Honeycomb Credit Closes $1.75M Seed Round to Expand Community Capital Model Nationwide
Updated: Jun 18, 2021
PITTSBURGH — Honeycomb Credit, a first-of-its-kind loan crowdfunding platform, is expanding its community-based small business financing model nationwide after closing a $1.75 million seed funding round.
The Pittsburgh-based company has connected small business owners with more than $3.5 million in expansion loans crowdfunded from thousands of people who want to support the local businesses they love. Operating under Regulation Crowdfunding, this model of community-sourced loans is a new alternative to small business financing and has taken off during the COVID-19 pandemic.
“While local businesses were working on the fly to adapt their business models to the pandemic, the modest funding they needed simply wasn’t available through traditional lending sources as banks and online lenders pulled back,” said CEO George Cook, a sixth-generation community banker who worked in credit analytics before co-founding Honeycomb. “We give these businesses a way to connect with community members who care deeply about the survival of their local businesses and want to ensure it through their investments.”
Honeycomb’s latest funding round was anchored by the American Family Insurance Institute for Corporate and Social Impact, a venture capital firm under the umbrella of the Madison, Wisconsin-based American Family Insurance group. The investment is one of the first examples of a major financial services organization recognizing Regulation Crowdfunding as a viable, scalable way to drive capital more equitably to Main Street businesses.
“At the Institute, we look to support the very best entrepreneurs across the country who are building scalable, sustainable businesses in a long-term effort to close equity gaps in America,” said Rob Kornblum, Fund Portfolio Manager at the American Family Insurance Institute. “Honeycomb is creating real change in these communities by providing growth capital to under-banked small business owners, especially underserved entrepreneurs who have historically experienced barriers accessing traditional capital.”
Harnessing the Power of Main Street
As community banks have decreased in numbers, small businesses have faced increasing difficulty obtaining financing from banks. Filling this investment gap, Honeycomb democratizes small business loans by letting the community vouch for a business’s viability and lend directly to a business. Operating under Regulation Crowdfunding, Honeycomb’s platform lets people invest as little as $100 and receive quarterly repayments. In turn, more than 80% of businesses that have crowdfunded through Honeycomb have reached their funding goals — nearly four times the crowdfunding industry average.
“Letting people vote with their wallets is a really powerful, affordable way to get the knowledge of the community back into these underwriting decisions,” Cook said. “It also creates circular economies that build community wealth. Instead of paying a banker on Wall Street, businesses are paying back their neighbors and fans.”
Since its founding in 2017, Honeycomb has run more than 100 investment crowdfunding campaigns in 18 states, including in major coastal cities, like Washington D.C., Los Angeles, and San Francisco, Rust Belt towns, like Youngstown, Pittsburgh and Cleveland, and rural communities, like Suwanee, Georgia and Swedesboro, New Jersey.
"The COVID-19 pandemic has shone a spotlight on the challenges faced by Main Street America," said Ken Martin, co-founder of Honeycomb Credit. "This funding round will allow the team to accelerate efforts to partner with investment funds and financial institutions to deploy community-minded capital nationwide."
Additionally, more than 57% of the businesses in Honeycomb’s campaigns are owned by women or minorities and 55% have been in low-to-moderate income communities. "Honeycomb appeals to many of these businesses because the size of the loan they seek is often too small for traditional capital", Cook said. The crowdfunding platform’s average loan is roughly $40,000, while many banks won’t make small business loans under $100,000.
In addition to the American Family Insurance Institute, other companies supporting this seed funding round include Innovation Works, K50 Ventures (Formerly Kairos), The Urban Redevelopment Authority of Pittsburgh, Reinforced Ventures, and Flight.vc.
About Honeycomb Credit
Honeycomb Credit is a loan crowdfunding website that unlocks capital for small businesses from an unconventional and innovative source—their fans, friends, and community. By crowdfunding a small business loan, entrepreneurs create deeper relationships with their community and investors earn a return while supporting local businesses they love.
About the American Family Insurance Institute for Corporate and Social Impact
The American Family Insurance Institute for Corporate and Social Impact is a venture capital firm and partner of choice for exceptional entrepreneurs who are building scalable, sustainable businesses in a long-term effort to close equity gaps in America. It also recognizes that capacity building and supporting organizations and experts that have been working toward social causes are equally important in making a positive impact within our communities around the country.
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