P2P lending unicorn Funding Circle raises another $100M led by Accel

By Ingrid Lunden for TechCrunch

Make way for another large fintech investment out of Europe. Funding Circle, the London-based peer-to-peer lending platform that lets small businesses connect with investors willing to lend them money, has raised another $100 million in funding of its own, led by Accel with participation from other previous investors Baillie Gifford, DST Global, Index Ventures, Ribbit Capital, Rocket Internet, Sands Capital Ventures, Temasek and Union Square Ventures.

Samir Desai, the co-founder and CEO, said that Funding Circle is not disclosing its valuation, except to say that it’s “slightly higher” than its last raise in 2015. Back then, we had confirmed that the company was already valued above $1 billion.

The startup says that this is the largest funding round for a financial tech company out of Europe since April 2015 (a record set by none other than Funding Circle itself, which raised $150 million that month). All in all, 2017 appears to be starting on a funding roll for the fintech sector: just this week, mobile payments startup iZettle announced a $63 million raise; and CompareEuropeGroup raised $21 million.

This latest round, a Series F, brings the total raised by Funding Circle to around $375 million.

The $100 million comes at an interesting time for Funding Circle.

On one hand, the company itself has been growing at a rapid clip. In 2016, some £1.1 billion ($1.3 billion) was lent globally (it has operations in Europe and the U.S.; the U.K., which is now profitable for the company, is its biggest market, Desai said). And of that, £400 million came in Q4 alone, working out to 90 percent year-on-year growth.

For some context to understand Funding Circle’s growth in the last year, the company says that the total lent on its platform since being founded in 2010 is £2.5 billion.

On the other hand, Funding Circle didn’t actually need the money, but this is a critical time for lending startups, given some of the scandal we’ve seen around some like Lending Club and Wonga.

“It’s been a challenging market, especially for online lending in the last year. But we are feeling pretty good about our relative position. We still have substantial funds from our last raises,” Desai told me, “but we wanted to take the opportunity to further capitalize the business. This helps build confidence with the U.K. and European governments that we’re here to stay. We have established ourselves as a credible alternative to traditional banks, and this round is a validation of our progress and the future of our business.” To that end, some money will be invested in continuing to build out Funding Circle’s platform and algorithms “to make it even more robust,” Desai said.

The pitch to governments — which both lend on the platform and also benefit from the general boost that it gives to entrepreneurship, jobs and the economy — appears to be working.

“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 Chancellor of the Exchequer Philip Hammond, in a statement provided to TechCrunch. “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.”

Currently, Funding Circle works with some 60,000 individual accredited investors on its platform — including individuals, local and national governments, the European Investment Bank and financial institutions such as pension funds — which have loaned to some 25,000 businesses. The intention is to build this out to also include retail investors, Desai said. As for returns, he said that in the U.K. the company has paid out more than £100 million, working out to an annual return of 7 percent.

As for what Funding Circle will do next as a business, the plan is to continue growing in its own markets, and perhaps acquire operations in other markets as a route to expanding to new places, which is how Funding Circle entered the U.S. when it acquired Endurance Lending Network in 2013.

Desai said there are “no current plans to IPO” but longer term this will be the aim. “We’ve always said that we’d like Funding Circle to be a listed business, in line with the things that we care about deeply like transparency and being a tech platform versus being a lender ourselves.”

This continuity is one reason why Funding Circle appears to be tight with its current pool of investors, rather than bringing in new ones.

“We’ve been impressed by the Funding Circle team since our early investment in the company. It has achieved significant growth across multiple international markets by delivering an appealing lending option to SMEs and attractive risk-adjusted returns to investors on the platform,” said Harry Nelis, partner at Accel, in a statement. “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.”

First appeared at TC