Funding Circle Marketplace Lending: How to Get to the Golden Age Sam Hodges, Co-Founder and US Managing Director April 2016
Funding Circle is the global leader in marketplace lending to small businesses Funding Circle Origination Volume ($M) 1098.3992 October 2015 Launch in Germany, Spain & Netherlands October 2013 Launch in the US 482.183 August 2010 197.184 Launch in the UK 74.8442 26.4442 3.3413 2010 2011 2012 2013 2014 2015
We are achieving global scale +$2 Billion in SME loans +45,000 Investors globally 15,000 +600 5 $273 M business borrowers Employees in 5 offices Operating countries Raised in equity capital UK, US, Spain, Germany, Netherlands
We have taken great strides in the past 12 months Apr Oct Nov Feb 2015 2015 2015 2016 $200M+ $150M Launched in Jörg Asmussen raised by SME raised from blue Continental joins board Income Fund chip investors Europe SME Income Fund
We believe we are on track for a Golden Age “The marketplace model will eventually become the institutional framework of the global financial system – and this will happen within 20 years.”
We’re in an increasingly uncertain economic climate US High Yield Spread (BofA ML, option-adjusted) 9% 3% 2013-12-022014-02-212014-05-142014-07-312014-10-17 2015-01-072015-03-262015-06-162015-09-03 2015-11-202016-02-10 SOURCE: Bank of America Merrill Lynch
And scrutiny on the industry is increasing Operational Quality & Controls Stability Credit of Funding Sources Performance
These questions are normal for any emerging industry Visibility Peak of inflated expectations Slope of enlightenment Sustainable growth Trough of disillusionment Technology trigger Time SOURCE: Gartner
Marketplace lending is extremely well positioned in a period of uncertainty Compressed yields in Low interest rate Continuing instability of traditional asset classes environment the banking sector
But only if we perfect the marketplace model Stable lending capital Diversified funding sources without systemic risk Controlled risk Predictable credit outcomes with transparent performance Operational discipline Reaching scale in a cost-effective way Thoughtful levels of borrower and investor protection Infrastructure & transparency coupled with great customer service
A diversified capital base creates stability Whole loan marketplace Fractional marketplace Funding Circle SME Income Fund Individual investors 1 Institutional investors Private funds Investors 1) In US: Accredited Investors
We launched a $200M+ SME income fund SME Income Fund Permanent capital Purchasing loans in Traded publicly vehicle 5 countries On the LSE
There are significant benefits to using investment capital instead of deposits No maturity transformation No risk of a bank run No deposits Investment capital Do not hold inventory Lower capital requirements
We have a world-class risk team focused on consistent credit performance Jerome Le Luel Global Chief Risk Officer Manpreet Dhot Rahul Pakrashi Torsten Nahm Chief Risk Officer (US) Chief Risk Officer (UK) Chief Risk Officer (CE)
Strong risk performance generates consistent investor returns As we grow, we continue to collect more data – and that means our level of risk assessment is getting stronger everyday. Governance structure 360 view of small Global learnings and businesses experience 15
The marketplace lending model generates tremendous efficiencies More loans/ data Better models Better marketing & underwriting & acquisition costs processes Higher acceptance rates
Which allows us to build a truly global platform
We will never lose sight of our customers or our mission Small business creates 63% “Funding Circle’s process of net new private was fast. It felt like they had sector jobs 1 compassion for me as a new business owner, and an understanding of my financial needs.” Small business employ 55% Dr. Celina Hatt 120M Founder/CEO of SMBs with revenue Americans – half the $100K to $1M cannot private sector workforce 1 get full financing 2 SOURCE: 1) Harvard Business School; 2) Federal Reserve Bank of New York
We are proud to provide a best in class experience for borrowers UK net promoter score US net promoter score 90 -11 86 10 FC Banks FC Banks
In addition to transparency for our investors $ $ Financials Loan by loan detail Investor net returns
We have played a leadership role in promoting the responsible growth of our industry
Our vision is to originate $100 billion a year by 2025 Funding Circle in 2025 : Stable lending capital $100B 3M Controlled risk Origination New jobs p.a. p.a. Operational discipline 2M 750,000 Investors SMBs p.a. Infrastructure & transparency
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