By AltFi on Wednesday 22 October 2014
Orchard Platform has raised $12 million in a Series A funding round – bringing the total investment amount raised by the platform to $14.7 million.
Orchard is a platform that connects investors with peer-to-peer platforms. It will use the funds raised to accelerate the evolution of its technology platform, as well as expanding its team. Spark Capital and Canaan Partners led the round and were joined by additional investors such as John Mack, former chairman and CEO of Morgan Stanley; Hans Morris, former president of Visa and managing partner at NYCA; Nigel Morris, managing partner at QED investors and co-founder of Capital One Financial Services among others. Both Hans Morris and John Mack are on the board of Lending Club and so are already deeply involved in the sector.
John Mack, CEO of Morgan Stanley, highlighted the extreme growth that the industry has enjoyed:
"For institutional investors, the direct lending market wasn't even a blip 18 months ago. Now we're seeing a situation where investor demand is outstripping supply. That isn't going to last as more and more lenders recognize the opportunity to scale and diversify their capital by embracing marketplace funding."
“This is becoming a critical piece of the ecosystem and structure of marketplace lending.”
Dan Ciporin, a partner at Canaan Partners described the crucial role that Orchard plays by growing the secondary market in which loans can be resold. A liquid secondary market – open to investors from a range of different platforms – is something that the sector sorely lacks at present.
Orchard’s co-founder and CEO, Matt Burton said:
"At Orchard, we are on the leading edge of this new frontier. We are in the early stages of a massive change to the credit markets, which we believe will transform lending. Orchard's goal is to build the next generation of credit. Since founding the company one year ago, we have witnessed the emergence of a virtuous cycle that is driving benefits for all market participants."
There aren’t really any UK-based specialist access platforms – and Orchard already facilitates investment into a large number of UK P2P providers. We attribute the lack of UK equivalent businesses to the heavier involvement of institutional investors in the US market. Such institutions will not spend their time manually trawling through online marketplaces in order to handpick the best loans. They rely upon super-swift algorithms to make their lending decisions. Orchard provides these institutions with consolidated reporting, automated loan acquisition and integrated credit models – everything they need to streamline the process of investment.
The diagram below gives a clearer picture of how Orchard fits into the US P2P ecosystem.