Posted on Thursday, May 28th 2015
According to market reports, the peer-to-peer lending platform market is estimated to be worth $350 billion by the year 2025. Already, there are several Billion Dollar Unicorn club members operating in the space. One such member is UK-based, US-focused Funding Circle.
Funding Circle’s Offerings
Funding Circle was founded in 2009 by Samir Desai, Andrew Mullinger, and James Meekings who were small business owners. As business owners, the founders had experienced how hard it was to get businesses financed, even after one had a successful business to offer. After receiving more than 95 loan rejection letters, they realized that the traditional bank loan system was not really favorable for American small business owners. They thus set up Funding Circle to revolutionize the banking system to help small businesses get a better deal than the banks were offering.
Funding Circle’s underwriting team analyzes applications received for funding so that established and creditworthy businesses are able to borrow funds through their marketplace of investors. Businesses are able to access secured small business loans and browse term loans underwritten by credit professionals using proprietary data analytics. The company offers multiple investment options with access to loan-level data from across the loan book.
Today, they have become the world’s leading marketplace with exclusive focus on small businesses. They have lent more than $1 billion in funds to over 8,000 businesses in the UK and USA. They offer more than 40,000 individuals, financial institutions, and even the UK Government the ability to invest in small businesses through their marketplace. They currently offer loans in both UK Pounds and US Dollars and are also expanding their marketplace to now include Western Europe, India, and the Pacific Rim.
Funding Circle’s Financials
Funding Circle earns revenues by charging a fee from their borrowers and investors. They charge investors a 1% fee and borrowers a fee of 2%-4%. According to their accounts filed with Companies House in the UK, the company saw revenues grow from £1.9 million (~$2.9 million) in 2012 to £5.3 million (~$8.2 million) in 2013. Losses during these years have grown marginally from £3.8 million (~$5.9 million) in 2012 to £3.9 million (~$6 million) in 2013 due to continued investment in expansion. More recent financials are not available.
Funding Circle is venture funded so far with $273.2 million in funding from investors including Temasek Holdings, Sands Capital Ventures, Baillie Gifford, DST Global, Index Ventures, Ribbit Capital, Union Square Ventures, and Accel Partners. Their last round of funding was held in April this year when they raised $150 million from Temasek Holdings, Sands Capital Ventures, Baillie Gifford, and DST Global in a round that valued them at a billion dollars.
Compared with the recently listed competitor Lending Club, Funding Circle is still a small venture. Lending Club was trading at a market capitalization of $7.6 billion when it generated revenues of $213.4 million for the year. Given their revenue level, Funding Circle’s billion dollar valuation seems rather high.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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