Crowdfunding platform StartEngine has announced a buyout deal to acquire competitor SeedInvest from the Circle Internet Financial affiliate Pluto Holdings in a deal that will combine two of the largest equity crowdfunding platforms in the market.
The all-stock deal represents a market value of about $24 million.
StartEngine is advised by Kevin O'Leary of "Shark Tank" and led by Howard Marks, the co-founder of Activision Blizzard Inc ATVI, who spoke with Benzinga about the deal Friday.
Building An Investor Community: SeedInvest has supported over 300 startups and raised a collective $470 million from 700,000 users in the platform's 10-year history.
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On Friday, StartEngine CEO Marks told Benzinga the SeedInvest acquisition will augment StarEngine's user base of more than 1 million investors significantly, providing more opportunities for entrepreneurs to raise the capital they need to achieve their dreams.
"The SeedInvest audience of investors are a great audience, a great community that was built over 10 years and we also have a very significant community. But by putting the two together, we are definitely going to have the largest investor community in the equity crowdfunding market," Marks told Benzinga.
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He said the deal makes sense for Circle as well, as Circle now becomes a significant investor in StartEngine.
"The consolidation makes a lot of sense for Circle and for StartEngine as well," Marks said.
"By consolidating two of the largest players, we have a larger player and we think that's good for the market because it shows that, even in a difficult environment like today, we can raise capital for companies."
Navigating A Challenging Environment: Marks said rising interest rates and a challenging macroeconomic environment have prompted some institutional investors to take a more conservative approach to investing in 2022, leaving many entrepreneurs stranded.
"We're seeing a lot of companies where their existing professional investors have decided that they're not going to make it, and they're coming to us to see if there's a way for them to raise capital even in a difficult environment," Marks said.
Unlike many other companies that were not prepared for the 2022 economic downturn, Marks said StartEngine came into the year with a strong balance sheet and had the financial flexibility to take advantage of the market by acquiring SeedInvest.
Tighter financial conditions can actually be good news for equity crowdfunding platforms, he said.
"When capital is no longer available, there is no vacuum in the world, so people go where capital is available, and capital is available in equity crowdfunding," Marks said.
StartEngine expects the SeedInvest acquisition to close by the end of the first quarter of 2023, pending approval from the Financial Industry Regulatory Authority (FINRA).
Photo via Shutterstock.
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