While there any number of specific reasons to start a business, for most of the founders we talk to it always comes down to a similar story. They identified a problem in their lives, tried to find a solution on the open market and when the market failed to cough up something useful they decided to build the solution themselves.
In the case of HoneyBook Co-Founder Oz Alon, his specific problem was that he was turning into his father.
Oz Alon and his wife Naama Alon were both small business owners — Naama designed websites and Oz ran a bar. Oz Alon also had the distinction of being a second-generation entrepreneur with distinct childhood memories of invoices and paper proposals being everywhere. Yes, invoices were supposed to be “at the office,” but as Alon told Karen Webster in the latest PYMNTS Matchmakers podcast, they found their way from the office to the dining room table, living room, kitchen, car and everyplace else in the house. And when he grew up, got married and lived in an entrepreneurial household all his own — the invoices were back.
“My house was the same, just like my father’s — everything was everywhere and nothing made sense and when we realized that in today’s world we still had to accept checks, or worse, take cash, and send out agreements in the mail — we could believe all of this was still happening, so we decided to fix it.”
HoneyBook, built from the ground up by Naama Alon, was that solution — an all-in-one platform for solo entrepreneurs that linked every step of the business process: from the proposal development to invoice to payments, all digitally. Founded five years ago, HoneyBook currently has tens of thousands of customers and booked over a $1 billion in business transactions through its platform. Late last month the firm announced it had raised $28 million in Series C funding led by Citi Ventures, bringing its total fundraising to $72 million.
“Our plan for the additional funds is to launch more products and specifically financial products,” Alon said. “What we have seen is that today banks know how to serve consumers, they know how to serve enterprises — but they still don’t really know how to serve this solopreneur who falls in between.”
After apologizing to Webster for “bragging” about his brilliant wife, he noted their early big insight was despite the fact that 80 percent of businesses don’t actually like paper-based processes for generating proposals, generating invoices and getting paid, they used them because they were the path of least resistance. There were solutions out there, but they required too much time and too steep a learning curve to combine and leverage usefully. That, he said, was the birth of the HoneyBook 1-2-3 process. The proposal with a price goes out, the customer or client can review it and send back adjustments, the new proposal goes out and when all is settled, the buyer can hit pay and send funds to the SMB. Every step that happens is triggered by the step that comes before it, he explained, so that when a document is sent the system starts auto-filling the next document so it can be instantly ready to send. And, most critically, there is no opting out for the buyer and no other option given. This is the only way to pay for services — and the system makes sure they move through the process correctly.
It wasn’t an easy sale at first, he said, but it was a product that proved its utility quickly.
“What we saw at first was businesses didn’t buy into it. So my wife went back and made it very pretty and when businesses started to use it, we found out really fast that they had never had online payments before and they really liked it,” Alon told Webster. “We saw companies moving from no business online to 80 percent online.”
The firm’s first chosen vertical, he said, was photographers. From there, it ventured forth into wedding-related services, web designers and eventually the wider world that Alon calls “solopreneurs” — single proprietorships that are either full-time professional ventures, or part-time ventures run by people who very much want them to become full time.
The next frontier for HoneyBook with this latest swatch of funding under its belt, Alon told Webster, is in building additional financial services tools and products for its customers.
Solopreneurs are a challenging market to serve, he noted — they are hard to reach out to, hard to recruit to a platform and hard to keep. And that difficulty, he said, isn’t really due to churn. HoneyBook’s churn rate is about 1.5 percent — a fact that never fails to endure the firm to investors. But, Alon notes, it does lose clients, and when it does it is because a client has gone out of business.
And that, he said, is almost always a function of access to capital and/or cash flow management.
“Our battle at HoneyBook is to make sure they can maintain their business and that they will not burn out. As we are having this conversation, we are hoping the tenure of businesses will grow and grow because we will help them stay in business longer.”