How to Invest Into Equity of P2P Lending Marketplaces

One of the main developments in UK p2p lending this autumn is the IPO (initial public offering) of Funding Circle. It will be open for investors that commit at least £1,000 through an intermediary (see list of participating intermediaries). Investing at the IPO means investors will invest at a very late stage of the growth phase of a startup. This article and this article suggest that it might not be a good idea to invest in an IPO.

But is there really a chance to invest into equity of a p2p lending marketplace at an early stage, if you are not an employee, business angel or VC? Up to a few years ago the answer would have been NO. But crowdfunding for equity came into use a recently and a surprising number of p2p lending companies have used this route to raise funding.

In this article I will look at the p2p lending services that have used British equity crowdfunding platform Seedrs to raise money. Some of these p2p lending company funding rounds have taken place years ago, but the interesting point is that Seedrs has a secondary market and new investors can buy shares from existing investors that invested earlier through Seedrs. The secondary market opens every first Tuesday of a month (next on Oct. 2nd) and stays open for a week. Some of the shares on offer are in high demand and often sell out within an hour. If you’d like to buy on the secondary market you should open your Seedrs account now, as you’ll need time to verify it and deposit funds prior to the market opening.

P2P Lending Startups that raised funding rounds through Seedrs

Assetz logoAssetz Capital
Assetz Capital is a UK platform for SME loans. Assetz raised two rounds on Seedrs for an aggregate of 5.3 million GBP. The last round was in October 2017 at a pre-money valuation of 50M GBP. Shares of Assetz capital are usually in high demand on the Seedrs secondary market.

Brickowner logoBrickowner
Brickowner is a UK property investment platform. Brickowner raised four rounds for an aggregate of 0.4 million GBP. The last round was a converible in March 2018. The pre-money valuation in Nov. 2017 was 2.5M GBP. There is usually some availability of Brickowner shares on the secondary market.

Crowdlords
Crowdlords is UK property crowdfunding platform. Crowdlords raised one round for 0.2M GBP in Nov. 2014. The current pre-emption round is at a pre-money valuation of 3.2M GBP. There is usually limited availability of Crowdlords shares on the secondary market.

Crowdstacker
Crowdstaecker is a UK platform for SME loans. Crowdstacker is running a round right now for 0.8 million GBP at a pre-money valuation of 19.5M GBP.

Crowdproperty logoCrowdproperty
Crowdproperty is a UK platform for property development finance. Crowdproperty raised 0.9M GBP at a pre-money valuation of 5.9M GBP in November 2017. There is usually some availability of Crowdproperty shares on the secondary market.

Flender logoFlender
Flender runs a platform for Irish SME loans. Flender raised on Seedrs round of 0.5M GBP at a pre-money valuation of 4.5M GBP in January 2017. Supply of Flender shares on the secondary market is scarce.

Investly logoInvestly
Investly is a platform for invoice financing operating in the UK and Estonia. Investly raised on Seedrs round of 0.7M GBP at a pre-money valuation of 6.6M GBP in March 2018. Investly shares have been in high demand on the secondary market.

Landbay logoLandbay
Landbay is a UK platform for buy-to-let mortage lending. Landbay did multiple Seedrs rounds from 2013 till 2018. The last round was in March 2018 at a pre-money valuation of 28.9M GBP. There is usually good availability of Landbay shares on the secondary market.

Orca logoOrca Money
Orca is an aggregator for UK p2p lending investments. Orca is running a round right now for 0.5M GBP at a pre-money valuation of 1.8M GBP.

Welendus logoWelendus
Welendus is a UK platform for short-term loans. Welendus raised 1.3M GBP GBP through 3 Seedrs campaigns including the currently running round at a pre-money vaulation of 6.0M GBP.

There are shares of mulitple other interesting fintechs available on the Seedrs secondary market, including Commuter Club which has an interesting connection to p2p lending: The loans for the transport tickets were financed first by Ratesetter lenders and now by Zopa lenders. There is usually good availability of Commuter Club shares on the secondary market.

P2P-Banking has a pre-launch notification service for upcoming new Seedrs campaigns. Sign up and you get a head start on new campaigns which might potentially include Assetz Exchange, a new Brickowner round and p2p lending startup Neo Finance.

Summing up: While there are other sources for shares in p2p lending companies, Seedrs is a good place to start looking.

This article is not an investment advice. Investing in startups bears significant risks, including total loss of investment.

Fellow Finance Plans IPO at Nasdaq Helsinki

LogoFinnish p2p lending marketplace Fellow Finance plans an IPO at Nasdaq Helsinki. Established in 2013 and launching operations in 2014, Fellow Finance is an internationally active and growth-oriented FinTech group that provides crowdfunding services. The Company has facilitated peer-to-peer loans to consumers as well as loan-based crowdfunding and invoice financing to businesses in a total amount of more than EUR 295 million, serving nearly 430,000 users from around 50 different countries. Fellow Finance’s net sales consist mainly of commissions and interest income. Taaleri Plc is the largest owner of the Company, with an ownership of 45.7 percent before the IPO.

In 2017 Fellow Finance’s net sales was EUR 8.7 million, growing by 55 percent from the previous year. The good development continued in the first half of 2018, as the Company’s net sales grew by 43 percent compared to the same period of the previous year.

The objective of the planned IPO and Listing is to finance international growth and expansion of operations. Further objectives for the Listing are to increase the number of share-holders, give the Company access to capital markets, and in-crease the liquidity of the Company share and awareness of the Company. The Listing will also allow the more efficient use of shares as e.g. means of payment in eventual corporate acquisitions and in the remuneration of employees. The gross proceeds that the Company will receive from the Share Issue are estimated to amount to a total of approximately EUR 10.0 million, before IPO related fees and expenses.

Institutional investors consisting of certain funds managed by OP Fund Management Company Ltd and Sp-Fund Management Company Ltd as well as Prior&Nilsson Fund and Asset Management Ltd have given their pre-commitments to subscribe for shares and agreed to become cornerstone investors in the IPO. Additionally, the Company’s Chairman Kai Myllyneva, and members of the Board of Directors Esa Laurila and Jorma Alanne given their pre-commitments to subscribe for shares in the IPO. Total subscription commitments amount to approximately EUR 4.6 million.

Fellow Finance’s CEO Jouni Hintikka says:
“We have created an advanced marketplace where we unite businesses and individuals looking for financing in Finland, Sweden, Germany and Poland with a global pool of investors looking for returns. Borrower customers are provided with peer-to-peer loans, business loans and invoice financing at market terms. For investor customers our services enable diversification of assets into an alternative asset class with minimum need of time and effort.”

Growth of Investor Numbers on P2P Lending Marketplaces

Today I take a look at the recent development of investor numbers on several p2p lending marketplaces. I chart relative numbers with the index set to 100 for June 1st, 2018. The advantage of using indexed numbers for this comparison is that platforms use very different definitions for their investor base size. Some count registered investors, some count investors with deposits, some count active investors, some count recently active investors, … .

The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because they come from smaller absolut numbers. An example for this effect is Peerberry where percentage growth of investors is rapid, but the absolute number as of Sep, 1st has reached only 2468 investors as it is a very young marketplace.

P2P Lending Investor Statistic
Indexed investor numbers (with June 1st, 2018 = 100). Peerberry exceeds the choosen display scale – value for Apr. is 66 and value for Sep. is 183
Reading example: On Sep 1st the index value for Mintos was 123, meaning Mintos had 23% more investors than on Jun. 1st

Orca Money to Raise 500K via Equity Crowdfunding – Interview with CEO Iain Niblock

Orca Money is currently running an equity crowdfunding campaign on Seedrs to raise 500K GBP at a premoney valuation of 1.7M GBP. Anybody can invest in Orca Money shares with a minimum investment amount of 10 GBP applicable. I interviewed the Orca CEO Iain Niblock

What is Orca Money about?

Orca is an aggregation platform, allowing investors to invest across a range of peer to peer lending (P2P) platforms, lending sub sectors and a large number of borrowers. We further offer independent investment research, providing confidence to investors when making decisions.

Currently investors are investing directly on P2P platforms. This makes building and managing a diversified portfolio frustrating. We centralise this process by allowing investors to research, build and manage their portfolio from the Orca platform. We provide the P2P platforms with a source of retail investors.

Investors can review the performance of their portfolio, diversify their risk and earn the attractive returns that the sector offers.

What are the three main advantages for investors?

Risk adjusted returns: We offer an investment return to our users which is reduced in risk through diversification. By allowing investors to invest across multiple P2P platforms, lending sectors and a large number of borrowers, we facilitate easy diversification.

Reduced admin burden: Orca manages all fund deployment, email communication and performance data aggregation. Investors can login to their personal Orca dashboard and view a breakdown of their portfolio, as well as an aggregated view of their investment performance.

Automatic portfolio build: Orca has been producing independent analysis on the market for the past three years. We have conducted due diligence in the market and curated a portfolio for investors to invest through. This removes the hassle from P2P investing.

Iain NiblockYou are currently raising money. Who are you raising from and what do you plan to use the capital for?

Our investment is open to the public on the Seedrs equity crowdfunding platform. Investors across the EU can register and invest in the Orca business. The proceeds will allow us to expand our userbase, integrate with more lenders and to further develop the functionality of our platform.

Prior to launching the crowdfunding campaign, we secured a portion of this investment from two institutional funds based in Northern Ireland and a number of leading angel investors. It’s great to be combining these investors with crowd investors.

Why have you selected Seedrs for your equity crowdfunding campaign?

A number of our customers mentioned that they would like to invest in Orca’s business. We’ve gained incredibly valuable feedback from these customers and, ultimately, we wanted to give them an opportunity to own shares in the business. We hope that this campaign will attract further investors and customers to do the same.

Personally, I’ve tracked the equity crowdfunding market closely for many years and I’m now genuinely excited to be leading a campaign. Seedrs was an obvious choice as they have facilitated funding for a number of other P2P platforms.

One benefit of Seedrs is that investors invest through a nominee structure. The Seedrs nominee structure holds and manages the shares on the behalf of the underlying investor. For the investor, this means the nominee can track and monitor shareholder rights as a collective. For the company, this reduces the administrative burden of having a large shareholder base.

Where do you see Orca Money in 3 years?

We aim to evolve into the hub for P2P investment research, investing and portfolio management. Investors will be given access to credit investments across the EU, originated by P2P platforms and other non-bank lenders. The functionality of our platform will increase, delivering a fully functioning investment aggregation platform.

Orca is a differentiated product in a rapidly growing market.

Name one fact that makes your pitch a better investment than any other pitch on Seedrs.

In comparison to other Seedrs pitches we believe our valuation is very good value. This was set by institutional investors based in Northern Ireland where valuations are generally lower than other parts of the UK and in particular London. I’d expect the valuation to rise substantially during any subsequent rounds.

P2P-Banking.com thanks Iain Niblock for the interview.

International P2P Lending Volumes August 2018

The table lists the loan originations of p2p lending marketplaces for last month. Mintos leads ahead of Zopa and Ratesetter. The total volume for the reported marketplaces in the table adds up to 420 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms. This month I added Soisy.

Milestones achieved this month (total volume since launch):

  • Mintos crossed one billion EUR

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

P2P Lending Statistic August 2018
Table: P2P Lending Volumes in August 2018. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.

Notice to p2p lending services not listed: Continue reading

Up to 9% Interest Rate – How To Register as a Non-Resident Investor at Ratesetter Australia

Ratesetter is the brand name of one of the top 3 UK p2p lending marketplaces. Unfortunately only UK investors can invest on Ratesetter UK, otherwise I would have tried it out.

Ratesetter is also the brandname of Ratesetter Australia. While not rund by the same company this Australian p2p lending marketplace uses the same technology base and is offering similar products, consumer loans of up to 5 years. Since launching in 2014 Ratesetter Australia has originated more than 325 million AUD in loan.

The site does not feature it, but actually Ratesetter is open to non-resident investors. I recently found this out and went ahead and opened I account in the past week. The signup process for non-residents is not as straightforward as on other marketplaces. I post a detailed description of how I did it below.

But why send money that far away?

Because rates are attractive. Interest rates are currently up to 9.3% (compare that to around 6% that is achieveable for 5 year investments on Ratesetter UK).
And that rate is AFTER fees.

Ratesetter Australia Returns

A further important feature is the provision fund. That is capital stored that is used to reimburse lenders of defaulted loans. While that is no insurance or guarantee, it is in my view a much stronger portection than the ‘buyback guarantee’ that some other market places promise.

There is currently 10.6 million AUD in the Ratesetter Australia provision fund. And since 2014 the provision fund has paid for every default without exception.

Ratesetter provision fund

Review of advantages

  • established platform
  • very high interest rates (displayed rates are after fees)
  • no default losses since 2014 for investors (due to the provision fund)
  • comprehensive statistics & loanbook download

Review of disadvantages

  • signup a little more effort than usual (see description below)
  • no secondary market. Investors investing in the secondary market should not expect to be in a situation were they might need that money earlier
  • 10% withholding Tax for German residents (for other countries check here – according to Ratesetter it is either 0% or 10% depending on country)
  • very volatile currency exchange rate
  • transaction fees for changing EUR -> AUD according to description below is 0.35%; to convert back AUD -> EUR the fee is 0.45%

My conclusion

Only investors that want to invest a larger amount for a long duration should consider this. Otherwise it is not worth the effort in my opinion.

Currency EUR AUD chart
Currency exchange rates EUR/AUD last five years (Source)

How I signed up as a a non-resident investor on Ratesetter Australia – step my step explanation

As the process is more effort than usual, I suggest you read the complete remainder of the article and decide if it is for you, instead of just diving into the registration process.

Step 1: Trigger Ratesetter registration process

Sign up via this link and the first 5 investors have a chance to get a cashback bonus of $75 AUD – see conditions below*

First there is a welcome page, click “Register Now” there and then this page is shown:

Ratesetter AUS Registration

Yes, you saw that right. After clicking Register, you STOP and do NOT proceed with the signup on the website as it can only handle Australian residents.

Step 2: Continue registration

After a few minutes I got an automated email asking me to complete my registration. I did NOT click on the link provided in the email, but rather send a reply email, stating that I am a German resident and would like to invest on Ratesetter and that I have an Australian bank account. I asked that they would please guide me through the process.

Step 3: Australian bank account

WTF? Sounds much more prohibiting than it actually is. I had a Transferwise account already and with a few clicks could open a free Transferwise borderless account in Australian dollar which comes complete with account number and BSB code (routing code). If you don’t have Transferwise you can open it for free, only plan a little time for verification.

The Australian Transferwise account later serves as reference bank account which is entered into the form in step 5.

Converting EUR in AUD costs 0.35% at Transferwise (how I saved that fees is written below). The current fee for later changing back AUD to EUR is 0.45%.

Step 4: Obtain scanned certified copies of documents for registration

While I waited for the answer from Ratesetter from Step 2, I went ahead and obtained scanned certified copies of documents. I could do that a the town hall (cost incurred 3.50 EUR). It will probably be different in other countries. Needed is
a) current driver licence OR current passport
b) proof of address no older then 60 days: utilities bill (such as an electricity bill or phone statement) OR bank statement or other bank correspondence OR correspondence from a local or central government department

Step 5:. Going on with registration

Meanwhile I got the reply from Ratesetter support. They are super helpful, but time zone difference means every back and forth takes a day. Ratesetter sent me a link of a web form to complete. I did that (entered ‘-‘ for SWIFT) and told them so via email, which I attached the requested certified document copies to.

Step 6: Registration is complete

One day later I got the confirmation that my registration was completed and I was ready to go.

Step 7: Deposit

One can now convert in the Transferwise account Euro to AUD wechseln and then send money from the Transferwise Australian currency account to Ratesetter. Ratesetter shows the necessary routing information under Transfer funds in > Transfer by Bank Transfer > Other

Saving in currency exchange when depositing

I could save the 0.35% Transferwise currency exchange fee for EUR > AUD by using a free Revolut account and exchanging between Monday and Friday EUR to AUD fee free. Then transfer the AUD either to the Transferwise AUD account or directly as a Ratesetter deposit payment.

I just started. I intend to lend for the 5 year market and experiment with setting my own desired rates slightly above market rate. Watch out for an update here on the blog after I have several month of experience or – probably more frequently on the dedicated thread on the German discussion forum.

*$75 AUD Cashback Bonus for the first 5 investors, that register thought the given link before 16.09.2018 and at least $2000 AUD  on the 3 or 5 year market. Precise terms and conditions on the Ratesetter site. To qualify I think swift action will be needed, given that the registration, deposit and lending will take some time.

Swiss Invoice Finance Marketplace Advanon Hit by Fraud Case

Swiss invoice finance platform Advanon has to deal with a large fraud case. A client allegedly made up invoices for non-existing transactions and submitted forged invoices, bank records and emails. These invoices were then financed on the Advanon platform by 78 private investors. The fraud continued undiscovered for about a year racking up a total damage of 2.4 million CHF (approx 2.1M EUR).

2.4M CHF may not sound a very large absolute sum for a p2p lending company, but Advanon so far had financed invoices of only about 60M CHF in 2017, so the potential loss equals roughly 4% of the total yearly volume. And the exposure per investor is unusually high for a p2p lending marketplace as the affected investors could face a 30K CHF loss on average. Media speculation is that they might face a total loss. Advanon has about 3,000 registered investors, the majority from Switzerland with a few German investors. Advanon offers interest rates between 6-20%.

“We founded Advanon with the mission to help SMEs meet the ever-increasing payment deadlines and thus have a positive impact on the SME economy and its growth. It is frustrating and intolerable that this was being exploited by fraudsters with great criminal energy. We are mobilising all our efforts to fight for our investors and to recover the money they have invested.” Several lawyers and the entire management are working on the case. “We will adjust our strategic direction,” said Advanon CEO Lojacono. As a consequence, only institutional investors will soon be admitted to the platform. Advanon has always emphasized that investing in a high-risk asset class like factoring should only be considered as part of a diversified portfolio.

The case is now investigated by the public prosecution body.

Last November Advanon announced a pilot project for an invoice financing cooperation with insurance company AXA Wintherthur.

 

Lower Interest Rates on Mintos – How do Investors React?

Compared to the beginning of July the interest rates for newly issued EUR loans on Mintos are much lower now. While investors enjoyed interest rates of up to 13-14% for loans issued in the first half of the year, typical rates are 8-11% now, with a 12-13% for more exotic loans mixed in.

Cause of the change in market condition was that Mogo, one of the larger loan originators on Mintos, issued a bond worth EUR 50 million, with an annual interest rate of 9.5% (ISIN XS1831877755) on June 25, 2018 and Mogo announced that starting from July 13, 2018, Mogo would partially repurchase loans from investors on Mintos using their call option as stipulated in the assignment agreement. During July, Mogo plans to gradually repurchase in total up to EUR 16 million net of loans issued to borrowers in Bulgaria, Estonia, Latvia, Lithuania, Poland, and Romania.

Following the repurchase, the interest rates for newly issued EUR loans were sharply lower not only for Mogo loans but also for loans of the other originators on the Mintos platform.

This left most investors with a lot of cash in their accounts, as commonly 1/3 to 2/3 of all the Mogo loans in their portfolios had been repurchased and their previously configured autoinvests did not match any loans any more at their set interest rates.

To find out how investors reacted to the situation P2P-Kredite.com conducted a survey among German speaking Mintos investors. Here are the preliminary results (48 respondents):

  • 35% say they withdraw uninvested cash and invest it on other p2p lending platforms
  • 21% say they continue to invest on Mintos primary market
  • 17% say they just wait, the interest rates will rise again
  • 15% say they withdraw uninvested cash and invest it in other asset classes (e.g stock)
  • 12% say they buy on the Mintos secondary market now, instead of using the primary market

For continental European investors looking for high yield alternatives here are 5 platforms that survey respondents liked:

  1. Bondora
    Bondora is a long established Estonian company offering consumer loans in Estonia, Finland and Spain. Investors can choose between their new “Go&Grow” product (up to 6.75% interest) or the self-select autoinvest options with individual loans yielding much higher (nominal) interest rates
  2. Estateguru
    Estateguru is a marketplace for property secured loans mostly in the baltic countries. Typical interest rates are 10-12%. Investors pick individual loans or enable autoinvest
  3. Grupeer
    Grupeer is a young Latvian platform gaining popularity among the German investors. They list business and development loans in several countries (e.g. Latvia, Russia, Belarus, Norway, Poland). Typical interest rates are 14-15%
  4. Peerberry
    Peerberry is a young Latvian platform listing consumer and property loans in several countries (e.g. Lithuania, Poland, Czech Republic, Ukraine). Typical interest rates are 11-13%
  5. Robocash
    Robocash is a Latvian platform listing consumer loans in Kazachstan and Spain. Typical interest rates are 14-14.5%.

This selection is based on the likings of German speaking investors that voted in August for best p2p lending platform in a P2P-Kredite.com survey:

Best p2p lending platforms by German investor survey
51 respondents, platforms that got no votes are not shown

The survey shows that Mintos is still rated number one in investor opinion among the queried audience, but the others are catching up (compared to similar surveys in the past).

My own Mintos portfolio shrank to less than 40% of its previous size as only  less than 1/3 of the Mogo loans I had in early July are still in my portfolio. I withdrew a lot of cash and have transfered it to other p2p lending market places. Of course I’ll hold on to the my remaining Mogo loans as nearly all of them are at 13-14% interest rate.

International P2P Lending Volumes July 2018

The table lists the loan originations of p2p lending marketplaces for last month. Mintos leads ahead of Zopa and Ratesetter. . The total volume for the reported marketplaces listed in the table adds up to 449 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms.

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

P2P Lending Statistic July 2018
Table: P2P Lending Volumes in July 2018. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.

Notice to p2p lending services not listed: Continue reading

International P2P Lending Volumes June 2018

The table lists the loan originations of p2p lending marketplaces for last month. Zopa leads ahead of Mintos and Ratesetter. I delisted Funding Circle from the table as they announced they will only update figures quarterly now (was daily). Furthermore they have withdrawn the downloadable loanbook. The total volume for the reported marketplaces listed in the table adds up to 380 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms.

Milestones achieved this month (overall volume since launch):

Investors living in national markets with no or limited selection of local p2p lending services can check this list of international investing on p2p lending services. Investors can also explore how to make use of current p2p lending cashback offers available. UK investors can compare IFISA rates.

P2P Lending Volume 06 2018
Table: P2P Lending Volumes in June 2018. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.

Notice to p2p lending services not listed: Continue reading