Honeycomb Credit, a two year old Pittsburgh-based fintech platform, aims to enable growing businesses loans to be underwritten by its customers at reasonable rates and terms. Honeycomb Credit reportedly offers investors (customers of a certain business) an 8-14% return on their investment over a 36-60 month period. Founder and CEO George Cook, a 6th generation community banker, started Honeycomb Credit in 2017 to help businesses receive expansion loans. While based in Pittsburgh, Honeycomb Credit also currently operates in New York, Pennsylvania, Ohio. At this writing the platform has completed 14 deals for over $400,000, including the Pittsburgh Pickle Company and The Pittsburgh Juice Company. Current live campaigns include Good Chroma, The Flame Barbeque and Pope’s Kitchen.
Crowdfund Insider reached out to recent Dartmouth College Tuck Business School alum Cook via email to learn more about what’s going on in the Honeycomb Credit hive. Our interview follows:
Crowdfund Insider: please discuss why you decided to launch Honeycomb Credit?
George Cook: I’m a sixth generation community banker, my family has been running a small community bank in rural Appalachia for about 130 years. Growing up in the family business, I spent a lot of time thinking about community banking and its impact on Main Street communities. But I started to notice that the banking industry is consolidating at a dumbfounding rate – we lose one community bank in the U.S. every single day.
When I started to dig into the data, I realized this was disproportionately impacting small businesses who historically relied on their community banks for expansion capital. I spent a lot of time thinking about the challenge and while in graduate school I met my co-founder, Ken Martin. Ken sits at the intersection of Wall Street and Main Street with a successful investment banking career but also having experience owning and operating Main Street small businesses.
The two of us put our heads together and set out to create a tech-enabled, scalable platform, to create the community bank for the 21st century.
CI: Where did you see a potential niche?
Cook: In short, Main Street, Middle American small businesses. The data is clear, access to capital for small businesses is most depressed off of the coasts and outside of major metro areas. We believe this leaves a massive market opportunity, and more importantly, the opportunity to do some tremendous good for communities that have been overlooked by big investors.
CI: Which other platforms did you use as templates?
Cook: Honeycomb Credit is incredibly lucky in that we can sit on the shoulders of giants. Before starting our company, my co-founder Ken, and I spent months interviewing hundreds of consumers and small business owners. One thing we found that there is nearly universal familiarity with traditional crowdfunding thanks to the great work that Indiegogo, Kickstarter, and GoFundMe have done. We were able to build on top of that crowdfunding recognition to demonstrate the value of our crowdfinancing model. The key difference is that traditional crowdfunding is either a donation or reward-based – usually a trinket or some prepaid product – whereas crowdfinancing allows individuals to invest in a campaign in exchange for a debt or equity investment product.
We heard over and over again that while reward crowdfunding is a great channel for startups that are looking to build a business around a new product, business owners and potential donors felt uncomfortable with reward crowdfunding for a more established business. It just doesn’t feel like a fair transaction once a business has had some success. Honeycomb Credit has demonstrated that our crowdfinancing model is a great fit for established small businesses that are expanding and are still looking for that community engagement that comes from crowdfunding.
CI: How are those platforms failing in your opinion?
I certainly wouldn’t say that they are failing, rather they have found different niches. There are hundreds of millions of artists, entrepreneurs, small businesses, and charities around the world who can leverage the power of crowdfunding in a myriad of different ways. I believe crowdfunding is in its infancy and we will continue to find creative new platforms and applications to serve the needs of different constituencies.
That said, I think that many of our peers in the investment crowdfinancing space have focused on how to unlock new, alternative asset classes for investors – essentially trying to let everyday people invest in the next unicorn startup. That is a good and noble cause and it has the potential to democratize finance in some really exciting ways.
However, few investment crowdfinancing platforms are focused on unlocking capital for underinvested communities or industries. That is one of Honeycomb Credit’s major differentiators. Ultimately we believe that the next generation of unicorns are not struggling to find investment capital, but locally owned, Main Street businesses are. We also believe that everyone should have the opportunity to support their community, not only as consumers but also investors. With Honeycomb, we’re uniquely addressing both of those needs.
CI: How are you establishing a pipeline of clients and investors?
Cook: One of the most exciting things that we’ve seen through our first full year in operations is that our referral traffic has been very strong from two key sources.
Firstly, local governments, economic development agencies, and even banks recognize that there are a lot of perfectly creditworthy small businesses who fail to check every one of the rigid checkboxes that most banks require. They view Honeycomb as a great resource to help these small businesses grow. Many partners also view Honeycomb as a tool to build community wealth while increasing local engagement – there’s something pretty magical about getting everyday people invested in the financial success of the businesses on their own Main Street.
Secondly, working with well-respected small businesses in local communities has helped us organically attract other small businesses. Business owners pay a lot of attention to what other business owners are doing. By making the fundraising process public, we are able to get in front of many small businesses by simply working with one business owner.
CI: What are your thoughts on the Rust Belt region?
Cook: Beautiful Pittsburgh, PA is and will remain home base for Honeycomb Credit. Today, we are actively operating in Ohio, New York, and Pennsylvania. There is a large market here, and many of the coastal startups are less excited about these ‘fly over states’. That’s just fine by me, growing up in Appalachia and spending many years in the Midwest, I love this part of the country and look forward to being part of the Rust Belt Revival.
CI: Please share Honeycomb Credit’s plans for growth.
Cook: We will continue to expand our geographic reach and are actively looking at other markets in the Great Lakes and Midwest. Our growth will be through a combination of hiring City Managers in exciting new markets and forging partnerships with key players in the small business ecosystem.
While we are focused on the greater Midwest as our core market, we recognize that the capital crunch impacts businesses across the country and we welcome the opportunity to work with other small businesses outside of our core market.
CI: Where has Honeycomb Credit experienced setbacks?
Cook: One frustration we run into time and again is the SEC’s investment caps on Reg CF. Today, the formulation takes into account an individual’s income and net worth. We find many retirees with a high net worth but more modest income who are blocked from putting their hard earned dollars to work in their own community.
Likewise, we find many young people with professional degrees who view Reg CF investments as a tool to diversify and build their net worth, but they are blocked from doing so because, despite a strong income, their net worth is small or perhaps even negative given their student debt.
CI: Who advised you and Ken on the platform’s launch?
Cook: We’ve been blessed with some fantastic advisors. The idea for Honeycomb Credit was initially born while Ken and I were getting our MBAs at Dartmouth College. Through Dartmouth, we had a team of classmates and professors cheering us on and providing invaluable feedback. Many continue to be key advisors, including Professor Ron Adner, an author and leading thinker on disruptive technologies, who has been incredibly generous with his time and advice.
After graduation we were lucky enough to be admitted to the AlphaLab Accelerator program in Pittsburgh. Through AlphaLab we were able to put our technology in place, navigate the FINRA registration process, and successfully launch the platform. Their mentorship and coaching was incredible.
I should also note that Pittsburgh has been a great place to launch a technology company, the tech ecosystem is large enough to have a wide range of heavy hitting experts, but small enough that everyone is extremely approachable and usually just one phone call away.
CI: Please discuss the team and board.
Cook: Honeycomb now has twelve team members with diverse backgrounds ranging from ex-bankers to food bloggers to former startup founders. What we have in common is a shared passion for unlocking growth opportunities for small businesses and building vibrant, financially empowered communities.
In addition to Ken and myself, Christian Bilger rounds out our leadership team. Christian is our COO and Chief Compliance Officer and has emerged as one of the most knowledgeable Reg CF practitioners in the country.
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