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.

Interview with Kristjan Koik, CEO of Flender

Flender launched a year ago. What did you achieve since launch?

  1. We have funded c. 1,300,000 EUR deals through our platform and we are proud that our defaults have remained at 0%.
  2. We have just finished equity fund raise where we raised successfully 800,000 EUR from world’s biggest VC Enterprise Ireland and private investors.
  3. We have strengthened our credit team with head of credit Colin Barry who came from AIB Bank and David McNamara ex director of Merrill Lynch International Bank. David has joined our credit committee and board of directors. This all means that our lenders can be assured that Flender has best in class underwriting practices.
  4. Following due diligence, Price Waterhouse Coopers is heading our debt raise from institutional finance providers.

We offer very attractive 10-11.5% interest rate to our lenders. Current default rate is 0% and our world class credit team will ensure great returns to our lenders.

You now want to raise a 50M Euro debt package. What will that be used for?

Funds will allow:

  1. Accelerate funding of the deals on our pipeline
  2. Loans on our marketplace will get funded quicker
  3. Offer bigger variety of credit options to borrowers such as higher ticket loans and property backed peer to peer loans

Can you please give details about the planned launch of property finance loans?

Our target market will be property developers and builders looking for working capital towards last phases of construction. Target loan size is 250,000-750,000 EUR.

Kristjan KoikHow will these loans be secured?

Loans will be secured against 1st legal charge on the property

What interest rates can investors expect on the property loans?

8-10%

When will we see the first property loan listed on the marketplace?

We are aiming for May 2018

You recently repaid a convertible loan. Why did you decide to repay that loan rather than convert this into equity stakes in Flender?

This was condition of our new equity investor. Investment allowed us to repay our loan participants with very generous 12% return.

Flender holds permission to lend in the UK. How are your plans progressing to offer loans in the UK market?

Our plan is to expand and grow our brand in Ireland. We will review our launch plan for the UK towards end of this year.

What are the main challenges in growing the business right now?

Now that our platform and model have been proven then our goal is to scale up. We would need to grow both the number of retail lenders and involve institutional finance for this.

We welcome your readers to participate in campaigns on our marketplace.

Can you share some demographics on your (retail) investor base?

  • Ireland 58.41%
  • United Kingdom of Great Britain and Northern Ireland 14.86%
  • Germany 13.74%

You have one wish that the regulator fulfils for you. What is your wish?

We would welcome EU wide regulatory framework for p2p platforms.

P2P-Banking.com thanks Kristjan Koik for the interview.

Flender – new p2p lending marketplace in Ireland

Flender, which recently soft launched a p2p lending marketplace in Ireland, received full FCA authorisation last week, saying it took two years of consultation with the FCA and the legal team to achieve approval. This will be needed for the launch in UK, planned for later this year.

Limited time offer: Cashback: 10% cashback on any investment over 1,000 GBP for P2P-Banking reader.  Sign up to use. (Update Aug. 2017: the cashback offer has been extended to August 31st, the minimum investment requirement is now 2,500 EUR)

Flender offers both SME and consumer loans on the marketplace. The main points for investors are:

  • no fees for investors
  • 50 Euro minimum bid
  • open to international investors (prerequisite is a bank account in the European Union)
  • interest rates of the currently listed loans range from 8.1% to 10.4%
  • reverse auction bidding (though at the moment, loan supply outstrips lender demand, therefore I don’t expect any underbidding soon). currently no autoinvest

Flender charges origination fees for business loans from the borrower. While there are no origination fees for borrowers for consumer loans, Flender does have a margin income on those (same with business loans).

Once the UK operation launches, investments can be made cross-border. An interesting aspect is that the borrower will take the FX charges.

Flender does have big plans. On the list are an IFISA offer, several features for investors and borrowers to customize the experience and mid term a secondary market. Flender currently has a team of 7 employees.

I published an interview with the CEO of Flender in the end of 2016, when they raised 500K GBP through equity crowdfunding on Seedrs. Flender will likely be back on Seedrs to raise another round later this year.

As my experiences with another Irish p2p lending marketplace are good so far (it has low default rates), I registered on Flender too. There are currently 4 business loans listed seeking a total amount of about 150K Euro.

Flender marketplace
Screenshot of Flender marketplace loan listings (excerpt)

Interview: Flender Pitches to Raise 500K

Flender is a UK startup (with background in Ireland) currently pitching to raise 500K GBP from the crowd.

Interview with Kristjan Koik, CEO of Flender

What is Flender about?

Flender is a peer to peer finance platform which helps businesses and consumers to borrow and lend money through their existing networks.

Businesses can leverage their customer base and strengthen loyalty; while friends become part of each other’s’ success. Flender does this while adding a new element of trust via social network connections.

Flender emphasizes the social relationships between borrowers and lenders. Don’t you think borrowers are hesitant to ask friends and connections for money?

The social lending market among friends, family and connections has never been formalized, which is crazy when you consider that this is a market worth over 3 billion EUR a year in Ireland and the UK based on independent research performed in September 2016.

Asking people that you know for money – and lending to them – is an awkward thing to do and is certainly an unreliable means of finance. Whether it’s to fund further study, grow a business or to fund home improvements, Flender will let you borrow from and lend to people with whom you have a connection much more easily.

For individuals, there is the satisfaction of helping others while earning more interest than a standard savings account while businesses can have access to funds faster and at the interest rate they prefer. Everyone wins.

P2P lending has evolved a lot over the past 10 years. Your model has a back to the roots touch to me. Do you see your model as a reinvention of the true spirit of p2p lending?

I believe p2p lending and the sharing economy is the future of finance.

We have all lent or borrowed money at some stage of our lives and will use some sort of finance in the future – be it mortgage, car leasing, credit card, deposit account or investments. Similarly, we all have people in our social circles and professional networks who have money to lend or are looking for finance. It makes no sense that rather than doing these transactions with people who you know and trust we would do these with complete strangers with whom we know little or nothing.

Flender is not trying to create a new marketplace. We are simply formalising existing massive social lending market and by providing a seamless user experience and having first- mover advantage we feel we can dominate this sector.

The pitch video

Flender positions itself as different to other p2p lending marketplaces. Yet you take these as benchmarks for valuations in an exit. Furthermore your expected margin is much higher than those of other UK p2p lending marketplaces. What is the reasoning behind this?

Yes, we are very different to other p2p platforms, but investors will initially want to benchmark against something with which they are familiar, hence our comparison to existing platforms. Continue reading