Archive for 2016
Don’t Write Off Marketplace Lending Just Yet; Silicon Valley Just Made a Big Bet
November 18, 2016
Don’t lose all hope on marketplace lending yet. Silicon Valley just made a big bet on one startup.
Silicon Valley’s leading venture capital firm Andreessen Horowitz invested $15 million in PeerStreet, a marketplace for secured real estate loans. PeerStreet was founded in 2013, by former Google employee Brett Crosby and former real estate attorney Brew Johnson, who oversaw the sale of travel website VirtualTourist to Expedia/TripAdvisor for $85 million. The Manhattan Beach, CA-based company’s crowdfunding platform offers investors secured real estate loans that it sources from local real estate lenders across the country.
“This round of funding will help us further execute on our goal of building a world class investment platform for real estate debt,” said co-founder and CEO Brew Johnson.
To date, it has funded over $165 million in loan investments with $50 million in returns to investors and has 50 lenders on the platform. The company has secured funding from marquee Silicon Valley investors including Michael Burry of The Big Short fame who predicted the 2008 subprime crisis and Adam Nash, former CEO of Wealthfront. Alex Rampell, general partner at Andreessen Horowitz and co-founder of consumer lending Affirm Inc led the investment and will take a seat on PeerStreet’s board.
“They (PeerStreet) have a unique distribution model that allows them to leverage existing lending networks to lower loss rates, and grow without direct marketing,” said Rampell in a statement.
Marketplace Lender P2Bi Raises $7.7 Million In Venture Funding
November 18, 2016
Denver-based crowdfunding marketplace lender, P2Binvestor has raised $7.7 million in Series A1 funding led by a Colorado-based angel investor network, Rockies Venture Club and a Japanese venture firm Future Venture Capital Co, its first investment outside Japan.
The P2Bi platform currently has 150 investors – both institutional and retail and it plans to fund 112 new borrowers, up from the current 80 borrowers, by Q1 next year. The proceeds will be used to boost sales and marketing efforts and grow the company’s operations towards this target.
Founded in 2012, P2Bi provides revolving lines of credit of up to $10 million to businesses. With an average line of $1 million, the company’s customers include businesses in retail, manufacturing and consumer goods packaging. It has originated $350 million since 2014 and it is on track to hit $8.2 million in revenues this year.
“We’re seeing more interest in our model as venture funding hits a two-year low and more entrepreneurs are looking for ways to grow their business while preserving their equity using good-quality, flexible debt,” said CEO Krista Morgan in a press statement.
P2Bi has been bullish about fundraising and diversifying its capital sources. Less than two months ago (September 20), it closed a $10 million credit facility with Pittsburgh-based mortgage service company Urban Settlement Solutions and in April this year, through a partnership with New York-based hedge fund, MW Eaglewood Americas, the company raised $50 million in debt.
Prosper Files 10Q, Revenues and Originations Shrink
November 17, 2016
The slight delay with Prosper’s 10-Q filing is over. The company originated $311.8 million in loans in Q3 versus $445 million in the previous quarter. Revenues were $24 million, down from $28 million in Q2.
The filing delay was said to have been attributed to a recent arbitration decision. That decision and financial impact were disclosed in their report. “On November 17, 2016, Prosper and Colchis [one of their earlier loan buyers] entered into a Settlement and Release Agreement, pursuant to which Colchis has agreed to terminate the Colchis Agreement and waive all rights conferred under such agreement in exchange for a $9 million cash payment by Prosper and equity. Prosper expects to make the $9 million cash payment in the fourth quarter of 2016.”
$9 million is a lot for Prosper who reported only $31.8 million in cash on their balance sheet.
The company has run up a $70 million loss on just $108 million in revenues so far this year, compared to a $17 million loss on $140 million in revenues for the first 9 months of 2015.
Revenues in Q3 year-over-year are down by nearly 60% while originations are down by more than 70%.
Earlier this week, Prosper’s CEO, Aaron Vermut, and executive chairman, Stephan Vermut, both stepped down from their posts.
Brief: LiftForward Secures Up to $100 Million Credit Facility from Monroe Capital
November 17, 2016Chicago-based investment firm Monroe Capital arranged a credit facility of up to $100 million for New York City-based small business lender LiftForward.
LiftForward provides small business loans up to $1 million using automated underwriting. The company also sells “hardware-as-a-service” like Microsoft Surface to manufacturers, distributors and retailers, and supports the financing of these transactions.
Monroe Capital makes debt and equity investments in middle-market companies in healthcare, technology, media, specialty finance across the U.S. and Canada.
The Season Finale of Alternative Lending Has Everything You’d Expect
November 17, 2016
This month kicked off what appears to be the first segment of the 2016 two-part season finale of alternative lending. So far, it has everything you’d expect, a main character gets killed off, another simply won’t be returning next season, a wedding, a scandal and even a cliffhanger!
So in that precise order, here’s what you missed:
A main character’s surprising death
Crowdfund Insider reported on Wednesday that Dealstruck, a small business lender, had ceased lending operations. An email sent to Dealstruck has not yet been returned, but Crowdfund Insider’s story includes a quote from Dealstruck’s CEO saying that the company is no longer originating new loans.
The company initially arrived on the scene to much fanfare. A writeup in techcrunch last year said that they had raised $8.3 million in venture financing and secured a $50 million credit facility.
Guess who won’t be back next season
Aaron Vermut is stepping down as Prosper Marketplace’s CEO. He is being replaced by company CFO David Kimball. Vermut’s father, Stephan Vermut is also stepping down as executive chairman.
A wedding between an old character and a new one
Peerform, which was founded in 2011, has been acquired by Versara Lending. Versara, an unfamiliar name, appears to be related to NYC-based Strategic Financial Solutions, a debt relief company headed by Ryan Sasson. Peerform CEO Mikael Rapaport has updated his LinkedIn profile to reflect a new role at both Versara and Strategic.
Scandal! The fake business loan negotiator from upstate New York has been arrested
His name is Sergiy Bezrukov, but the world may know him by another name (or three), John Butler, Thomas Paris or Christopher Riley. After terrorizing the MCA and business lending industry for almost a year, he now sits in prison awaiting trial.
Cliffhanger
Oh, so you thought Prosper would file their 10-Q on Tuesday? You were wrong. The company instead informed the SEC that they would be filing their report late, leaving loan investors wondering if there may be more to the recent executive departures.
Stay tuned!
If this were really a TV show, you’d probably think it jumped the shark when the country elected a President that pledged to dismantle Dodd-Frank while potentially defanging the CFPB. But that is precisely what has happened. “The Dodd-Frank economy does not work for working people,” the President-Elect’s website states. “Bureaucratic red tape and Washington mandates are not the answer. The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”
If anything, this is all the more reason that you should be tuning in and following the industry in 2017.
The Infant Startup that Swooped an Erstwhile Industry Leader
November 16, 2016It’s not very often that an infant upstart comes by and swoops up an erstwhile industry leader.
While new to the scene, Versara Lending is a New York City-based debt consolidation lender that has already acquired Peerform, one of the early P2P lending marketplaces run by Wall Street credit broker Mikael Rapaport. The company confirmed that it is not an acqui-hire and that Peerform’s entire operation will be merged and be operated by Versara. Rapaport also changed his LinkedIn profile to reflect another new position – SVP of lending markets at Strategic Financial Solutions, a NYC-based financial consultancy firm, which appears to be related to Versara.
Versara only lends in seven states including Arizona, Florida, Georgia, Missouri, North Carolina, New Mexico, and Utah. In contrast, Peerform was founded six years ago, as Lendfolio by Rapaport and other Wall Street execs, Meytal Benichou and Elie Galam. The company raised $5.3 million in funding since inception and its proprietary Loan Analyzer tool matched borrowers with lenders on its platform who funded personal loans up to $25,000.
“We are committed to continue the growth we’ve experienced since we started the company in 2010,” said Rapaport, Founder and CEO of Peerform, in a statement. “In order to realize our potential, it was important for us to build a strong strategic partnership. By joining Versara, we will be able to combine our resources to scale quickly to compete effectively in the consumer lending industry.”
Once a posterboy for P2P lending, Peerform now is emblematic of the churn in the industry. At its launch, Peerform was ready to compete with Lending Club and Prosper head on, backed by institutional investors, thanks to the founders’ investment banking pedigree. The company’s platform started by offering personal loans to borrowers with a FICO score of above 660 for a three-year term. But after failing to gain critical mass, it reinvented its underwriting algorithm with its loan analyzer tool to lend to riskier borrowers (FICO scores <600).
“At this early stage it is difficult to tell whether Peerform will become a strong alternative to Lending Club and Prosper. But their timing is far better now,” Peter Renton wrote in a blogpost on LendAcademy in 2014.
Two years hence, Lending Club has taken several lumps, Prosper’s prospects are in question and in a David and Goliath-esque scenario, once touted to be an industry leader, Peerform hands off its reins to a startup.
UK’s P2P Pioneer Wants to Be a Bank. Who’s Next?
November 16, 2016
UK’s P2P pioneer Zopa is changing its stripes to turn into a bank.
The 11-year-old company, upbeat about the regulatory environment in the UK that is looking to bring innovation and entrepreneurship to banking, will apply for a license soon. “Zopa has a history of creating innovative retail-facing financial services, driving consumer choice and transparency. We are responding to the positive regulatory environment and building on our experience to bring yet more choice to the market,” said CEO Jaidev Janardhan in a press release.
The new Zopa Bank will be a retail bank and provide deposit and savings accounts, thereby giving the company a stable funding source for its P2P platform.
This trend has also picked up pace across the pond, at home. For online lenders like SoFi that are adding lending products faster than they can secure sources of capital, the prospect of becoming a bank may now be more tempting than disrupting them. Marketplace lending companies in the US including Avant, Prosper and Lending Club are struggling to retain and grow investors on their platforms.
While tightening credit and raising rates to prevent delinquencies is one way to keep investors, some companies like SoFi have also started hedge funds to buy up their own loans. The advent of online lending promised to offer alternatives to the already chunky, fragmented banking system which was further straitjacketed by regulation like the Dodd-Frank Act which mandated banks have stricter lending standards. However, the rapid proliferation of the industry has brought forth concerns like fast depleting capital and waning investor interest.
Will alternative lenders in the US also drink the kool-aid and become the entity they intended to overhaul?
The Status of Prosper Marketplace???
November 16, 2016Loan investors will have to wait even longer to find out if the resignation of Prosper’s chief executive on Monday holds special significance. That’s because on Tuesday the company informed the SEC that they would be filing their 3rd quarter results late. They were unable to complete the report in a timely manner, according to the filing, “without unreasonable effort or expense due to a delay experienced by the Registrants in completing its financial statements and other disclosures in the Quarterly Report relating to a recent arbitration decision.”
Jay Antenen, the Senior Editor for DealReporter, said on twitter that the arbitration reference has to do with “the early 2013 loan purchase agreement Prosper signed with Colchis.” According to a brief Antenen published with Eleanor Duncan on Debtwire, “Under that deal, Colchis gained the right to see Prosper’s origination pipeline and bid for loans at no disadvantage to other investors on the platform.” Apparently, there may be some tension between Colchis and new investors.
This all belies the fact that Prosper’s previous quarter produced a gut-wrenching $35.5 million loss on just $28 million in revenue. They had $14 million in expenses just from restructuring related to their downsizing and layoffs which included the closing of their Salt Lake City office and the termination of 167 employees. Their first quarter of the year yielded a $17 million loss on $56.5 million in revenue.
Meanwhile, loan performance has remained fairly steady, even as they continue to make regular pricing adjustments.
On Monday, the company’s CFO, David Kimball, was promoted to CEO to take over Aaron Vermut’s role. Vermut will remain on the company’s board.
