1. Summary

 

• Honeycomb Credit is an investment crowdfunding platform. 

• We let local businesses borrow funds from their fans and community. 

• At the same time, we empower everyday people to become investors in the local businesses they love while building wealth.

• Honeycomb is dedicated to helping local businesses access fair capital to grow while at the same time forging stronger connections between a business and their clientele. 

 

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2. About Honeycomb

 

Since being founded in December 2017, Honeycomb Credit has helped over 200 businesses run investment offerings with approximately 85% of borrowers successfully reaching their minimum funding goal. 

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Honeycomb is headquartered in Pittsburgh, PA with offerings in over 30 states. Honeycomb is often recognized as a company using financial technology to make business growth and community investment accessible. 

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3. Regulatory Background

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In 2012, The Jumpstart Our Business Startups Act (“JOBS Act”) established a structure for smaller businesses to raise capital from everyday people through Regulation Crowdfunding. Before the JOBS Act, small businesses could not publicly solicit investments from the general public. 

 

The JOBS Act requires all transactions under Regulation Crowdfunding to take place online through SEC-registered broker-dealers or funding portals (such as Honeycomb Credit).

 

As a funding portal, Honeycomb is regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority. Businesses raising funds on Honeycomb also have certain common-sense regulations they must follow. Our team will brief you on the dos and don’ts of regulation crowdfunding.
 

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4. Overall Process For Businesses

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Accessing funds on an investment crowdfunding platform such as Honeycomb takes two steps.

 

1. Credit Analysis - Honeycomb Credit’s credit analysis committee reviews the financials of the applicant including operating history, personal credit, market conditions, and business plan to assess the business’ creditworthiness. Businesses can raise between $25,000 and $500,000 using Honeycomb.

2. Investment Offering - If the business is extended a Honeycomb term sheet, the business owner works alongside the Honeycomb Credit team to build an investment offering page and file the necessary documents with the SEC. Interested investors (both accredited and unaccredited) can then invest in the offering. 

 

4.1 Step 1: Credit Analysis

 

Not every business interested in running a Honeycomb might get the chance to run an offering. As a funding portal, Honeycomb conducts due-diligence to protect investors from fraudulent offerings and evaluates the creditworthiness of potential borrowers. Additionally, Honeycomb sets the terms of the crowdfunded loan.

 

To conduct due diligence and price the offering, Honeycomb asks that businesses submit financial documents, personal credit checks, and abbreviated business plans. All persons who own a 20% or larger stake in the business must undergo a background check.

 

Businesses who successfully pass credit analysis are extended a Honeycomb term sheet, some businesses may receive multiple term sheets and choose the one that makes the most sense for them. 

 

Upon completing their Honeycomb application, most businesses can expect a credit decision within 24-48 hours.

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4.2 Step 2: The Investment Campaign

 

We know that crowdfunding isn’t easy. With Honeycomb, you won’t do it alone. Once a Honeycomb borrower signs their term sheet, the borrower is introduced to a campaign manager. Campaign Managers will work alongside you to construct a custom marketing strategy for their investment offering. 

 

When your campaign goes live, everyday people are able to invest in your business! At this time. you will point people to your offering page and encourage them to invest. As your campaign builds momentum the pool of folks you’re reaching out to grows. The most successful offerings start with friends and family, then longtime customers, then social media followers.

 

Investors will visit your Honeycomb offering page and create a Honeycomb account to invest. They can invest as little as $100. These funds will be deposited into a third-party escrow account. Once your offering meets its minimum funding goal, the funds will be disbursed to your account. In the event that your offering doesn’t meet its minimum funding goal by the time your Honeycomb campaign ends, the funds will be returned to investors.

 

You and the Campaign Manager can expect to have weekly strategy check-ins where you two will plan outreach methods and review the last week’s results. They’ll cheer you on and encourage you to meet and surpass your goals. 85% of Honeycomb campaigns meet their funding goals!

 

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5. Eight Tips to Help Ensure a Successful Investment Offering

 

Recruit a team to help you.

No one becomes successful all alone. Before you launch your offering, recruit some folks to reach out to their networks and to post on social media. Ideally, you’ll have 3-5 “champions” – people who are committed to your offering and talking to their friends and family about it, and 8-10 “amplifiers” – people who have a wide social media reach and can post and share your content.

 

The first 24 hours matter—a lot.

In the week leading up to the launch of your campaign, be sure that those close to you and your business know that they should invest within the first 24 hours so that you can get off to a good start. Raising these funds quickly signals to others that your project is supported by a lot of people and that it’s a worthy cause.

 

Don’t go to social media first.

While it can be tempting to cast your widest net immediately, this can backfire. If a random acquaintance sees that your offering is only 2% funded, they’ll likely write it off as a longshot. On the other hand, if they see that it’s 40% funded, they’ll be much more likely to hop on the bandwagon and participate.

 

Vary your social media content.

Once you do post on social, take care to have some variability in your posts. Your audience will get bored if all your posts are centered around asking for money. Some things you can post are testimonials from folks who have already invested, spotlights of cool features of your product, and any positive attention you’ve received from the press.

 

Be persistent.

Most people need to be reminded 3-4 times before they actually invest. If someone has told you they’d like to participate, they’ll appreciate your reminders!

 

Push through the mid-campaign slump.

Most investment offerings see the most success at the beginning and end of their timeline. That doesn’t mean you can sit back and relax in the middle though; the legwork you put in here will pay off in a big way at the end.

 

Thank your contributors.

As soon as you can, send a nicely-written thank-you to those who have invested in your offering. This will go a long way, especially if you need a last-minute boost at the end. Many of these investors can step up and invest a second time to push you over the edge.

 

Believe in your project.

If you wholeheartedly believe in the value of your project, that will shine through. If something is important to you, it will likely be important to others around you. So tell your story in earnest, be yourself, and raise those funds!

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6. Honeycomb After The Funds

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Once your campaign ends, you have a 30 day interim period where no payment is required. You will make one repayment monthly to our escrow partner. Every three months, the borrower's repayments are disbursed to community investors in proportion to how much they invested! Most businesses use this opportunity to keep in touch with their investors by either sharing a project plan, exciting business news, or maybe even investor-only promotions or events.