US platform Vouch Financial is said to be shutting down in the latest blow to the marketplace lending sector.
The Wall Street Journal reports that Vouch Financial is closing down, based on intel from people familiar with the matter. The WSJ was unable to source a comment from the company’s CEO Yee Lee. Vouch secured a $3m equity round at the tail-end of 2014 from a number of prominent backers, including Alex Rosen of IDG Ventures, Grelock Partners, First Round Capital and a huddle of angel investors. The company raised a further $6m in a Series A in May 2015. The WSJ articles states that Vouch has to date raised $11m in venture funding.
The platform aimed to leverage a borrower’s social network in order to drive down their cost of borrowing. The more a prospective borrower’s friends and family members “vouched” for them via the platform, the more attractive their rate of borrowing would become.
“Vouchers” had to complete a short survey about the borrower, answering questions about that borrower’s financial responsibility. Those Vouchers then had the ability to sponsor loan recipients with an amount of their choosing (starting at a minimum of $25). These commitments acted as a kind of crowdsourced guarantee. Vouch also assessed a number of other criteria in producing its social credit score, including the speed with which Vouchers respond to a request for support, response rates in general, the overall size of a borrower’s network, percentage of vouchers that sponsored, and so on. Loan amounts ranged from $500 to $7,500, with terms of 1 to 3 years, and borrowing rates of 5% to 30%.
The San Francisco-based Vouch has between 11 and 50 employees, according to its LinkedIn profile.
Vouch closes its doors during a time of pronounced difficulty within the US market. The monstrous equity fundraises of months past now seem a distant memory, with share prices for the listed platforms tanking over the past few months. Institutional demand for loan purchases has also waned, prompting platforms to explore various methods of keeping the mill turning – including funding loans on balance sheet.