The buy local movement is growing in the United States but one new startup is adding a twist to this trend: investing local as well. Smallknot is a new small business investing site that lets everyday consumers support small businesses in our communities in exchange for good and services.


Smallknot works only with small, local business owners who need a financial boost to expand. “Maybe your favorite coffee shop wants to build a new back patio, or your favorite pizza place needs a new oven. For a lot of local businesses, even very successful ones, projects like these get put on hold or never happen because of a lack of access to capital,” says the Smallknot website.


Projects like these may only cost a few thousand dollars, but in a slowly recovering economy, it isn’t exactly easy for the business owner to front the money. This also isn’t typically the lending realm of financial giants like Bank of America, and so this is where Smallknot comes into play.


Jay Lee, CEO of Smallknot, explained more about the company during a recent email interview.


MNN: When was Smallknot founded?

Jay Lee: It depends on what you mean by founded! I first left my career as a securities lawyer in June 2011 with nothing more than a belief and concept of local investment, but no real ability to execute on my own. I spent months as a solo founder just thinking about ways to make this work. I brought on my first co-founder Ben Rossen in October 2011, but the full founding team didn't come together until March 2012 when our CTO Jason Punzalan joined as a co-founder. We launched our current platform in mid-June 2012.    


What was the inspiration behind Smallknot?

At its core, Smallknot just stemmed from witnessing the madness of the financial system from the inside and understanding the value of small businesses in our communities. Ben and I had spent years deep on the legal side of the financial world of investment banks, billion-dollar deals and massive global capital flows. We lived and played in local restaurants, retail, bars and other spots, but until the collapse of Lehman and the credit crunch that decimated the small business economy, we had always taken the vitality of our neighborhoods for granted. There was just a moment when we stepped back and realized that it was simple to move all of our retirement savings and investments into huge companies across the world, but there was no way to take the smallest bit of capital and invest it into the small business 50 yards away. That felt ridiculous. My local coffee shop and bookstore are the places where my life actually happens, and there is really no way to take an active role in its success. So, we're trying to do just that.  


How many companies have received funding from a Smallknot campaign?  How much has been awarded thus far?

So far we have successfully funded 8 businesses and expect 2 more in the coming week or so and we will have helped fund nearly $60,000 in small business capital within the last couple of months. Things are picking up though, so we expect those numbers to start climbing dramatically in the coming months.  


How do companies apply for a Smallknot campaign?

Small business owners are the busiest people alive, so it's vital that the process is simple. As of today, just send us an email at or and we can walk you through the process very quickly and easily. Within the next couple of weeks, we will roll out our self-service application process so business owners can run the process themselves. We built it to be as simple and easy as possible, so a business owner seeking funding on Smallknot can simply log onto the site and apply to build and run a campaign.   


Where do you see Smallknot in one year?  Five years?

Ultimately, our vision is to build a platform for communities to finance themselves and in the process, build the connective tissue between businesses and their communities. A new way to promote community self —empowerment. Geographically, we would like to be in over a dozen cities around the country within the year. Within five years, we want to be the place where aspiring entrepreneurs and successful business owners can go to get the capital they need to help them grow and thrive, and the place where everyone feels empowered to get directly involved in building their local economy and building the community they want to live in.  




One of the campaigns currently live on the site is Neighborhoodies, a Brooklyn, N.Y.-based company that is launching a new clothing collection while creating jobs for single moms. With a $75 investment in the campaign, you will receive a customized super heavy-duty hoodie and a one-month membership to The Mutual. If you have $1,000 to invest you'll receive 25 custom hoodies. There are only a couple of days left in the Neighborhoodies campaign, and the company is close to reaching its goal.


I already buy local whenever I can and so I’m excited to see Smallknot grow to be the company that Lee wants it to be. I love the idea of financially supporting a small business that in turn will help support the community. I always see the phrase “small businesses are the backbone of our economy” and with Smallknot’s help, these small businesses will help boost the economy in the neighborhoods they serve.


Related small business story on MNN: Learn more about the small business grant process


MNN tease photos: Smallknot blog


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