As Honeycomb Credit CEO and cofounder George Cook puts it, there is an urgent case for investing small and local.
To that end, the Pittsburgh-based crowdfunding loan platform recently closed a seed funding round of $1.75 million to expand its work across the country.
Founded in 2017, Honeycomb connects small business owners with community members who want to support them financially. Through Honeycomb-sponsored online campaigns, businesses can attract individual investments from their clientele and community, accessing funds more easily than if they relied only on resources like venture capital or grants. In turn, investors are repaid their loan quarterly, with potential returns as high as 12%.
This seed funding round was led by the American Family Insurance Institute, with additional support from Innovation Works, K50 Ventures, the Urban Redevelopment Authority of Pittsburgh, Reinforced Ventures and Flight.vc.
During the COVID-19 pandemic, interest in Honeycomb’s platform dramatically increased, Cook told Technical.ly.
“Because so many small businesses were impacted, we started to get inbound traffic from all over the United States,” said Cook, whose family has worked in community banking for 130 years.
While Cook acknowledged that the economic impact of the pandemic made investing in new business projects riskier, he also noticed that more traditional loan options through banks or online lenders were limited.
“At the same time, everyday people in the community wanted to have a say in what their Main Street communities were going to look like on the other side of the pandemic,” he said. “And it created this really interesting opportunity for Honeycomb, and community capital in general, to be part of the solution.”
Cook hopes that this seed funding round, which it announced in March, will help Honeycomb grow its customer base to meet the nationwide demand they’ve seen over the past several months. Recently, he said, Honeycomb has launched and completed campaigns beyond their core mid-Atlantic market, in states like South Carolina, Montana and Idaho.
“We realized that those Main Street small businesses exist all over the United States, and so we’re accelerating our growth to be able to serve more communities more quickly,” he said.
Honeycomb has plans to increase its Pittsburgh presence, too.
“We’re absolutely going to continue to bring great small businesses in the Pittsburgh area onto the platform,” Cook said.
Over the next year, he added, the company’s plans for Pittsburgh will encompass hiring for a larger headquarters team, which currently includes an opening for a marketing director.
Beyond using this seed funding to advance Honeycomb’s mission, Cook also hopes that the investment helps kick off a larger trend in community crowdfunding for small businesses, particularly after the pandemic ends.
“Unfortunately, we think that even as the economy continues to reopen, and things are trending in the right direction, we worry that the capital gap is going to remain for months, or potentially even years, into the future,” he said. “So I think we’re going to be operating in that space for a while.”
But even after the economy recovers and more traditional lending options return to full operation, Cook feels confident that Honeycomb will continue to hold its own.
“The tools and process of running a crowdfunding campaign turns out to also be a good marketing campaign of getting your customers really emotionally and financially invested in your business,” he said. “And that’s a powerful marketing tool that other loan offerings don’t have.”
Sophie Burkholder is a 2021-2022 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Heinz Endowments. -30-