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.

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.

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

 

Crowdproperty Pitches to Raise 600K GBP through Equity Crowdfunding

UK p2p lending marketplace Crowdproperty is currently pitching on Seedrs to raise 600K GBP from the crowd at a pre-money valuation of 5.9M GBP.

The Crowdproperty marketplace was launched in 2014 and the company has since funded 10.7 million GBP in property loans. All loans are secured by a first legal charge against the property. The company says no investor has incurred any losses so far. The company received full FCA authorization in October 2017.

Crowdproperty states it has unique proprietary access to the largest property network in the UK, the Property Investors Network (pin), which provides competitive advantage in terms of high quality deal origination and has enabled the proof of the business with limited marketing investment to date.

Crowdproperty claims that it’ is already profitable with more favourable economics than peer to peer platforms in consumer and SME marketplaces owing to shorter average loan lengths, higher average loan sizes, borrower frequency/retention and achievability/sustainability of fee levels. With a gulf now emerging between property-based peer to peer lenders that are gaining traction versus those struggling at the sub-£5m level, the team aims to become the market leader in project-based finance direct to SME property professionals whilst simultaneously providing competitive first-charge secured returns to its retail pool of lenders.

CEO Simon Zutschi told P2P-Banking: ‘I am delighted that we have now proven this model of helping successful property developers to fund their projects, whilst helping investors gain a secured return on their money. All of the recent project launches have been quickly funded up by our eager and loyal base of lenders, which clearly demonstrates the traction we have built in our brand. Over the last year, we have focused on our platform technology and processes, and now we are ready to scale this business to its full potential. This will not only benefit our lenders, but also help and support SME developers, who often struggle to raise funds from hesitant banks, to access the essential funding they need to help reduce the UK housing crisis’.

(Source: Crowdproperty pitch on Seedrs)

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.

The Complete Guide to Using Revolut for P2P Lending Investors

This article is a must read for non-residents, investing on British p2p lending marketplaces from abroad. You will learn two advantages that will make the process easier for you and save you money by using the free Revolut App.

What is Revolut?

Revolut is a free app for money management. To register you need:

  1. An Android smartphone or an iPhone with front and back camera
  2. to be a resident in the European Union, Norway or Iceland and your ID document (e.g. passport)
  3. the ability to receive SMS messages

Just download the app in the Google Play store or the App Store on iOS.

After that, I suggest to first follow the steps described that are needed to verify your identity, as this is a prerequisite for some of the features described further down. This took me about 10 minutes.

Usecase 1: Free transfer of money from one UK p2p lending marketplace to another

Sort code and my own account number - click to enlargeI have invested on several UK p2p lending marketplaces, but there was no free way to shift money from one UK marketplace to another as I do not have a UK bank account, since I am not a UK resident. Up to April last year I could use a free Monese account, but Monese started charging 5 GBP per month, so that was no longer an option.

Every Revolut user can get an own UK bank account number for free. Important update: Not true any more for new accounts – see comments. It is important to note though that technically Revolut is regulated as an electronic money issuer and is not a bank. This means that money in your account is not protected by the UK deposit protection scheme (FSCS)! However that is fine for me as I just use the account to pass the money through on the way from one platform to another.

The important fact is that with the own account number it is possible to use that for withdrawals from UK marketplaces as no reference is needed for the transfer. I have done this a couple of times now and it takes only a few hours for the money to arrive and get credited. Likewise it only takes a few hours after I transfer it to another platform to be credited there. All without incurring any costs for me.

Revolut bank transfer -click to enlargeEntering the recipients bank details on a smartphone is a bit cumbersome, but it needs to be done only once, as the details are stored and can be reused for future transfers.

Note to UK investors: You cannot use the Revolut app likewise for transfering funds from on p2p lending platform in the Eurozone to another p2p lending platform in the Eurozone. At least not at the moment. The reason for this is that users don’t get an own IBAN account number. Warning: Revolut will block Euro transfers that come from a third party and return them and deduct a fee and return the funds to the sender.

Another potential benefit might be, that foreign investors could gain access to those UK platforms that don’t require residency but do require a UK bank account. But I haven’t tried if that works with a Revolut account. If anybody checks this out, please post your experiences in the comments.

Usecase 2: Best exchange rate for changing Euro into Pounds

Conventional bank transfers are not a good option for moving money from an Eurozone bank account to a UK p2p lending platform due to fees and bad exchange rates applied.

Instead I used Transferwise and Currencyfair so far and have been happy with these services. However there might be issues with platforms not supporting withdrawals via these.

Revolut account can hold multiple currencies - click to enlargeAnd when I did a comparison of exchange rates at the time of writing this article, I found that actually Revolut offers a much better exchange rate. This is what I got when I compared:

Revolut: 238 Euro gets 206.12 GBP

Transferwise: 238 Euro gets 204.92 GBP

Currencyfair: 238 Euro gets 202.91 GBP

Quite a difference, though it will be smaller for larger amounts and you can actually influence the exchange rate on Currencyfair by setting a desired rate.

To exchange Euro into pounds I simply transfered money from a bank account in my name via a SEPA transfer to the Euro account of Revolut, stating my personal reference number the Revolut app showed me under ‘Top-up‘, ‘EUR‘ ‘Bank transfer‘. After two days Revolut alerted my via push notification (they don’t send emails) that the money arrived. Via the exchange menue point I can then see the fluctating live exchange rates and execute the exchange any time I want.

Important tip: Never exchange money on Revolut on a weekend, as Revolut will charge a 1% fee then.

Also note that there is a limit of 5,000 GBP /  6,000 EUR / 6,000 USD (or equivalent) per calendar month for the free foreign currency exchange. That is sufficient for my needs. Above that Revolut charges a 0.5% fee. If you invest really large amounts it might by worthwhile to consider upgrading to a premium account for a monthy fee as premium accounts do not carry fees even for larger exchanges.

To sum up: Revolut makes investing on multiple UK p2p lending platforms much easier for European investors and can save a lot of money during currency exchange for investors from the Eurozone. I have used the account for only a few weeks so far and I really like it and I do hope the basic account will stay free.

Fans will actually have the opportunity to invest into equity of the Revolut company and own shares of Revolut soon. This will be conducted through the equity crowdfunding platform Seedrs. The concrete date has not been announced yet, but if you are interested you should register at Seedrs now to complete the registration and verification process ahead, as I expect the Revolut campaign will be oversubscribed and filled within hours, if not minutes, once it is launched. In fact, when Revolut raised 1 million GBP last year on Crowdcube, the offer was massively oversubscribed. To see how pitches work at Seedrs have a look at the current pitch by p2p lending company Landbay or read my earlier articles about Seedrs. Notice: This article is not an investment advice. Investing in startups bears significant risks, including total loss of investment.

Revolut says it currently has 550,000 users. I expect that to rise fast with the advantages the Revolut account offers. Have you used Revolut in the context of your p2p lending investments? You are welcome to share your Revolut experiences in the comments.

Oh and I forgot to mention: There is even another interesting tie-in of Revolut with peer to peer lending. UK users can get a loan through Revolut which is actually handled by Lending Works funded though fellow p2p lenders. During AltfiEurope Summit a figure of 300 referred loan applications per day was given and that was only 2 weeks after launch.