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It’s Official: Kabbage To Acquire Orchard

The tech focused small business lender, Kabbage, has announcement the acquisition of Orchard, the leading loan analytics provider in the online lending space

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It was the worst kept secret in fintech. There were rumors flying around during LendIt Fintech earlier this month and then Bloomberg published this story a couple of weeks ago about the pending deal. Well, today it became official. In a press release this morning it was confirmed that Kabbage, the leading tech-focused small business lender, will acquire Orchard.

I met Matt Burton, the CEO and Co-founder of Orchard, at the very first P2P lending meetup in New York in early 2013. This was before Orchard even existed but right away it was clear that we both shared a true passion for the burgeoning online lending space. I invited Matt and his fellow co-founder, Angela Ceresnie, to speak at the very first LendIt in June of that year. I still remember their presentation on institutional investing and how they were building tools to make the investing process easier. Orchard was officially founded in August 2013 and since then they have gone on to become the leading connector of capital between loan originators and institutional investors.

It was back in February when I first heard rumors that Orchard was for sale. I was a bit surprised because they had closed a $15 million Series C just a few months before. They had also recently released their new Deals platform to facilitate both primary and secondary market loan transactions. But from what I have heard, and the Bloomberg article seems to confirm this, their new platform has failed to get the traction they had hoped.

So, what will become of Matt Burton and his team? Some clues are provided in the press release:

Orchard’s CEO and co-founder, Matt Burton, as well as Chief Analytics Officer and co-founder, David Snitkof, will both join Kabbage in leadership roles upon the closing, helping oversee technology integrations and future innovations. In total, Kabbage will add more than twenty Orchard employees who are predominantly focused on advanced analytics, data science and engineering to its New York City office.

[Read more…]

LendingPoint Expands Into Point of Sale Lending by Acquiring LoanHero

Online near prime lender LendingPoint to boost expansion into point-of-sale with acquisition of LoanHero.

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It’s not often we report on acquisitions in fintech. From my perspective this is because the industry is still relatively young despite some of the interesting innovation happening. A vast majority of traditional financial services companies are still figuring out their strategy to infuse tech into their businesses. More often, we see the successful companies continuing to raise rounds of financing. Today’s acquisition announcement though didn’t come from a traditional financial services firm, it was a fintech acquiring another fintech.

LendingPoint is a balance sheet lender serving the near prime segment. They have been around since 2015 and in a relatively short time they have established themselves as one of the leading players. They now have acquired LoanHero, a company operating in the point of sale space. LoanHero first came on our radar when they were selected as a finalist for PitchIt at LendIt in 2015.

Last year when we checked in with a number of PitchIt finalists, we learned that the company was in talks with national and regional banks which would be the key to scaling the business. According to the press release, LoanHero signed with hundreds of merchants across medical, dental, and home improvement. With the acquisition LendingPoint plans to accelerate their expansion into point-of-need and point-of-sale financing.

Tom Burnside, co-founder and CEO of LendingPoint stated:

LoanHero’s merchant platform is the perfect complement to our consumer portfolio. The combination of the two companies doubles our origination channels and current customer base and triples the number of consumers we can serve, with credit and payment solutions for folks with credit scores from 450 all the way to 850. We’ve been so impressed by the energy and talent of the LoanHero team, and we look forward to working with them to dramatically improve access to credit for a large and underserved segment of consumers and merchants, whenever they need it.

Combined the companies have issued almost 70,000 loans totaling $500 million.

Conclusion

The point of sale space is fascinating and is a vertical that has led to some very interesting businesses. One concern for many online lenders is high customer acquisition costs and in point of sale finance that challenge can be mitigated since acquisition of customers is primarily through partnerships with merchants. It’s going to be interesting to see where LendingPoint goes from here as they expand their product offerings.

Marketplace Lending Predictions for 2016

I stare into my crystal ball and provide predictions for the year ahead as well as review my predictions from one year ago.

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Crystal ball - 2016 predictions

Happy New Year everyone. Here is my annual predictions post where I review my previous years predictions and make some new ones for the new year.

Review of my 2015 Predictions

  1. Lending Club will issue $10 billion in new loans and Prosper $4.1 billion
    I was a bit optimistic on my loan volume predictions. While both companies had a great 2015 Prosper came in at $3.7 billion for the year, below my $4.1 billion projection. We won’t know Lending Club‘s final numbers until their next earnings call in a few weeks but we do know that they did $5.8 billion through Q3. So, if they keep a similar growth rate to previous quarters I would expect around $2.5 billion in Q4 for $8.3 billion in total loans for the year. Still a great year but below the aggressive numbers I projected.
  2. Prosper will remain a private company
    I got this one right. Prosper remained a private company with not even a whisper of an IPO for them in 2015.
  3. There will be two new marketplace lenders completing an IPO
    This one I got completely wrong. Given the state of the IPO market today compared with 12 months ago it is not surprising that no other U.S. based marketplace lending went public in 2015.
  4. A new platform will launch targeting non-accredited investors
    I was only partially right on this one. While several new platforms contacted me throughout the year with their intention to launch for retail investors the only offerings that actually launched in 2015 were from existing real estate platforms Groundfloor and Fundrise.
  5. A midsize bank starts their own marketplace lending platform
    This was an interesting one. While I also did not get this one right there was more talk about the banks role and response to our industry in 2015 than ever before. We did see news break in June about the intention of Goldman Sachs to create their own platform but nothing has materialized on that front yet. I think I was just a year early on this (see prediction #4 below).

I also predicted that Lending Club would make two acquisitions and I was dead wrong on that as well. Lending Club is biding their time on acquisitions but clearly they will grow their borrower base at some point through acquisitions. I am confident that the predictions I got wrong will all come true in the near future, some in 2016 as you can see below.

My 2016 P2P Lending Predictions

Now on to this year. I am going to see if I can improve on my somewhat dismal performance from 2015. Here are several predictions I feel confident making for 2016. [Read more…]

Funding Circle Acquires Zencap, Expanding Their Reach To SMEs

Funding Circle will now offer loans in 5 different countries across Europe and the United States.

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FundingCircle_Buys_Zencap

Samir Desai, co-founder and CEO of Funding Circle, the world’s largest marketplace for small business loans, made a big announcement today at LendIt Europe 2015. They will be acquiring Zencap, an SME lender based on Germany. Zencap has only been around for just over a year, but they have been very successful thus far.

Earlier this year at LendIt USA 2015, Zencap claimed to be the fastest growing small business marketplace lender in Europe. Over the last 17 months, they have lent more than €35 million to 520 businesses. Although Zencap’s growth is impressive, the most important part of this news is that Funding Circle will go from offering loans in just two countries (UK and the US) to offering loans in 3 more: Germany, Spain and the Netherlands. This will solidify Funding Circle’s spot as the leading global brand in the small business lending space. [Read more…]

Prosper Makes its Second Acquisition, a Personal Finance Company Called BillGuard

Prosper has acquired BillGuard, a personal finance analytics company based in Israel, for $30 million

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Prosper Acquires BillGuard

There is big news out of Prosper this morning. They have made their second acquisition this year (in January they bought a healthcare lender) and it is not what you might expect. They have purchased BillGuard, a personal finance analytics company with offices in Tel Aviv and New York. BillGuard is not a lender; its core product is an app that helps consumers track spending and detect possible fraudulent charges.

This was not the kind of acquisition that I expected out of Prosper so yesterday I chatted with CEO Aaron Vermut to find out more. He was, not surprisingly, very enthusiastic about this deal saying it will give Prosper an edge in many new ways.

What does BillGuard actually do?

Before I get to Aaron’s comments let’s explore BillGuard. Funnily enough, I have been a user of BillGuard’s free service since 2011. One of the cool features that drew me to the product back then was their crowdsourced technology where they would use the crowd to flag any possible fraudulent charges on your credit card bill. When someone detects a fraudulent charge from a merchant this flows through to others who use that same merchant. Over the years, it has been useful to me catching the occasional questionable transaction.

Today, BillGuard offers far more than just this crowdsourced technology. They have a full service personal finance app (highly rated on both the Android and iOS stores) that helps consumers with budgeting, tracking expenses, credit monitoring and even identity theft. It is kind of like Mint and LifeLock rolled into one product. They have 1.3 million registered users and have flagged over $70 million in fraudulent transactions for their users.

How does BillGuard fit with Prosper?

[Read more…]

Prosper Makes Its First Acquisition – a HealthCare Lender

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Prosper Acquires American Healthcare Lending

More big news from Prosper today and this story is very significant. Prosper has completed their first acquisition – American Healthcare Lending (AHL) – for $21 million in cash.

As the name implies AHL is for patients looking to finance their medical procedures. Founded in 2009 in Salt Lake City, Utah, they work in a number of verticals within health care: cosmetic surgery, fertility, spine and neuro surgery, behavioral health, just to name a few. They are not actually a lender as such; rather they have developed a cloud-based patient financing platform that is integrated with a variety of lenders including Prosper.

This is from the AHL website:

American HealthCare Lending sits at the intersection of the healthcare, technology, and financial services markets and we are using technology to bring innovative financial services solutions to a massive healthcare problem. Our patient financing platform allows healthcare providers nationwide to Make Healthcare Affordable™ for patients every day by offering high-dollar installment loans to individuals with good credit.

This acquisition all started when AHL became a referral partner of Prosper last year. AHL is an innovative young company that appealed to the executive team at Prosper. They are looking to disrupt financing in the healthcare industry in a similar way Prosper is looking to disrupt the broader consumer lending industry.

AHL works directly with a number of lenders, including Prosper, but their main innovation occurs inside the doctors’ offices. The patient can enter their information on the spot and get a decision on their loan instantly. The maximum loan size is $100,000 and loan terms go up to 7 years. Obviously the loans they refer to Prosper would fit within Prosper’s loan terms – a maximum size of $35,000 and a maximum loan term of 5 years.

A Strong Position in the Medical Financing Market

[Read more…]

Lending Club May Also Be Seeking a Buyer

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This morning I just read this article on Reuters PE Hub. It claimed that Lending Club is also seeking a buyer at the same time they are preparing for an IPO.

LendingClub Corp., which is backed by investors including Kleiner Perkins Caufield & Byers, is pursuing a dual track process, two sources said.

The peer-to-peer lending company filed to go public in August but is also seeking a buyer, the people said. Goldman Sachs, who is an underwriter on the IPO, is advising on the sale, one of the sources said.

Now, let me say right away that I have no idea whether these rumors are true and I didn’t even bother contacting Lending Club about this because they would clearly say nothing. But it may explain why the IPO has not yet taken place. The original timetable said that the IPO would likely be before Thanksgiving. Given that they have not started their roadshow yet, that timetable is probably not going to happen.

I will be surprised if they do indeed sell before an IPO but it makes for an interesting exercise thinking about who would buy Lending Club. Given their lofty valuation I don’t think any bank would be willing to pay that much and as the article said private equity firms would likely not be interested either. If I had to guess I would say Facebook – they have shown they are willing to pay ridiculously high multiples in previous acquisitions and they have also indicated an interest in financial services recently. Then there is the historical link between the two companies – Lending Club launched in 2007 as a Facebook app.

It will be interesting to see how this plays out. I will obviously share when there is any real news to report.

Lending Club Makes Their First Acquisition: It’s a Traditional Lender

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Lending Club's first company acquisition is Springstone Financial

First, let me say this is not an April Fools joke. This announcement from Lending Club today is very big news and it is real. Lending Club has just closed on their first acquisition and it is not an online lender – they are buying a traditional lender called Springstone Financial for $140 million in a cash and stock deal.

Springstone Financial, not to be confused with Springleaf Financial, is a consumer lender based in Massachusetts, just outside of Boston. They have two divisions: a patient financing business that provides loans for people seeking elective medical and dental procedures as well as a tuition financing business for K-12 private school education.

Lending Club Raises a New $65 Million Round at a $3.76 Billion Valuation

Despite all their recent success Lending Club does not have $140 million in cash sitting on their balance sheet so they needed to raise more capital to finance this transaction.

Part of this financing was a $65 million equity capital raise from T. Rowe Price Associates, Inc., Wellington Management Company, LLP, BlackRock and Sands Capital. While Lending Club did not share their valuation for this raise it is not difficult to work out from their 8-K filing. Lending Club is now valued at nearly $3.8 billion (up from $2.3 billion just last November).

This $65 million equity round only got Lending Club part of the way there. They also took on $50 million in debt financing and the remainder of the deal ($25 million) was paid for in Lending Club stock. Which basically means no cash whatsoever came off Lending Club’s balance sheet to finance this deal.

Who is Springstone Financial?

[Read more…]

ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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