As a peer-to-peer business lender, Funding Circle is no stranger to understanding the plight of British SME owners that are trying to secure finance in order to further the growth of their companies.
Of course, having raised a total of $273m in equity funding since launching in 2010, finance isn’t something Funding Circle has to worry about.
It should be noted, however, that the fintech space has only truly taken off in the past couple of years but it’s over the past nine months that Funding Circle has truly been put on the map.
Naturally, that’s a reference to the company securing a $65m Series D round in July 2014, which was swiftly followed up with a $150m Series E round in April 2015 effectively enabling it to be crowned as the British company with the fifth largest venture capital investment round in UK history.
Explaining how the business has changed since the Series D, Funding Circle CEO and co-founder Samir Desai told Real Business: Growth on both sides of the Atlantic has been phenomenal. Investors are now lending approximately 40m per month in the UK, and $15m per month in the US. In the States investors have reached the same level of lending as Funding Circle in the UK after three years, in just 1.5 years.
Discussing how Britain served as a great starting point, he revealed: The UK in particular was a great market to start Funding Circle in, and this has included fantastic support from the regulator and government. The government has introduced a new regulatory regime and has also committed 60m to lend through our marketplace in the UK. If anything, this proves that you can start a good idea anywhere in the world and be able to access global capital to grow.
This is very much what Funding Circle is aiming to do for established small businesses allow them to access capital from around the world to grow and expand faster and at lower cost than the options they have today.
The funding was used to consolidate the growth, according to Desai, who revealed that was achieved with investments in technology and talent while chalking up the rapid growth in the US to innovation, marketing and credit analytics experience.
However, even more interestingly, the record-breaking $150m Series E wasn’t even something that Funding Circle was in dire need of.
It’s worth noting that we actually still have the vast majority of funds on our balance sheet from our last round,” Desai explained casually. Whilst we did not need the additional capital, the opportunity to bring on some of the most sophisticated and largest investors in the world was too good to pass up our backers collectively manage over $5tn.
“We are now one of the best capitalised small business marketplace lending platforms in the world, which gives investors and borrowers the confidence that Funding Circle is here to stay.
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At the time of the announcement, it was stated that the funds would support the company’s further growth. Detailing the specifics of the expansion, Desai insisted that aggressive investment in company technology was paramount to the operation.
He added: We also plan to offer more lending products to better meet the needs of the small businesses that are coming to our platform. In the UK alone, the small business lending market is worth 7bn a month, and the US is five times that size so we have plenty of room to grow in our core markets in any case.
David Yu, former CTO and CEO of Betfair, has joined Funding Circle as part of that strategy as the company’s chief product officer which will see him running tech globally.
“We aim to become the marketplace for small business finance, where any investor, small or large, can earn an attractive return by lending to creditworthy small businesses,” said Desai of the hire.
Last year we introduced property finance for small businesses in the UK which has been hugely successful. Small businesses have now borrowed more than 50m helping to provide more than 400 homes across the country. In time, we expect to be able to offer the full suite of small business finance products.
Around 8,000 businesses and 40,000 investors are signed up to Funding Circle and, with growth in mind, Desai said investors are set to lend over $1bn to small businesses globally, and expects increases of more than 100 per cent annually.
Funding Circle has managed to thrive in a time where banks have become comparable to outcasts, with an eBay study finding that SMEs have started to snub the traditional financial institutions. As such, alternative finance has rise to the fore, making room for a number of startups to capitalise.
Emerging Crowd, a new UK crowdfunding business, is one of them. But why does the world need another crowdfunding company Well, Emerging Crowd has its sights set on developing markets and is pointing British investors to look beyond their borders in order to make quicker returns on the back of faster regional growth.
Clearly Funding Circle, with its support of the US and UK, is fixed on developed markets but for how long
Desai was coy about where the company would expand to, but teased: We have visited many countries in the world and very few, if any, have a well functioning small business lending sector. We cannot disclose at this time where we will go next. Small businesses are under-served across the world, which is why we believe the Funding Circle marketplace model can be global.