Leading UK peer-to-peer/marketplace lender lands major investment after challenging year for fintech.
Funding Circle, the world’s leading online marketplace for small business loans, has raised $100m (£82m) in an equity round led by Accel. Participation in the round also came from a number of existing investors, including Baillie Gifford, DST Global, Index Ventures, Ribbit Capital, Rocket Internet, Sands Capital Ventures, Temasek and Union Square ventures.
The company will use the funding to continue to consolidate its position in the UK, US and continental Europe, as well as to continue to invest in technology and talent.
Asked about its valuation and whether this latest fundraise constitutes an “up-round”, the company said: "Funding Circle has never disclosed its valuation, we prefer to speak about the $5bn of economic value and 50,000 jobs created by the platform."
The investment will be seen by some as a beacon of hope, after a particularly challenging year for the global marketplace lending industry. The major fundraises that came by the bucket load in 2015 suddenly dried up last year, in tandem with a general wavering of confidence among institutional loan purchasers. While the US platforms were hit hardest by these developments, their UK counterparts were not entirely insulated, and were simultaneously being tested by macroeconomic developments such as the Brexit vote.
After a reasonably quiet couple of months in the immediate aftermath of the referendum result, Funding Circle’s lending volumes rebounded from September through to December. The firm lent a record £400m in the fourth quarter alone, while also becoming the first UK-based marketplace lender to top the £100m mark in a single month in November. Furthermore, Funding Circle has now revealed that it was cashflow positive for the final quarter of 2016.
“This investment makes Funding Circle the largest and best capitalised SME lending platform in the world, and we’re thrilled to continue to support its journey,” said Harry Nelis, a partner at Accel.
Funding Circle, which operates in the UK, mainland Europe and the US, has now raised a grand total of $373m in equity capital. The firm last raised equity money in April of 2015 – a $150m round led by DST Global. The firm has lent a cumulative total of around £1.84bn in the UK, according to AltFi Data, and is over the £2.5bn mark globally.
Given its size and international scope, it’s no surprise that Funding Circle looked initially to have been hit pretty hard by Brexit. The firm was forced to bring forward stress-testing plans as a show of post-Brexit resilience for investors, while also admitting at that its planned multi-billion pound funding programme with the European Investment Bank was “very unlikely” to continue.
However, as lending volumes have recovered, so too seemingly has the company’s capacity for raising capital. In addition to this latest equity injection, Funding Circle clinched an additional £40m in loan funding from the British Business Bank last week, bringing the total amount invested through the platform by British taxpayers to £100m.
“Funding Circle has become a real success story for British Fintech and news that it has attracted £80 million of investment is further evidence of the growing importance of this industry,” said Philip Hammond, Chancellor of the Exchequer. “This is another vote of confidence in a UK firm that plays an important role in our economy - helping businesses to grow and create jobs.”
Funding Circle CEO Samir Desai (pictured above) said that the platform would create 50,000 jobs over the next 12 months, and that the fundraise is the next big step towards becoming a “category-defining” company.