Finnish p2p lending marketplace Fellow Finance* plans an IPO at Nasdaq Helsinki. Established in 2013 and launching operations in 2014, Fellow Finance is an internationally active and growth-oriented FinTech group that provides crowdfunding services. The Company has facilitated peer-to-peer loans to consumers as well as loan-based crowdfunding and invoice financing to businesses in a total amount of more than EUR 295 million, serving nearly 430,000 users from around 50 different countries. Fellow Finance’s net sales consist mainly of commissions and interest income. Taaleri Plc is the largest owner of the Company, with an ownership of 45.7 percent before the IPO.
In 2017 Fellow Finance’s net sales was EUR 8.7 million, growing by 55 percent from the previous year. The good development continued in the first half of 2018, as the Company’s net sales grew by 43 percent compared to the same period of the previous year.
The objective of the planned IPO and Listing is to finance international growth and expansion of operations. Further objectives for the Listing are to increase the number of share-holders, give the Company access to capital markets, and in-crease the liquidity of the Company share and awareness of the Company. The Listing will also allow the more efficient use of shares as e.g. means of payment in eventual corporate acquisitions and in the remuneration of employees. The gross proceeds that the Company will receive from the Share Issue are estimated to amount to a total of approximately EUR 10.0 million, before IPO related fees and expenses.
Institutional investors consisting of certain funds managed by OP Fund Management Company Ltd and Sp-Fund Management Company Ltd as well as Prior&Nilsson Fund and Asset Management Ltd have given their pre-commitments to subscribe for shares and agreed to become cornerstone investors in the IPO. Additionally, the Company’s Chairman Kai Myllyneva, and members of the Board of Directors Esa Laurila and Jorma Alanne given their pre-commitments to subscribe for shares in the IPO. Total subscription commitments amount to approximately EUR 4.6 million.
Fellow Finance’s CEO Jouni Hintikka says: “We have created an advanced marketplace where we unite businesses and individuals looking for financing in Finland, Sweden, Germany and Poland with a global pool of investors looking for returns. Borrower customers are provided with peer-to-peer loans, business loans and invoice financing at market terms. For investor customers our services enable diversification of assets into an alternative asset class with minimum need of time and effort.”
Today I take a look at the recent development of investor numbers on several p2p lending marketplaces. I chart relative numbers with the index set to 100 for June 1st, 2018. The advantage of using indexed numbers for this comparison is that platforms use very different definitions for their investor base size. Some count registered investors, some count investors with deposits, some count active investors, some count recently active investors, … .
The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because they come from smaller absolut numbers. An example for this effect is Peerberry where percentage growth of investors is rapid, but the absolute number as of Sep, 1st has reached only 2468 investors as it is a very young marketplace.
Indexed investor numbers (with June 1st, 2018 = 100). Peerberry exceeds the choosen display scale – value for Apr. is 66 and value for Sep. is 183 Reading example: On Sep 1st the index value for Mintos was 123, meaning Mintos had 23% more investors than on Jun. 1st
Orca Money is currently running an equity crowdfunding campaign on Seedrs to raise 500K GBP at a premoney valuation of 1.7M GBP. Anybody can invest in Orca Money shares with a minimum investment amount of 10 GBP applicable. I interviewed the Orca CEO Iain Niblock
What is Orca Money about?
Orca is an aggregation platform, allowing investors to invest across a range of peer to peer lending (P2P) platforms, lending sub sectors and a large number of borrowers. We further offer independent investment research, providing confidence to investors when making decisions.
Currently investors are investing directly on P2P platforms. This makes building and managing a diversified portfolio frustrating. We centralise this process by allowing investors to research, build and manage their portfolio from the Orca platform. We provide the P2P platforms with a source of retail investors.
Investors can review the performance of their portfolio, diversify their risk and earn the attractive returns that the sector offers.
What are the three main advantages for investors?
Risk adjusted returns: We offer an investment return to our users which is reduced in risk through diversification. By allowing investors to invest across multiple P2P platforms, lending sectors and a large number of borrowers, we facilitate easy diversification.
Reduced admin burden: Orca manages all fund deployment, email communication and performance data aggregation. Investors can login to their personal Orca dashboard and view a breakdown of their portfolio, as well as an aggregated view of their investment performance.
Automatic portfolio build: Orca has been producing independent analysis on the market for the past three years. We have conducted due diligence in the market and curated a portfolio for investors to invest through. This removes the hassle from P2P investing.
You are currently raising money. Who are you raising from and what do you plan to use the capital for?
Our investment is open to the public on the Seedrs equity crowdfunding platform. Investors across the EU can register and invest in the Orca business. The proceeds will allow us to expand our userbase, integrate with more lenders and to further develop the functionality of our platform.
Prior to launching the crowdfunding campaign, we secured a portion of this investment from two institutional funds based in Northern Ireland and a number of leading angel investors. It’s great to be combining these investors with crowd investors.
Why have you selected Seedrs for your equity crowdfunding campaign?
A number of our customers mentioned that they would like to invest in Orca’s business. We’ve gained incredibly valuable feedback from these customers and, ultimately, we wanted to give them an opportunity to own shares in the business. We hope that this campaign will attract further investors and customers to do the same.
Personally, I’ve tracked the equity crowdfunding market closely for many years and I’m now genuinely excited to be leading a campaign. Seedrs was an obvious choice as they have facilitated funding for a number of other P2P platforms.
One benefit of Seedrs is that investors invest through a nominee structure. The Seedrs nominee structure holds and manages the shares on the behalf of the underlying investor. For the investor, this means the nominee can track and monitor shareholder rights as a collective. For the company, this reduces the administrative burden of having a large shareholder base.
Where do you see Orca Money in 3 years?
We aim to evolve into the hub for P2P investment research, investing and portfolio management. Investors will be given access to credit investments across the EU, originated by P2P platforms and other non-bank lenders. The functionality of our platform will increase, delivering a fully functioning investment aggregation platform.
Orca is a differentiated product in a rapidly growing market.
Name one fact that makes your pitch a better investment than any other pitch on Seedrs.
In comparison to other Seedrs pitches we believe our valuation is very good value. This was set by institutional investors based in Northern Ireland where valuations are generally lower than other parts of the UK and in particular London. I’d expect the valuation to rise substantially during any subsequent rounds.
The table lists the loan originations of p2p lending marketplaces for last month. Mintos* leads ahead of Zopa and Ratesetter*. The total volume for the reported marketplaces in the table adds up to 420 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file, I can publish statistics on the monthly loan originations for selected p2p lending platforms. This month I added Soisy*.
Milestones achieved this month (total volume since launch):
Ratesetter is the brand name of one of the top 3 UK p2p lending marketplaces. Unfortunately only UK investors can invest on Ratesetter UK, otherwise I would have tried it out.
Ratesetter is also the brandname of Ratesetter Australia. While not rund by the same company this Australian p2p lending marketplace uses the same technology base and is offering similar products, consumer loans of up to 5 years. Since launching in 2014 Ratesetter Australia has originated more than 325 million AUD in loan.
The site does not feature it, but actually Ratesetter is open to non-resident investors. I recently found this out and went ahead and opened I account in the past week. The signup process for non-residents is not as straightforward as on other marketplaces. I post a detailed description of how I did it below.
But why send money that far away?
Because rates are attractive. Interest rates are currently up to 9.3% (compare that to around 6% that is achieveable for 5 year investments on Ratesetter UK*). And that rate is AFTER fees.
A further important feature is the provision fund. That is capital stored that is used to reimburse lenders of defaulted loans. While that is no insurance or guarantee, it is in my view a much stronger portection than the ‘buyback guarantee’ that some other market places promise.
There is currently 10.6 million AUD in the Ratesetter Australia provision fund. And since 2014 the provision fund has paid for every default without exception.
Review of advantages
established platform
very high interest rates (displayed rates are after fees)
no default losses since 2014 for investors (due to the provision fund)
comprehensive statistics & loanbook download
Review of disadvantages
signup a little more effort than usual (see description below)
no secondary market. Investors investing in the secondary market should not expect to be in a situation were they might need that money earlier
10% withholding Tax for German residents (for other countries check here – according to Ratesetter it is either 0% or 10% depending on country)
very volatile currency exchange rate
transaction fees for changing EUR -> AUD according to description below is 0.35%; to convert back AUD -> EUR the fee is 0.45%
My conclusion
Only investors that want to invest a larger amount for a long duration should consider this. Otherwise it is not worth the effort in my opinion.
Currency exchange rates EUR/AUD last five years (Source)
How I signed up as a a non-resident investor on Ratesetter Australia – step my step explanation
As the process is more effort than usual, I suggest you read the complete remainder of the article and decide if it is for you, instead of just diving into the registration process.
Step 1: Trigger Ratesetter registration process
Sign up via this link* and the first 5 investors have a chance to get a cashback bonus of $75 AUD – see conditions below*
First there is a welcome page, click “Register Now” there and then this page is shown:
Yes, you saw that right. After clicking Register, you STOP and do NOT proceed with the signup on the website as it can only handle Australian residents.
Step 2: Continue registration
After a few minutes I got an automated email asking me to complete my registration. I did NOT click on the link provided in the email, but rather send a reply email, stating that I am a German resident and would like to invest on Ratesetter and that I have an Australian bank account. I asked that they would please guide me through the process.
Step 3: Australian bank account
WTF? Sounds much more prohibiting than it actually is. I had a Transferwise* account already and with a few clicks could open a free Transferwise borderless account in Australian dollar which comes complete with account number and BSB code (routing code). If you don’t have Transferwise* you can open it for free, only plan a little time for verification.
The Australian Transferwise account later serves as reference bank account which is entered into the form in step 5.
Converting EUR in AUD costs 0.35% at Transferwise (how I saved that fees is written below). The current fee for later changing back AUD to EUR is 0.45%.
Step 4: Obtain scanned certified copies of documents for registration
While I waited for the answer from Ratesetter from Step 2, I went ahead and obtained scanned certified copies of documents. I could do that a the town hall (cost incurred 3.50 EUR). It will probably be different in other countries. Needed is a) current driver licence OR current passport b) proof of address no older then 60 days: utilities bill (such as an electricity bill or phone statement) OR bank statement or other bank correspondence OR correspondence from a local or central government department
Step 5:. Going on with registration
Meanwhile I got the reply from Ratesetter support. They are super helpful, but time zone difference means every back and forth takes a day. Ratesetter sent me a link of a web form to complete. I did that (entered ‘-‘ for SWIFT) and told them so via email, which I attached the requested certified document copies to.
Step 6: Registration is complete
One day later I got the confirmation that my registration was completed and I was ready to go.
Step 7: Deposit
One can now convert in the Transferwise account Euro to AUD wechseln and then send money from the Transferwise Australian currency account to Ratesetter. Ratesetter shows the necessary routing information under Transfer funds in > Transfer by Bank Transfer > Other
Saving in currency exchange when depositing
I could save the 0.35% Transferwise currency exchange fee for EUR > AUD by using a free Revolut* account and exchanging between Monday and Friday EUR to AUD fee free. Then transfer the AUD either to the Transferwise AUD account or directly as a Ratesetter deposit payment.
I just started. I intend to lend for the 5 year market and experiment with setting my own desired rates slightly above market rate. Watch out for an update here on the blog after I have several month of experience or – probably more frequently on the dedicated thread on the German discussion forum.
*$75 AUD Cashback Bonus for the first 5 investors, that register thought the given link before 16.09.2018 and at least $2000 AUDÂ on the 3 or 5 year market. Precise terms and conditions on the Ratesetter site. To qualify I think swift action will be needed, given that the registration, deposit and lending will take some time.
Swiss invoice finance platform Advanon has to deal with a large fraud case. A client allegedly made up invoices for non-existing transactions and submitted forged invoices, bank records and emails. These invoices were then financed on the Advanon platform by 78 private investors. The fraud continued undiscovered for about a year racking up a total damage of 2.4 million CHF (approx 2.1M EUR).
2.4M CHF may not sound a very large absolute sum for a p2p lending company, but Advanon so far had financed invoices of only about 60M CHF in 2017, so the potential loss equals roughly 4% of the total yearly volume. And the exposure per investor is unusually high for a p2p lending marketplace as the affected investors could face a 30K CHF loss on average. Media speculation is that they might face a total loss. Advanon has about 3,000 registered investors, the majority from Switzerland with a few German investors. Advanon offers interest rates between 6-20%.
“We founded Advanon with the mission to help SMEs meet the ever-increasing payment deadlines and thus have a positive impact on the SME economy and its growth. It is frustrating and intolerable that this was being exploited by fraudsters with great criminal energy. We are mobilising all our efforts to fight for our investors and to recover the money they have invested.†Several lawyers and the entire management are working on the case. “We will adjust our strategic direction,†said Advanon CEO Lojacono. As a consequence, only institutional investors will soon be admitted to the platform. Advanon has always emphasized that investing in a high-risk asset class like factoring should only be considered as part of a diversified portfolio.
The case is now investigated by the public prosecution body.
Last November Advanon announced a pilot project for an invoice financing cooperation with insurance company AXA Wintherthur.
