Interview with Loit Linnupõld, CEO of Crowdestate

What is Crowdestate about?

Crowdestate is a leading Nordic real estate crowdfunding marketplace offering high-quality, pre-vetted real estate investment opportunities. Only the best investment opportunities survive our rigorous due diligence process, and these are the ones we open for investing on our platform.
With each project, we present our investors with extensive background information, risk level, SWOT, business plans and financial models. Combine it with Crowdestate’s low, just 100 euro minimum investment – all of this makes investing into real estate quick, easy and affordable to everyone.

What are the three main advantages for investors?

Pre-vetted real estate investment opportunities – Our experienced real estate and finance team evaluates thoroughly each aspect of every project and picks the best investment opportunities to be published for crowdfunding.
Low minimum investment amount – the minimum investment on our platform is just 100 euros, meaning basically anyone can afford to invest into real estate with Crowdestate.
Everyone can invest – Crowdestate is open to all investors all around the world, provided that they have a way to make an international bank transfer to their virtual investment account previously created on our platform.

As an additional advantage, we charge no fees from our investors.

There are many different types of investment opportunities on Crowdestate. Debt, equity, secured, unsecured… Why did you decide to use so many different types for the offers?

If we look at the real estate industry, any real estate project needs different types of capital – from senior loans to mezzanine debt to preferred or common equity. Crowdestate’s aim is to become a full capital stack provider so we can address our Sponsors’ needs properly. This is the reason why we have not limited us to a single capital type.

If we look the real estate projects from investors’ perspective, investors have different investment preferences (e.g. time horizon, risk tolerance etc) and therefore they are looking for different types of investment. Young and aggressive investors might like high-risk equity deals while some other investors might prefer lower risk-lower return senior loans.

What ROI can investors expect?

The historical money-weighted average internal rate of return on our exited investment currently at 29.59%. However, as the fast-increasing money supply is driving the expected returns down, the investors’ annual returns are probably going to remain between 10-20%. The return rate is a reflection of project’s riskiness – a mortgage-backed senior loan might yield around 10% per annum while riskier mezzanine or equity investments may offer much higher yield.

How did you start Crowdestate? Is the company funded with venture capital?

During my few decades in the banking industry, I have met hundreds, maybe even thousands of clients, who are unhappy with the investments offered by their banks and they have clearly expressed their preferences to invest in real estate. Unfortunately, for most of these people investing into real estate never became a reality. They simply could not afford it due to the high entry costs and significant individual investment ticket.

At the same time, funding real estate projects had become a challenge for developers as banks became more and more picky.

I founded Crowdestate in 2014 to match the needs of the investors to the needs of real estate companies.

Is the company profitable now?

Yes, Crowdestate has been profitable from its very first year, and we have reinvested all the profits to developing the business.

Loit Linnupõld, CrowdestateIs the technical platform self-developed?

Yes, our platform was developed from scratch, and we are constantly working on improving it.

Are there any new features for the platform your team is working on? What about a secondary market?

We are currently finishing updating our mortgage-back loans offering and we will have very quick and automated approach there. We are also introducing a reverse interest auction to determine a true market rate for a specific project and an autoinvest feature.

We are also considering opening a Secondary Market for investments within this year allowing our investors to buy and sell their investments to other Crowdestate’s investors.

Currently there are usually one or two new investment opportunities per month. Can investors expect more deals in the second half of this year?

Our thorough vetting process eliminates most of the original investment ideas and therefore limits the number of investment opportunities we can present o our investors each month. Our Estonia and Latvia based teams are working hard to identify high-quality investment opportunities in the region.

We are also testing the interest for crowdfunded corporate finance deals and we are launching a new mortgage-backed loans solution soon. We expect those new solutions to increase the variety of investment opportunities on the platform.

Crowdestate is open to international investors. Can you please share from which countries the majority of your investors come?

Crowdestate is visited from all over the world and our investors come from South-East Asia to North-America.

As Crowdestate was founded in Estonia, Estonians are still the largest investor group, but the fast-growing number of international investors will bypass them probably quite soon.

Do you plan to cooperate with institutional investors? In which way?

Crowdfunding is about crowd and investment democracy and we prefer to serve a large number of small investors to serving a small number of large investors.

What is the current state of the real estate market in Estonia?

We believe the overall health of the market is good as the economy is doing well, interest rates are low and real wages are growing fast. At the same time, we have some suspicions on the health of specific sectors, namely offices and retail spaces – there is a lot of speculative developments in those sectors and we will probably see some changes there.

How do you think the property development market will be impacted by p2p lending in Estonia / in Europe in the future?

One of the leading Scandinavian banks stated recently, that the residential developments should be funded by equity, prepayments and crowdfunding. As the credit is quite tight in most of CEE countries, crowdfunding will play a significant role in funding the real estate development market.

Where do you see Crowdestate in 3 years?

I hope that Crowdestate is present outside our current domestic markets and we can help hundreds of thousands of investors in turning their savings into earnings.

P2P-Banking.com thanks Loit Linnupõld for the interview.

Interview with Joerg Bartussek, Co-Founder of Finnest.com

What is Finnest.com about?

Finnest.com is the only platform successfully providing modern corporate finance for well-established Mittelstand companies (no start-ups). Borrowers are mostly AAA-like rated brands and industry leaders that have been on the market for years (often decades) and are able to demonstrate a sustainable and profitable growth path.

These top-companies are actively seeking alternatives to their traditional bank loans and want to diversify their finance mix. For the first time, Finnest.com gives these Mittelstand champions access to the capital market. The platform is a 21century version of a classic corporate bond bookbuilding process and provides end-to-end financing solutions.

Currently, Finnest.com is licensed and active in Germany, Austria, Switzerland and Slovakia.

What are the three main advantages for investors?

1.) Investors get access to a completely new class of investments, previously reserved for a handful of professional investors.
2.) On Finnest.com, investors select the interest rate of their choice! Only if the company agrees to pay this annual rate (or more), will a deal be closed.
3.) Investors can invest in local and regional companies that create jobs and income in their area.

What are the three main advantages for borrowers?

1.) For the first time, Finnest.com provides this segment of well-to-do Mittelstand borrowers with access to the capital market previously reserved for large corporations.
2.) Mezzanine financing as provided via Finnest.com strengthens these companies’ balance sheets.
3.) An enormous PR & loyalty effect – when customers invest into “their” brand, the term “brand messenger” gets a rich new meaning.

What ROI can investors expect?

On Finnest.com, investors select their interest rate of choice. On average, companies have paid out 5.5% annually fixed interest rates. The concept works: a Finnest investor invests about 7.000 Euro per transaction, that is roughly 20 times higher than on other online platforms.

Finnest charges investors a fee of 1% (minimum 25 Euro). Doesn’t a high fee hinder diversification?

We are one of the few (the only?) platform that charges an investor fee. It’s 1% of the invested amount. That means if an investor invests 7.000 Euros, she/he is charged 70 Euros once. That’s it. We haven’t learned of any investor who would not invest because of this small fee.

Finnest.com uses subordinated loans (‘qualifiziertes Nachrangdarlehen’). An Austrian court recently ruled that this structure severely disadvantages investors. Why did you choose this structure rather than standard loans?

Headquartered in Austria, Finnest.com is licensed by the Austrian AlternativfinanzierungsGesetz (alternative financing law). This law (just like its German counterpart, the Schwarmfinanzierungsprivileg) actually requires us to use subordinated loans. It’s the tool the law selected.
The court ruling you refer to, addressed one specific contract by one single issuer who did not use any legally checked platform, but decided to do this financing on his own. Apparently, that was not such a smart idea – that contract must have been quite bad and the court ruled accordingly. Our contracts are thoroughly checked by leading law firms in each jurisdiction and have been presented to the financial authorities, of course.

How did you start Finnest.com?

For many years, Günther Lindenlaub, my co-founder, had been in charge of capital market transactions for one of Europe’s leading banks. While he saw, that large corporates keep using tools like corporate bonds to diversify their finance mix, the banks we not able (or willing) to offer something similar to the Mittelstand. But bonds are too complex and costly for the Manners and Almdudlers of this world. So, he decided to create his own platform – Finnest.com.

Joerg BartussekIs the technical platform self-developed?

Yes. It was built by a team that had previously built part of ING-Diba and AustroControl, the Austrian flight control agency. These guys know everything about stability, security and usability. We like to joke that we did not build a Tesla but one of those 80s’ Volvos with the iron bars in the doors. Very safe, very stable, drives, and drives, and drives.

Was the company funded with venture capital? Is the company profitable now?

We were lucky to attract Speedinvest, the largest Austrian VC, as our seed investor. And we have added a carefully selected group of international angels and VCs since. As we are still growing fast, we are not profitable, yet. But we are doing very good business.

Are there any new features for the platform your team is working on? What about a secondary market?

We are expanding: As we are speaking, our team is in the last phases of building a new, second platform. It will provide a similar service as Finnest.com does, but it will address a different market segment: large corporations on the one hand and professional as well as institutional investors on the other hand. Modern corporate finance XL, so to say.

Which country are you most successfully attracting investors in?

Even though we originate in Austria, Germany is our prime market. Already today, the majority of our investors comes from Germany and we have just hired new team members focusing mainly on the German market.

You plan an expansion beyond Germany, Austria and Switzerland. What can you tell us about your next market(s)?

Our industry is a highly regulated one, governed by national rules and regulations. But with the new platform, we will be able to provide a pan-European service. That will open a completely new scale of opportunities for us.

Do you plan to cooperate with institutional investors? In which way?

Yes, definitely. The new platform will be customized for their interests and needs.

What is the current state of the market in Austria?

With the passing of the AlternativfinanzierungsGesetz, (alternative financing law), the online financing market grew at a rapid pace. We have now more than a dozen platforms and high 2-digit number growth rates. But of course, business in Austria is always only a fraction of that in Germany. Germany is the main market we are focusing on.

Where do you see Finnest in 3 years?

We believe, that in 2020 there will be three main platforms financing larger, successful companies across Europe. Finnest.com should be one of them.

P2P-Banking.com thanks Joerg Bartussek for the interview.

Rocket Internet Sells Lendico to Arrowgrass

Rocket Internet has sold its majority stake in German startup Lendico to Arrowgrass. The German p2p lending marketplace Lendico was struggeling in the past months. It stopped the origination of consumer loans in Germany and the Netherlands. Investors complained about ongoing IT problems of the platform.

The purchase price was not disclosed.

Arrowgrass, a UK hedge fund, was among the investors in Lendico’s 2015 round. At that time Arrowgrass obtained a 7% stake.

Another Rocket Internet backed German p2p lending startup, Zencap was sold to Funding Circle in 2015.

The German market is a tough market for p2p lending services to succeed. Few companies run a p2p lending marketplace model. One of the earliest players, Smava pivoted already in 2012 and now brokers bank loans.

Funding Circle Germany Publishes Loanbook Performance Figures

After months and years of announcements and waiting Funding Circle Germany yesterday published loan book performance figures. Data reported is on all loans since launch on March 30th, 2014 (at that time Zencap) and as of June 30th, 2017. In total there were 920 loans.

Figures:

Total loan origination volume 66,560,800 EUR  100%
Repaid loan volume 26,859,284 EUR 40.35%
Loan volume in default (more than 90 days overdue): 3,988,632 EUR 5.99%
Outstanding principal: 35,712,885 EUR 53.65%
Total interest paid to investors: 4,578,552 EUR

The outstanding principal of 35,712,885 EUR (100%) is further categorized:
Current: 33,293,583 EUR 93.23%
Loans that are less than 30 days overdue: 1,664,005 EUR 4,66%
Loans that are 30 to 60 days overdue: 421,902 EUR 1.18%
Loans that are 60 to 90 days overdue: 333,394 EUR 0.93%

Average weighted interest rate: 8.41%

I would have linked to the source here, but Funding Circle pulled the figures within hours after publication and the page now returns a 404 error (I did save a screen shot before they were pulled). I reached out via email to Funding Circle asking for the reasons, but have not received a reply up to the point of publication of this article.
Update: I received a reply from Funding Circle stating that the figures were not correct and did not match Funding Circle’s global reporting format. An example given was that payments made by defaulted loans were omitted. Funding Circle strives to publish the corrected figures asap.
2nd update July 13th: Funding Circle has now published updated figures in changes format. They are online here.

Phrasing it differently one could say that 9.6% (6,4M/66,6) of all issued loans are currently overdue or in default.

In my view the figures give a very bleak – but correct picture of the state of Funding Circle Germany’s loan book. Overdue and default figures are high. With nearly 6% of the loan amount in default and more than another 6% of the remaining loans overdue, there is a very high probability that many investors will incur (after tax) losses. Usually German investors cannot offset default losses against interest earned.

My portfolio

I invested into 27 loans with 100 EUR each (the minimum bid). I stopped investing already in February 2015, after only 10 month, when it became clear to me that Funding Circle Germany had higher overdue figures than expected. However as there is no secondary market at Funding Circle Germany I was stuck with the loans until maturity.

Of my 27 loans the status today is:
– 22 repaid
– 4 overdue (2 of them for 256 days !)
– 1 default (in collection)

I already received back 2,303 EUR of the principal, so there is only about 15% of my investment amount still outstanding. I might get away with a return around zero, as my defaults + overdues are still lower than the interest paid, but it will be close as I have to pay taxes on the full interest earned regardless of defaults. My dashboard still claims 4.12% yield for my portfolio, which does not reflect reality as I see it. The only chance for that to happen would be full recovery of defaults and overdues, which is an unlikely scenario.


My own portfolio at Funding Circle Germany

Investor sentiment towards Funding Circle Germany seems to have turned mostly negative to sarcastic in the past two years if you look at the massive critic on the Funding Circle forum at P2P-Kredite.com. Funding Circle Germany no longer publishes statistics regularly on new monthly loan volumes.

International P2P Lending Volumes June 2017

The table lists the loan originations of p2p lending marketplaces in June. Funding Circle leads ahead of Zopa and Lendinvest. Assetz Capital makes a huge leap forward. The total volume for the reported platforms adds up to 530 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 reached this month are:

  • Twino reaches 150 million EUR in origination 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 statistic june 2017
Table: P2P Lending Volumes in June 2017. Source: own research

Note that volumes have been converted from local currency to Euro for the purpose of comparison. Some figures are estimates/approximations.
*Prosper and Lending Club no longer publish origination data for the most recent month.

Notice to p2p lending services not listed: Continue reading

Plum Automates Investment in Ratesetter – Plum Equity Crowdfunding Pitch

Plum is another fintech that makes use of Ratesetter’s products through a cooperation. Plum is bot on Facebook messenger designed to automate savings for the user and to invest money on his behalf. Savings can currently be invested in Ratesetters rolling market. Plum is currently pitching to raise 700K GBP through a convertible with a valuation cap of 5M GBP on Seedrs. Watch the video for more information on the Plum product and pitch. The minimum investment for this equity crowdfunding campaign is 10 GBP. The pitch is EIS eligible (UK residents). Other investors include 200K US$ invested by VC 500 Startups. This pitch is not yet officially launched on Seedrs, but already open for investments. You can use P2P-Banking’s free notification service to be alerted of upcoming Seedrs pitches early and review them ahead of the crowd.

Competitors of Plum include Digit, Qapital, Clarity, Albert, Squirrel, Cleo and Savedroid.

The Plum pitch deck is  informative reading. To request that, login, click on ‘Documents’ in the pitch, and send a message to request the pitch deck.

Another example of an innovative cooperative cooperation making use of products of a p2p lending service is Commuterclub.

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