The Los Angeles-based startup operates an unsexy but lucrative business.
Online coupons may sound so 2008, but they are still big business in 2018.
Honey, a startup whose internet tool tells online shoppers whether there is an eligible coupon for their purchase, has held talks to raise somewhere around $ 100 million in new investment money, according to multiple sources.
Honey co-founder Ryan Hudson confirmed the talks to Recode in February, but at the time said his company had discontinued the discussions to focus on new product development. But after another inquiry last week, Hudson confirmed that the talks had restarted.
“Something came inbound that we’re seriously considering but not closed so nothing to announce yet,” he wrote in an email. He declined to provide more details.
Honey, based in Los Angeles, was founded in 2012 and makes technology that scours the web for available digital coupons and sales. Its website browser extension then displays those coupons or sale codes to shoppers right when they reach the checkout page on thousands of partnering retail sites. The tool is designed to help shoppers feel confident about going ahead with their purchase — coupon or no coupon — without leaving the page.
The funding discussions come at a time when investors have shown renewed interest in digital-native consumer brands that have the potential for mass appeal, and especially those that can grow fast without losing massive amounts of money.
Hudson said in February that Honey was basically running at “cash-flow neutral” and would only raise money if the terms were too good to pass up. The startup generates revenue by earning a commission on transactions at some partnering merchants since it says its tool increases purchase conversion rates. Honey also makes money from a cash-back program similar to that of Ebates, the unsexy online shopping site that is nonetheless a cash cow; Rakuten bought it for $ 1 billion in 2014.
Over the past year, Honey has beefed up its staff from 30-something people to north of 120 as it quietly builds the next version of the company. Honey has raised around $ 40 million in venture capital from Anthos Capital and others to date.
“If we plan to just do what we do today, we would do that with a much smaller team and be generating a lot of cash,” Hudson said.
He declined to provide details of what the company is working on other than saying it will be “a mobile version of the Honey shopping experience” that will likely launch before the holidays.
“If people think of us as a coupon extension a year or two from now,” he said, “we will have failed at execution.”