MarketInvoice, a peer-to-peer business lender, just closed its first major round of financing despite already being four years old and lending over £475 million ($US741 million) to date over its platform.
The London startup has raised £6 million ($US10 million) from Nordic venture capital firm Northzone, which also backed Spotify, and Paul Forster, the co-founder of job search engine Indeed.com.
It’s the company’s “series A” round — tech speak for the for the first injection of capital from institutions rather than friends, family, or rich individuals.
It’s clearly been doing fine without outside investment. MarketInvoice, launched in 2011, turned a profit in 2013 and 2014.
Co-founder and CEO Anil Stocker explained why they thought the time was right to raise money now. He told Business Insider: “We feel we’ve really laid the foundations to push this into the mainstream. We went from doing £15 million ($US23 million) a month last year to doing £30 million ($US46 million) a month now. I feel like we’re really getting a momentum going. It’s the perfect time to put our foot on the accelerator.
“And also from the market point of view, if you look at the attention the market is getting, not only from investors, but also from businesses, from the government — we think it’s a good time to raise the money.”
MarketInvoice is part of a wave of peer-to-peer businesses that have sprung up in the post-financial crisis world. A combination of bank lending drying up and poor returns for investors due to low interest rates have created the perfect conditions for peer-to-peer, where investors cut out banking middle men by lending directly to businesses or people.
MarketInvoice’s online platform applies the peer-to-peer lending model to invoice financing, a form of business lending where companies can borrow money against unpaid invoices. It’s effectively a way for businesses to get hold of money they’re due in the future today, although at a discount.
The idea is to become the destination for working capital, that short-term oxygen of finance that businesses need
Businesses that borrow typically have a turnover of between £1 million ($US1.5 million) and £2 million ($US3.1 million), Stocker says, and cover everything from construction to fashion wholesale to media.
Unlike other peer-to-peer lenders such as Funding Circle, MarketInvoice only lets sophisticated investors lend money over its platform right now. That means pension funds, hedge funds, rich individuals who classify themselves as sophisticated investors, and the government, which lends on the platform via the British Business Bank.
But MarketInvoice plans to open up the platform to retail investors — ordinary people — next year, using the money raised to help with a marketing push.
“The other one that we’re doing is to allow businesses to borrow money to pay suppliers to get goods made. The idea is to become the destination for working capital, that short-term oxygen of finance that businesses need.”We’ve launched this product called licence finance, which lets businesses draw down against monthly subscriptions up to a year in advance. That helps a lot of software businesses, technology businesses. We’re the first people to come up with this type of product.”
The startup is also working on new products. Stocker says: “We’ve been really focused around this invoice finance product, which is growing fast. We’re now starting to widen it out a little bit.
MarketInvoice also wants to expand to new markets in Europe in the second half of next year, Stocker says.
Jeppe Zink, a partner at investor Northzone, said in an emailed statement: “We’re seeing great metrics around user growth and engagement. This is a classic example of a tech business disrupting an age-old industry and having a fantastic real world impact on its users based on a fundamentally better service. The opportunity for growth is massive.”
The business is the brainchild of Stocker, a former banker and consultant who worked at Lehman Brothers before its collapse, and Ilya Kondrashov, an ex-Goldman Sachs analyst.