$100 vs $1000 Investment - Which has a Bigger Bang for Your Buck?
Pip & Lola's investors attending a thank-you party in honor of their successful $96,000 crowdfunding campaign!
We’re super proud of the fact that with Honeycomb, anyone (over the age of 18) can invest for as little as $100. In the world before the JOBS Act, which legalized regulation crowdfunding, only people with high net worths could invest.
So, investors can certainly start with a $100 investment, but what does that actually mean for their return, and for the business they’re investing in? In this article, we’re going to dig into the investment minimum at Honeycomb and explore what that return can potentially look like in reality.
*This is not investment advice and should only be considered for educational purposes. An investment in a small business is always risky, and an investor should be prepared to lose some or all of their initial investment.
So why have the $100 minimum?
As we mentioned before, this kind of investing wasn’t legal until the JOBS Act was passed in 2016. Before that, you had to have a net worth of at least $1,000,000, or an annual income of $200,000 to be able to invest. This blocked out quite a lot of people from investment opportunities, and often blocked lots of businesses from getting that investment capital!
The $100 minimum investment is also great for encouraging people from all different backgrounds to invest and to begin building their own wealth. With a relatively low entry point, anyone can slowly begin building their investment portfolio - and investing in a small business in one’s own neighborhood has got to be one of the most accessible entry points into investing there is!
Another reason for the $100 minimum is that it’s a great boost for business owners to point out to promote their campaign. Having a relatively low hurdle price can be enough of an incentive to get first-time investors to contribute to a specific campaign.
Basically, if someone has never invested in a Honeycomb campaign before, or even never invested before, it might be difficult to convince them to drop a couple of grand on an investment. The $100 minimum makes it so that they can still be a part of the crowdfunding campaign with a bit less of a risk to their wallet (though investing inherently has risk!).
Some thoughts on return on investment and initial investment cost
The next question to address is, is a $100 investment really for everybody? Well, it depends on what you’re looking to get out of your investment. Ultimately, it comes down to your own risk tolerance and how you feel about the campaigns you’re investing in - but we’ll get to that in a bit. Now, let’s look at the numbers.
It might seem a bit obvious, but a $100 investment is going to have significantly less of a return, dollar-for-dollar, than a $1000 investment. If you’re investing just $100, you’re probably ultimately going to make just $5-12 bucks off of that investment, depending on the interest rate - that’s just a coffee run for your office, or a really nice sandwich.
If you invest $1,000, you get more like $50-120 in interest on your investment - that’s so much more substantial. This could go towards a number of fun things you can spend disposable income on, or could certainly be used towards another investment in a small business.
You can also think about it in context of the difference your investment will make for the business owner you’re investing in. While $100 can definitely make a difference, especially in combination with many other small investments, it’s a minimum difference. When you invest a bit more, you personally have made more of a tangible impact on the business - you’re almost like a benefactor!
Consider this: $100 can buy a chair for a taproom, but $1,000 can finance a couple tables, or maybe a month’s wages for a new employee!
Also, compare this to putting the money in a bank account - you’re actually making a tangible difference and getting interest back. The main difference is that you’re taking on more risk in making an investment, rather than keeping it in the bank. However, your money gets to work for a small business in your community, not a big bank.
What factors lead investors to decide how much they want to invest?
Ultimately, the choice of how much you wish to invest in a small business on Honeycomb (if any) is up to you. But there are some common factors that lead many investors to make their decisions, and maybe they’ll help you decide.
The first factor is risk-reward tolerance. This is essentially how much are you willing to potentially lose, and how much are you expecting to receive for taking on that risk? Generally, the higher the investment you place in a business, the higher your risk-reward tolerance. However, the amount of risk you personally place on an investment is entirely dependent on your own experience and your level of comfort.
Another factor that often impacts the amount that investors are willing to put into a crowdfunding campaign are the amount of emotion that they have over the business they’re investing in. Small businesses, after all, usually mean something to the community they’re in, whether it’s a sense of pride, a gathering place, or a place where they celebrate certain milestones. The higher emotional value a business has to an investor, the higher the amount of money they might be willing to invest in it.
Related to that is the next factor - the proximity of the investor to the business they’re investing in. If it’s in your neighborhood, you’re probably more likely to invest in it than you would in a campaign across the country. That’s why we do what we do - creating opportunities for local investors to support businesses in their community and build their neighborhoods twofold.
Another common factor in amounts that people invest in Honeycomb small businesses are the level of social impact that the business has. Many Honeycomb investors do so solely for the impact investing element of the platform. Perhaps they have a mission to support businesses that are sustainable and make an environmental impact - they’ll probably invest more in one of those campaigns than a business with a different (or no) mission.
Other ways you can support small businesses, no matter how much you invest
When it’s all said and done, the amount you choose to invest is entirely up to you, and there is only really so much that any amount of money can do. However, your role as an investor in small businesses does not have to end when you process your investment!
One way you can further your support is by sharing your investment with your friends! Obviously you don’t have to tell the details if you don’t want to, but let your social network know about the cool opportunity to invest in a local small business. The impact of social networks is so real when it comes to crowdfunding - you probably have many people who follow you who’d be interested in investing who otherwise would never have known about the opportunity.
Another way that you can extend your investment’s impact is by visiting the business and showing your support! It really does mean a lot to business owners who fund their growth on Honeycomb to run into people who’ve invested in their campaigns at their shops. While you can see the tangible returns on your investment at the place of business, they in turn can see the real people who invested in their success!
The final way you can go beyond investing is to check out other campaigns you can invest in, and spread the wealth around. Chances are there are other businesses in your neighborhood who are funding on Honeycomb - maybe you can make a difference for them! Or, there might be a campaign whose mission you really align with that’s halfway across the country - you have the opportunity to invest in them, too!
You can make a big impact on a small business.
When you invest in a small business, your dollars actually go toward tangible growth projects. They’re used to hire real people, purchase real equipment, and produce real products that you can hold in your hand yourself.
Take the next step in investing in small businesses in your area by signing in, and check out some of the live campaigns currently funding their growth on Honeycomb.
*This article is not investment advice and should be considered for educational purposes only.