Long time followers of the p2p lending space will remember Loanio.com. They were the victims of unfortunate timing when they launched in October 2008. Not only did they launch in the midst of the biggest financial crisis in decades it quickly became clear that the SEC required an S-1 registration to operate as a p2p lender, something Loanio did not have.
Fast-forward more than four years and Loanio founder Michael Solomon is back with a new venture. This time around Solomon can lean on his own experience with Loanio as well as those of his new partners who have a solid background in online financial services.
CircleBack Lending is the name of this new p2p lender but they are not looking to compete head to head with Lending Club and Prosper. Their focus is going to be on accredited and institutional investors only thereby skirting the expensive and onerous SEC registration process.
Judging from the size of the potential p2p lending market and the demand from these kinds of investors there is clearly room for more players. Whether or not CircleBack Lending can succeed will be dependent on whether they have a compelling enough offer to convince investors their platform is better than Lending Club and Prosper.
The planned launch for CircleBack Lending is in the third quarter this year but that will be dependent on how successful they are with their initial round of fundraising. When I spoke with Michael Solomon and co-founder Todd Walters last week they said they have been self-funded to date and their technology platform is around 75% complete. They are looking to raise angel capital soon that will help take them to launch and beyond.
The U.S. p2p lending industry needs more than two players. With Lending Club’s success in the past 12 months it is clear that the concept has legs. CircleBack is looking to piggyback on that success. But as the current number three p2p lender, Peerform, has shown it is not easy to get traction in this space. It will be interesting to see how CircleBack Lending does – I will be following their progress closely in the coming months.
You can read the full press release on the CircleBank Lending announcement here.
Thanks for your support, Peter. I wanted to clarify two things:
1. Loanio did have a substantially completed S-1 at the SEC that was to become effective shortly, but because we could not raise more money, I requested that the S-1 be withdrawn at the time. It sounded like your article may have suggested that we never did anything with the SEC.
2. More importantly, while we will strive to be competitive and differentiate our products, we do not believe that the key to our success will rest on convincing investors that we are “better than Lending Club or Prosper.” Rather, among other factors, we believe institutional investors will need to rely on multiple platforms to satisfy their specific underwriting objectives as the market continues to grow.
Thanks Michael. I appreciate you clarifying that. You may well be right about institutional investors needing multiple platforms but with the volumes they can put to work at LC and to a lesser extent Prosper, I don’t expect it to be easy to attract money right off the bat. But no doubt you have thought about this a lot more than I have.
Great news. I am so eager for there to be more than two parties in the p2p world. We would really benefit from further competition.
Peter, do you think that a competitor on the institutional-investor side of things will have side benefits for the retail market?
Simon, I think more competition will be good for everyone. There may not be many direct side benefits for retail investors from an institutional investor-type business but a more competitive market should lay the groundwork for more innovation.