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.

Investly Plans to Raise 2M GBP on Seedrs – Interview with CEO Siim Maivel

Investly is currently pitching on Seedrs to raise between 500K and 2M GBP in a crowdfunding for equity campaign. To become a shareholder, the required minium investment amount is 13 GBP.

What is Investly about?

Investly is an invoice financing platform which helps businesses from the UK and Estonia release cash from their long payment term invoices. We’re a marketplace that connects investors to companies that need short term capital, which we issue against their receivables. We have offices in London and Tallinn.

What are the three main advantages when investing in the invoices?

Liquidity – Investly is quite different compared to most platforms because the investment period is only 30 to 40 days on average. This means you can convert your investments into cash within a month by simply halting further investments.

Return – Historically investors have earned 11-12% annually on invoices. I believe every investor should have a portion of their funds allocated to P2P investing because of the higher return and additional diversification.

Added value – Invoice finance is helping small businesses who are growing fast but fail to get the support they need from local banks. The direct impact is clear – invoice finance has helped our customers grow faster and create more jobs. This would not be possible without investors.

What are the three main advantages for companies selling the invoices?

Most of all, faster business growth. We discovered that Estonian customers who are leveraging access to working capital are able to grow their turnover by 18.3%, while turnover growth benchmark equals 7.6% (Investly internal analysis, growth benchmark from Statistics Estonia report 2017)
But access to working capital is not just numbers in spreadsheet, but most of all it’s opportunities that business can take: hire more staff and win new contracts, get better supplier payment terms by offering early or up-front payment, ensure prompt payment for employees and subcontractors.

What ROI have investors made on average on the platform in the past?

On average investors have earned double digit returns in both markets. The net return on Estonian invoices has been 11.2% annually and in the UK it’s been 12.6% annually.

What is the procedure, if a company is late in repaying the invoice?

To ensure collection is as fast as possible, we rely on early action and automating notifications to debtors. If the debtor doesn’t pay within 30 days of the due date, we have the right to ask the seller to repurchase the invoice from investors. We also ask for a personal guarantee from one or several of the directors of the seller company. This means that if the company cannot pay, we can ask for payment from the directors.

Investly is the biggest p2p lending marketplace for invoice financing in Estonia. How did you achieve this position?

We use personal approach and always try to find the best solution for our customers and investors. That professional customer service constantly provides us a leverage over banks and competitors. Also, quick decision – we present an offer within one working day. This is something that many of small businesses can’t expect from traditional lenders. On top of that, we have flexible pricing, which we’re able to use thanks to loyal and engaged investors community.

Investly is also operating in the UK. Is it complicated to operate in two different markets simultaneously and which of the two markets is more attractive for future growth?

UK is the largest factoring market in Europe with €327b worth of invoices financed every year. For comparison, France is second with €268b/year and Germany is third with €217b/year. This is where the biggest potential is. However, traditional sales and marketing channels towards our target customers are extremely crowded with thousands of B2B service providers trying to sell them products. We have to be more clever about acquiring customers there. Open Banking enables us to do that.

Estonian businesses finance only €2.5b/year, but due to the connected infrastructure of public and private registries, we can reach our customers much more easily. Also, there’s fewer providers in Estonia and we’re creating a lot of the market ourselves as factoring hasn’t been available for them in the past.

Having built Investly for four years, what do you deem the biggest assets of the company?

We have gained a detailed understanding about the problem we’re solving. It’s not specific to any geography. Businesses across Europe and elsewhere in the world are struggling with the lack of working capital. It seems that our product offering helps to solve that problem more simply than traditional lenders.

Four years is typically a good time to become an expert at something. We have also build a strong team to execute our mission. We’re experts at invoice financing.

Also, we’ve managed to get a good set of advisors on board to help us build the marketplace and secure future rounds of financing if needed.

What role does ‘Open Banking’ play in the near future for Investly’s further development?

Open Banking is a technical enabler. Businesses can now choose freely between their bank and 3rd party providers to solve their specific financial needs. It’s done in a secure and easy-to-use way.

This has gotten banks looking into how they can continue to be profitable in this new environment. Completely new types of business models are emerging and we’re proud that Investly is one of the early pioneers to set the path for others. Being part of the Open Banking sandbox in UK helped us to be one of the first ones to integrate with banks like Barclays, HSBC, RBS, Lloyds and Santander.

We’re going to use these integrations to form partnerships with traditional lenders so we can serve our customer without them necessarily having to change their provider.

You want to raise new funding on Seedrs. Why did you decide to use crowdfunding for equity rather than traditional routes?

Throughout the years we’ve received multiple requests from our marketplace investors to participate in our equity financing round. They’ve been giving us a lot of valuable feedback when we’ve developed our product and directed our credit model. We’d like them to get a chance to be part of Investly mission as we continue to grow.

With traditional equity financing, we’d be overwhelmed by administrative work to get the round closed and to manage those relationships later on. Seedrs has provided a good platform on which we can do that efficiently.

What is the value proposition for investors? Do you aim for a stock market listing? What is the likely time horizon?

Get to participate in our valuation growth. The interest you earn on the marketplace is quite stable, but the potential upside on the equity investment is much higher.

UK based investors can take advantage of the EIS scheme. It’s quite a big incentive on the tax side.

Seedrs provides a secondary market, which helps to create liquidity for our shareholders. This way, you don’t have to wait for years until the startup makes an exit or files for IPO.

Is Investly profitable? If not, when do you expect to reach breakeven on cash flow.

Operationally, we’re quite close to breakeven. The target is to get profitable in core activities in the next 6 months after fundraising round closes. But on a company level we will still be investing heavily into building out the integrations with banks to execute the momentum we’ve managed to build up.

For which activities does Investly intend to raise the used funds?

Partnerships and further automation. Few years ago, all the banks would turn us down when we approached them with suggestion of cooperation. But with Open Banking, this is window of opportunity for both of us: Investly provides working solution with better experience and price for customers, banks acquire competitive leverage on the market and are part of this fintech revolution. Therefore, funds from this round will be used on product developments which will allow us integrate with banks infrastructure and automate our processes even more with the increase in volume.

Where do you see Investly in 3 years?

Investly will be the major provider of invoice finance to businesses across Europe. It’ll be partly through partnerships (invoice finance powered by Investly) and partly through building out our own brand by continuing to deliver superior customer experience.

With that scale, we will have had enough data to build up a narrow AI for credit decisions. We have followed our roadmap for getting there. We’ll be better able to score companies and collect payments than competitors.

Investors will have access to debtors across Europe, which enables them to achieve a good diversification of currencies, countries and sectors.

Once we’ve received that scale, we will be able to deliver the best financing rate to businesses with our marketplace model, where banks are lending alongside with our investor community.

P2P-Banking thanks Siim Maivel for the interview.

Updated Jan. 23rd: A previous version of this article stated 2.5M as upper limit of the fundraise. That figure was incorrect.

Investly pitch video on Seedrs

 

Investly Unveils New Investor Dashboard Design

Invoice discounting marketplace Investly released a new version of the website today offering a redesigned investor interface. Investly allows investors to finance invoices sold by British and Estonian SMEs. Since the launch 11 months ago the number and volume of invoices financed has steadily increased. On the other hand rising investor demand pushed down the interest rates during the auctions to the minimum rate of 8% often during the past weeks.

New Investly Dashboard
New Investly dashboard. View of my portfolio page. Click to enlarge

At the moment I don’t have any overdue payments – however in the past some payments were delayed for a few days. None of the invoices financed on Investly have defaulted so far.

Overall the new interface is a nice improvement and offers a better overview than the old layout. But there is still room for improvement. I would have liked it, if the tables were sortable for example. Continue reading

Investly Launches Invoice Finance for UK SMEs; Raised 600K from Speedinvest

Tallinn based p2p lending marketplace Investly, which recently launched an invoice finance product in Estonia announced the launch of the service for UK SMEs. The invoice finance option will give UK businesses almost instant access to much needed working capital to aid growth.

The launch comes after a successful European launch of the platform in Estonia 18 months ago, and a subsequent investment of 600,000 Euro from Venture Capital group, SpeedInvest.

Until now, invoice finance options – whether through traditional channels or via other peer-to-peer platforms – have been complex and laden with fees and charges.

Investly says it has simplified the product so that, once credit checks have been cleared, SMEs can sell invoices to investors within two days. And therefore assign the money to aid growth, enabling them to be the best they can possibly be without the cash flow worries. Initially, the invoice finance product will be available to any UK SME who passes the platforms sign-up criteria, which includes credit checks and confirming their identity. Further safeguards are put in place such as directors’ checks and potential guarantee.

Ruth Chamberlain, Investly’s UK Country Manager, said: “Long payment terms are crippling for UK SMEs. They are dependent on cash to sustain and grow their business, but as they invest in products and people, they may not get money on work completed a month or even 120 days after issuing their invoice. This is putting many businesses at risk – especially smaller ones and those that depend on payments from one or two key customers.” Continue reading

My First Bids in Invoice Finance Loans

Marketinvoice and Platform Black have offered the possiblity to invest in invoice finance / invoice discounting loans for some time in the UK. However these were not an option for me due to requirements (minimum invest and/or UK bank account).

investly-invoiceTherefore I made my first bid on a loan of this type on Investly on Dec. 31st. It was the first invoice discounting loan the Investly marketplace launched, making this asset class available to investors in the European Union from bid amounts as low as 10 Euro. Investly ran the offer in a three day auction period, with 15% maximum interest. Even though the bidding period was over New Year, the demand was high and several investors were outbidded during the underbidding auction (screenshot right shows status on first day of auction).
Registered investors are able to see the underlying invoice that is financed.

The loan is for less than a month, due to be repaid on January 19th.

Today Mintos launched a cooperation with DEBIFO which as a originator will provide invoice finance loans on the Mintos platform. That enabled me to make my second bid in invoice financing. The loans listed today at the Mintos p2p lending marketplace carry interest rates from 11.2% to 13.8% and are for a loan term of less than a month.

‘For most of the small and medium enterprises in the Baltics, receiving client payments in time is critical in order to ensure continuous operations. While many of these companies have large, reliable and stable business customers, they typically set payment terms of up to 60 days or more, which makes it hard for small businesses to survive’, says the peer-to-peer lending platform Mintos CEO Martins Sulte, who welcomed the cooperation with DEBIFO.

Mintos management forecasts high investor interest in this investment product. Martins Sulte continued by saying ‘Most of these outstanding invoices are from stable, large companies, which means that the risk is relatively low. The other aspect that investors will like are the short repayment terms’.

P2P Lending Service Investly Launched Today

P2P lending service Investly launched today offering business loans to companies financed by both private and institutional investors. All investment opportunities offered have undergone a thorough pre-screening process including business plan validation, financial analysis as well as credit evaluation.

Once the requested loan amount is filled Investly uses an reverse auction with investors underbidding each other and lowering the interest rate for the business until the auction ends.

The first investment opportunity Investly has live is the chance to lend to Sepapaja OÜ, a blacksmith who is planning to use the investment to scale up up their business by purchasing a larger pneumatic hammer, lathe and various other tools. According to Stig Paju, the manager of Sepapaja OÜ, they decided to use the service because: ‘by using Investly we are able to enhance our production, widen our product portfolio and serve more clients. As a positive by-product, our investors will help us to spread the word and gain even more customers.’. The interest rate offered is 15% p.a., but may sink if investor demand is higher than the loan amount. The loan is rated credit grade A by Investly.

Investly is open to international investors from the European Union and Switzerland. I was able to test-drive the platform during the just ended closed alpha. Transfering money in via a SEPA transfer and bidding was fast and easy.

To accelerate the development of the service, Investly will be participating in the BusinessTech accelerator run by Startup Wise Guys – a technology accelerator with a global reach based in Tallinn, Estonia. Investly was chosen from among 150 applicants to part-take in the program alongside 10 other teams from all over the world. Over the next 3 months, they will go through an intensive mentoring, service development and marketing process; ending with investor days both in Tallinn, Estonia and London.

Siim Maivel, CEO of Investly told P2P-Banking.com:  ‘Building on the launch in Estonia, we have ambitious expansion plans with preparations under way to enter new markets, with the UK to follow later in the year.’.