Marketplace Lending investments recovered in 2017 to set a new funding record
The Marketplace Lending sector saw nearly $9bn invested across 233 deals in 2017
Investment in the Marketplace Lending sector slowed down in 2016 with a YoY decrease of 12.8%. Total amount invested fell from $8.6bn in 2015 to $7.5bn the next year.
2016 proved to be a challenging year for Marketplace Lending. This was particularly true in the US where industry leader Lending Club was embroiled in scandal; the company’s lending practices were called into question, and its CEO failed to disclose a financial conflict of interest. As a result, lending companies faced increased scrutiny and difficulties in attracting funding.
However, investment rebounded in 2017 to reach $8.9bn which represents a YoY increase of 18.6%. This makes last year the strongest to date for global Marketplace Lending funding.
Despite the growth in funding, deal activity declined from 277 deals in 2016 to just 233 deals in 2017. This resulted in the average deal size jumping from $32.5m to $45.4m over the same period.
The second half of 2017 saw two of the strongest funding quarters to date
Q3 2017 and Q4 2017 were the second and third strongest funding quarters, respectively, for the Marketplace Lending sector. The strongest quarter was Q3 2015 when $3.1bn was invested in the sector globally.
The largest Marketplace Lending deal of the year was closed in Q4 2017. Shanghai-based Lufax, a P2P lending platform, raised $1.2bn. The Series B round was led by COFCO with co-investment from China Minsheng Bank and Guotai Junan Securities.
Despite the high total investment, deal activity was historically low in the final quarter of 2017 with just 45 deals completed.
Marketplace Lending investments are spreading geographically
In 2014, more than half of all Marketplace Lending deals were closed in North America. This has gradually decreased every subsequent year to reach a share of 30.1% in 2017.
Meanwhile, the share of total deals completed in both Europe and Asia increased over the same period to become equal with North America in 2017. Europe had a deal share of 23.2% in 2014 which rose to 30.1% last year, while Asia saw the largest increase from 17% to 30.1% over the same period.
‘Other’ regions including Africa, Australasia and South America maintained a steady share of deals between 2014 and 2016 with a range between 6.5% to 6.7%. This value rose to 9.7% in 2017. The largest deal in this category in 2017 went to Sydney-based consumer lending platform MoneyMe. The company received $91.5m in debt financing from Fortress Investment Group with co-investment from Evans & Partners.
The top ten Marketplace Lending deals in 2017 raised half of the total funding for the year
The top ten deals in the Marketplace Lending sector in 2017 raised a combined total of $4.4bn. The largest deal last year was the previously mentioned $1.2bn Series B round to Lufax.
The next three top deals all raised $500m and went to US-based companies: online loan provider LendingPoint in a debt financing round from Guggenheim Securities; lending and wealth management specialist SoFi in a Series F round led by Silver Lake Partners; and SME lending platform Kabbage in a debt financing round.
Four companies in the top ten are P2P lenders, while a further three offer solutions in each of the Online Loans and SME Finance subsectors.
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