prior to setting it aside as its parent company Circle's focus drifted more into crypto.

From a business perspective, it's a massive boon. SeedInvest is one of the top recognized names in equity crowdfunding, and the brand alone must be worth millions of dollars. This is on top of adding to StartEngine's sizable community of investors. SeedInvest hosted one of the most successful equity crowdfunded companies ever, NowRx, which started in 2017 with a small round at a $6m valuation, and ultimately accumulating over $40m in total with the most recent valuation of $275m, a 45x return on paper for early investors.

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