Looking to sell your private company in the alternative lending space? Check out this webcast: PANEL: Louis Vlahos, Tax Partner, Farrell Fritz, P.C. David Johanson, Partner, Hawkins Parnell Thackston & Young LLP Neil Morganbesser, President, DelMorgan & Co. MODERATOR: Alex Kasdan, Senior Managing Director, DelMorgan & Co. MAJOR TOPICS: Bargaining power at inception Shareholder, management […]
Looking to sell your private company in the alternative lending space? Check out this webcast:
Louis Vlahos, Tax Partner, Farrell Fritz, P.C.
David Johanson, Partner, Hawkins Parnell Thackston & Young LLP
Neil Morganbesser, President, DelMorgan & Co.
Alex Kasdan, Senior Managing Director, DelMorgan & Co.
Bargaining power at inception
Shareholder, management and other agreements
Importance of process – legal and investment banking
Reconciling goals of controlling shareholders with minority
ESOP as a sale strategy
Non-ESOP shareholder and management considerations
It is just the beginning of the coin offering market. In this article we, Block X Bank, an investment bank focused on blockchain, will explore using the best data available the past, present and future of the Initial Coin Offering (ICO) market. Total potential market size Private Equity Assets under management are valued in total to about […]
It is just the beginning of the coin offering market. In this article we, Block X Bank, an investment bank focused on blockchain, will explore using the best data available the past, present and future of the Initial Coin Offering (ICO) market.
Total potential market size
Private Equity Assets under management are valued in total to about $2.5 trillion USD. A Private Equity investor is typically locked in for 7 to 10 years. In general, the investment is difficult to value during that time. And the investor receives back their payment at the time that is solely at the discretion of the fund manager.
Imagine a world where most crypto-coins are regulated securities trading on regulated securities exchanges. And these coins are backed by shares in companies, cash flows, dividends, interests, notes, and other existing proven financial products.
Crypto-coins and initial coin offerings have in fact even more advantages: Initial coin offerings enable companies to not only raise money but to also get a set of initial customers and to build a community. This community will then also act as marketing agents and soft influencers to help promote the company and product as they have a vested interest in them being successful.
Per data from ICO Raises (www.icoraises.com) ICOs have raised approximatively about $3.494 billion until Dec 15 2017.
The general rule of thumb is that the average crypto holder will likely diversify into riskier and potentially higher return tokens about 5% to 10% of their portfolio.
As of December 19th 2017 according to coinmarketcap.com the total value of the tokens held by crypto market participants (in other words the market cap) is roughly $600 billion USD.
Therefore, we expect that about $30bil to $60bil in value is available for Initial Coin Offerings and other high-risk high-reward investments in the crypto space.
Some of these $30bil will probably be used for day trading and highly speculative pump-and-dumps or similar “business ventures”. We assume that a significant percentage , perhaps 20% of it at least, will still be used for Initial Coin Offerings.
Therefore, Block X Bank estimates that about there is additional demand for $3 to $5bil in ICOs as of December 2017.
From business-plans only to revenue-generating companies
The Initial Coin Offering market started with funding very early stage companies who only have a business plan. We have already noted that in the second half of 2017 the ICO market is now trending more towards companies with existing revenue, customers and working products. Early stage companies are still successful but only if they have a famous investor who puts their seal of approval by investing in the project first.
Basic economic cycle
Despite this move towards more established companies the Initial Coin Offering market also goes through the standard economic cycles.
The well know cycle of human emotions as applied to market cycles:
News Comments Today’s main news: SoFi Ventures to support financial services startups. Prosper’s valuation dives 70%. Fundrise drops minimum investment to $500 for New Starter Portfolio Offering. UK P2P lenders asked to reveal past defaults. Hargreaves Lansdown cancels special dividend. FinMason expands into Prague. PledgeMe close to profitability. Today’s main analysis: LendingClub is looking beleaguered. Australian fintech update. Today’s thought-provoking articles: Surge […]
For PeerIQ, it means continuing to execute upon the vision we shared at our seed financing just over two years ago. This fall, we will be launching our first products uniting TransUnion’s dataset with the PeerIQ analytics platform.
Along with its investment, Hearst brings several major holding companies, including auto data provider, BlackBook, and Fitch Ratings, the global ratings provider, which opens up many new value propositions for our customers. Finally, we are working hand in hand with Macquarie, a major provider of capital to the fintech space, to improve tools for warehouse lenders and their borrowers alike.
Fast forward to Monday. That’s when Lending Club is expected to log another progressive quarter, cranking revenue up to $136.2 million, and whittle the per-share loss back to only one cent; the company lost nine cents per share on $103.4 million in sales for the same quarter a year earlier. Not only is revenue expected to keep growing beyond that, Lending Club is expected to swing back to a profit in Q3, of two cents per share.
The Fundrise Starter Portfolio starts with a $500 minimum and includes a 9.25% annual dividend yield and zero advisory fees through the end of the year. If you want to try it out the Starter Portfolio comes with a 90 day guarantee. If you have a change of heart, Fundrise will purchase your investment back at the original investment amount. Not a bad deal to test the waters.
Prosper Marketplace Inc. is in talks to sell a roughly 10% stake to a Chinese conglomerate in a deal that could reduce the online lender’s valuation by more than two-thirds, according to people familiar with the matter.
Under the terms of the proposed transaction, Linca would invest $50 million in Prosper at a valuation of about $550 million. No deal has been finalized, however, and there was no guarantee the parties would come to an agreement, the people said.
David Kimball, who took over as Prosper’s CEO last December, has been focused on making the company profitable. In February, to ensure a funding source for the company’s loans, Mr. Kimball agreed to sell $5 billion worth of Prosper’s loans to a consortium of investors over the next two years along with warrants to purchase shares representing 35% of the company, The Wall Street Journal previously reported.
Real estate investment crowdfunding site Small Change has closed its first real estate offering available to everyone – not just accredited investors.
Small Change reports that investors have funded projects via their platform in cities including Pittsburgh, Los Angeles, New Orleans, and Washington D.C. These projects are as diverse as the cities in which they’ve been built. They include Pittsburgh’s first tiny house, a historic main street mixed-use conversion, and affordable housing in Washington, D.C. with the largest residential solar install in the country.
WSFS Financial Corporation (Nasdaq:WSFS), the parent company of WSFS Bank, today announced that it is now offering Private Student Lending Solutions, expanding its consumer lending product line to bridge the funding gap that exists between the actual cost of higher education and the federal aid, grants and scholarships available.
Social Finance, better known as SoFi, first teased it would file for an initial public offering nearly three years ago.
SoFi CEO Mike Cagney appears to be interested in filing for an IPO again.
If SoFi did file for an IPO, it would mark the second major IPO for a housing-related company after a dry spell the last few years.
According to an article in Reuters by Lisa Lambert, “Last year IPOs in the United States fell by more than a third from 2015, and many of those 102 share offerings ended up trading below their debut price.”
Fintech and adtech startup Fluid announced a strategic partnership with Nomad Credit, a financial marketplace for international students in the US; the partnership looks to offer better credit options to this underserved market; together the companies will deliver better financial literacy, credit building tools and more cost effective financial products.
Fledgling businesses rarely command seed or venture funding right out of the gate. But they still need cash to get started.
In reality, there’s a big difference between securing a loan for your business and winning over backers on a site like Kickstarter. Meanwhile, equity crowdfunding, enabled by sites like AngelList,CircleUp and SeedInvest, is generally for businesses that are further along.
Here are the real ways that most entrepreneurs get money at the very start.
Nine of the 15 United States financial technology “unicorns” — companies worth $1 billion or more, as tracked by CB Insights — are in the San Francisco area. These Bay Area companies, which are not public, include the online payments processor Stripe, the online lender Social Finance and the finance website Credit Karma.
For the last seven years, a New York business-backed program — the FinTech Innovation Lab — has been working to stem that West Coast tide by helping financial services start-ups sell their services in New York in an industry where the city clearly dominates: big banks and other finance companies.
One such “industry of the future” that Delaware should be working to attract is the financial technology sector, or what some affectionately call “FinTech. Empowered by mobile computing, these companies use technology to bring better, cheaper, more efficient financial services to citizens. Mobile apps that allow you to send money quickly to friends or family are examples of FinTech products.
For a number of reasons, Delaware is well-suited to become the nation’s FinTech capital. First, the financial services industry has served as a core portion of Delaware’s economy for over 40 years. Individuals with skills and expertise are ready and waiting.
Second, banks, of which many call Delaware home, are leading the way in partnering with startups large and small to develop new solutions and businesses in the space.
Third, Delaware’s nimble government and business community make it a flexible, attractive place for innovation.
There should be no surprise that with the growth of the internet and online banking that online lending would be close to follow. Over time, banks began to accept loan applications online and eventually began to offer full-service lending through the web.
While online loans may be tempting, it is important to consider every option when borrowing a large sum. Comparison shopping is your friend. There are more than 44 different kinds of business financing — that’s a large ocean to navigate before finding the lowest-cost option that fits your business profile and approval chances.
Nonbank lenders typically lend from their own funds or look to the financial markets to raise millions or billions of dollars to lend in smaller increments.
Here are some questions to ask yourself to get started:
How much money do you need to borrow?
Do you need an in-person experience or are you comfortable online?
The FCA is expected to announce new measures later this year, including forcing P2P groups to give extra information on the past performance of loans and on how much due diligence they have done on the borrowers’ past performance.
P2P lenders — which had collectively facilitated loans of £7.3bn in the UK by the end of last year, according to research from the Peer-to-Peer Finance Association (P2PFA) — have had plenty of time to prepare for tighter regulation.
The FCA’s latest review is the second in two years, and any measures are unlikely to come in before mid-2018, since the industry will be given between three and six months to respond to the proposals the authority puts forward later this year.
Fund supermarket Hargreaves Lansdown cancelled a planned special dividend on Friday after Britain’s financial regulator said the company needed to shore up its capital base, sending its shares lower.
The company plans to launch its HL Savings product later in the year, a cash deposit service supported by marketplace lending, and this year also launched Lifetime ISAs, or individual savings accounts eligible for a government bonus.
A recent survey revealed a third of SMEs in the IT sector have missed out on business opportunities because of a lack of finance. Distributors have long been a major source of credit for SME resellers but with consolidation taking place in distribution through mergers and acquisitions, the sources of credit available to resellers are being reduced.
One distributor that has publicly taken the initiative on credit is Exertis. The company recently introduced a programme called Credit Xtra with the intention of doubling the credit limit for more than 1,650 of its SMB accounts. There is also the option to increase the limit further if resellers remain within the distributor’s credit terms.
Dow believes that it is especially important to offer extra credit at this time of year, when resellers are targeting the peak summertime buying period in education.
NEW pricing rules on business loans will not apply to peer-to-peer lenders, the Competition and Markets Authority (CMA) has confirmed.
From today, all providers of unsecured loans and overdrafts worth up to £25,000 to small- and medium-sized enterprises (SMEs), will have to publish and clearly display the annual percentage rates (APRs.)
It had previously been unclear if this would apply to P2P and alternative finance lenders but the CMA confirmed to Peer2Peer Finance News this morning that it would not.
While NBFCs mostly deal with the unbanked population, P2P concentrate on the businesses that are usually locked out by traditional lenders and also on the tech-savvy individuals.
While P2P platforms have embraced the use of modern technology, NBFCs have failed in the use of technology. This has really affected their growth as they cannot really compete efficiently in the modern world.
The returns available to investors aren’t as high as they used to be, but they’re still much, much more than you’d get putting your money in a deposit account. But there’s a very good reason for that. It’s an awful lot riskier too. You’re not covered by the financial services compensation scheme – which safeguards up to £85,000 of your savings if your bank goes bust. That means you cold lose everything.
Hexindai Inc. (“Hexindai” or “the Company”), a fast-growing consumer lending marketplace in China, today announced that it has partnered with China UnionPay to launch its “Quick Pass” app on Hexindai’s mobile platform. The app will allow investors on the Company’s platform to use surplus funds that have not been lent out to pay for goods and services provided by stores partnered with China UnionPay by scanning a QR code created by the app.
CHINA will explore methods to include large Internet financial businesses of systemic importance in its macro prudential assessment, said a central bank report issued late Friday.
The first peer-to-peer lending platform opened in 2007, and exploded in popularity, with the number of such platforms increasing 18-fold between 2012 and 2015 and the combined transaction volume jumping about 40 times over the period, said the State Information Center.
Financial technology or fintech companies, particularly those focused on credit analysis, will greatly reduce cost of lending and also reduce credit risks. So, they are likely to experience fast growth on market demand as commercial banks are joining the inclusive finance market.
That market is currently dominated by smaller, private financial institutions, such as peer-to-peer or P2P lending platforms and consumer finance platforms.
In China, only 30 percent of citizens are covered by existing credit reporting system, while in mature markets the percentage could be 70 percent or higher.
By the end of July, the five biggest banks in China-Industrial & Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and Bank of China－had launched inclusive finance arms, just two months after the authorities concerned called for better financial services for a wider group of people across China.
Boston-based fintech and investment analytics firm, FinMason, announced its international expansion plans and the opening of a new operations center based in Prague. The company stated the initial expansion will include the hiring of twenty software engineers to keep pace with the rapid growth and development needs of the company.
The company shared that FinMason Europe, s.r.o., opened August 1st and the first employees have already started.
Vendorly, an innovative vendor oversight platform for financial institutions, today announced the continued expansion of its platform through the addition of three new third-party oversight integrations available on the Vendorly™ platform. These additions further enable our customers to enhance their compliance management framework and help them maintain the high oversight standards required in today’s marketplace.
Continuing this momentum, the new vendor oversight additions to the Vendorly platform include:
Dun & Bradstreet (NYSE: DNB)— Vendorly customers now have access to Dun & Bradstreet data to help make smarter decisions about their current and prospective vendor network.
The ID Co. — With DirectID, Vendorly customers now have the ability to conduct bank verification for current and prospective vendors in their network, to reduce fraud and misrepresentation prior to payment.
TINCheck — Vendorly customers now have the ability to validate the tax ID of all organizations in their current and prospective vendor network.
A new entrant in German online real estate lending, iFunded wants to address the market of larger property development projects that lie beyond the scope of real estate crowdfunding. Partnering with umbrella investment bank NFS Netfonds Financial Service, the platform is launching its first €10 million real estate bond issue, to be listed on the open market of the Frankfurt Stock Exchange. With this, iFunded leads, for the real estate online funding segment, the Fintech startup trend that consists in moving from exemption/sandbox status to a fully regulated financial environment.
According to Crowdfunding.de, in the first half of 2017, German online real estate crowdlending platforms raised €58 million, 45% more than in the entire year of 2016.
In July 2017, iFunded launched its first public bond offering, what motivated you as a company to add the classical fundraising channel to your online real estate platform?
Real estate crowdfunding in Germany has grown very significantly recently and will reach between €100 and €120 million by the end of 2017. However, it still is small.
Our first project Eisenzahnstrasse Berlin is a €10 million bond issue (ISIN: DE000A2E4FQ5) with a 3.5-year maturity and 5.5% interest rate. It is destined to transform an exi property into 281 flats, including a penthouse, and 2,400 sqm commercial space. The total estimated budget is €49.6 million and the expected income €67 million.
European robo-adviser Moneyfarm expects to become profitable by 2019 as it looks to bring to market new products in the coming months.
The Italian firm filed its 2016 financial statements this morning, announcing expansion to 10,000 customers in the UK and £260 million in global assets under management (AUM), which renders it the second largest robo-adviser in Europe.
The firm has reported total losses of £6.4 million in 2016, but claims this was in line with its agreed targets.
Linked Finance, Ireland’s leading peer-to-peer (P2P) lending company has raised over €1m for Kildare-based businesses.
36 Kildare businesses including well-known businesses Kelly’s Mountain Brew, Celbridge Playzone, and The Academy Barber, have used the Linked Finance platform to raise funds and facilitate business growth.
Mueller notes that Singapore and the UK were the early leaders in Fintech innovation as the respective governments determined it was of strategic importance. With government backing, Fintech flourished.
But there are many challenges for this transformation that is occurring at a breakneck speed. And as Mueller says;
“analog regulations built for the traditional banking space are not conducive to fostering innovation in a financial services industry turned digital.”
Mueller bullets out intrinsic challenges to the existing regulatory ecosystem:
Fear of failure has resulted in some regulators taking a go slow approach instead of being proactive. When things go wrong – who gets the blame?
Complexity in Fintech requires new skills. Regulatory agencies are typically populated with people entrenched in well defined processes. There is a lack of proper skills and staffing.
Internal culture may not be willing to adapt. Changing processes is always a challenge. A cohesive policy strategy is missing.
Fintech innovators may struggle to engage and communicate with a regulator. Fear of engagement harms us all
Yes, some countries are blazing trails in Fintech and the list of countries pursuing a Fintech Hub status is growing. Without acknowledging the elephant in the room that the US is not at the top of this list (even though it is the leading global financial center) is telling about the regulatory morass elected officials have allowed to persist.
Global banks and investment banks are far more complex creatures than their high street counterparts, which is why we’ve seen far less disruption in corporate, commercial and wholesale banking that we are seeing in retail, but don’t be complacent or closed here. There are things happening in the more complex areas too.
While fintech covers a diverse array of companies, business models, and technologies, companies generally fall into several key verticals, including:
Lending tech: Lending companies on the list include primarily peer-to-peer lending platforms as well as underwriter and lending platforms using machine learning technologies and algorithms to assess creditworthiness.
Payments/billing tech: Payments and billing tech companies span from solutions to facilitate payments processing to payment card developers to subscription billing software tools.
Personal finance/wealth management: Tech companies that help individuals manage their personal bills, accounts and/or credit, as well as manage their personal assets and investments.
Money transfer/remittance: Money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.
Blockchain/bitcoin: Companies here span key software or technology firms in the distributed ledger space, ranging from bitcoin wallets to security providers to sidechains.
Institutional/capital markets tech: Companies either providing tools to financial institutions such as banks, hedge funds, mutual funds, or other institutional investors. These range from alternative trading systems to financial modelling and analysis software.
Equity crowdfunding: Platforms that allow a collection of individuals to provide monetary contributions for projects or companies provisioned in the form of equity.
Meantime, rather than ignoring these changes, the biggest banks are investing in them. Since 2012, the ten largest US banks by assets participated in 72 rounds of investment totalling $3.6 billion in 56 FinTech companies whilst, in Europe, Banco Santander leads with the most number of unique investments to FinTech startups. The firm has made 13 investments to 12 unique fintech startups. The largest investment was a $135 million in Q3 2015 to small business lender Kabbage, that also included participation from ING among other investors.
Alternative lending was the golden child among investors around 2015, but lately, the industry seems to have fallen out of favor thanks to regulatory uncertainty and questions over the viability of some business models.
This week alone saw two examples of those concerns in action: One U.S. lawmaker, Rep. Emanuel Cleaver II (D-Mo.) sent a letter to five alternative small business lenders operating in the country, inquiring about their business practices.
PledgeMe came within cooee of turning a profit in the 2017 financial year, boosting revenue from fees to use its equity crowdfunding and peer-to-peer lending platform while also clamping down on costs, and is considering adding another string to its bow which that could need another capital injection.
The Wellington-based company narrowed its annual loss to $11,228 in the 12 months ended March 31 from $398,611 a year earlier as revenue climbed 55 per cent to $268,473 and operating costs were slashed 48 per cent to $288,502.
We have seen demand for construction loans between $10 million and $30 million spike 20 per cent per cent over the last six months as Tier 1 banks are quickly tightening both pre-sales thresholds and loan-to-valuation ratios on new developments.
One area of the greatest demand for non-bank finance is coming from Chinese property developers, who do not have the track record or Australian assets to provide comfort to the major lenders.
Peer-to-peer lending models, like that of Chifley Securities, allow us to access investor funds to progress these developments, as we are applying different, more nuanced assessment of the risks associated with these loans.
Braam Lowies, the study’s lead researcher, noted that while the concept was relatively new in Australia, it had been successful in the United States and United Kingdom for approximately seven years.
Wadhawan Global Capital (WGC), which owns 38% of Dewan Housing FinanceBSE 0.07 %, has invested Rs 175 crore in London-based mortgage financer Neyber, marking it’s second investment through the newly set up UK arm as it seeks to expand its global footprint.
Those who do not back the idea of PPF believe investors should carry the risk of loss as the principal idea of P2P Lending is to offer investors an “alternative investment route”. The P2P Lending platform, at best, can try to strengthen the risk-assessment processes by making the optimal use of technological innovations.
While the other camp which is in favour of PPF opines that it is not a luxury but a necessity at the moment as it will only instill confidence among the investors. And, it’s not about disbelieving one’s capabilities.
A summary of the proposals put forward by MAS in the Consultation Paper is set out below.
Expansion of licensing exemptions
(a) Expansion of licensing exemption for dealings in securities other than CIS
(b) Expansion of licensing exemption for provision of fund management services incidental to advisory activities
Dispensation with prior client approval for each and every rebalancing transaction
Case-by-case exemption from collecting full information on the financial circumstances of clients
Relaxation of criteria for CMS licences in fund management for digital advisers
Development, monitoring and testing of client-facing tools
Provision of information on algorithms and conflicts of interest
Responsibility of the board and senior management
MAS Establishes Payments Council (LATTICE80 Email), Rated: A
The Monetary Authority of Singapore (MAS) announced on 2 August that it will establish a Payments Council, comprising 20 leaders from banks, payment service providers, businesses,and trade associations. Members are appointed for a two-year term and chaired by Mr Ravi Menon, Managing Director, MAS. The Payment Council marks the vision of an e-payments society, fostering collaboration between providers and users of payment services in Singapore.
Communication and technology services company Green Packet Bhd is eyeing an expansion into a new growth area – the mobile payment solutions segment, an area poised for disruptions through technology.
According to the 2016 Visa Consumer Payment Attitudes survey, 74% of Malaysians prefer to make electronic payments instead of cash, an increase of 8% compared with 2015. In fact, Visa indicated in a separate study that seven in ten Malaysians are willing to use mobile wallets.
Such is the case of American banking giant Citi, which sees itself as a technology company with a banking license, having introduced video banking recently in India.
Video banking is seen suitable especially in wealth management, which is part of the regional consumer business led by Selva. This is a segment where customers need trust and constant advice.
Citi receives 70 million calls a year, almost half of which are answered by a phone agent. The bank usually spends about 30 to 45 seconds validating the call, asking the client his or her mother’s maiden name, date of birth and details about the last transaction.
In the Philippines, Citi now implements voice-enabled biometrics for easier client verification. Citi is likewise moving toward facial recognition.
GSX, which owns and operates the Gibraltar Stock Exchange, said on Friday that Cyberhub Fintech Holdings Limited is a new strategic shareholder. Cyberhub is a unit of Broctagon, a derivatives trading technology provider.
The stock exchange also wants to become the world’s first to fully integrate blockchain technology.
According to the 2017 Old Mutual Savings & Investment Monitor, working South Africans allocate only 15% of their incometowards savings.
Naidoo explained that these statistics emphasise the extent of the national savings deficit and the large gap that exists between targeted economic growth of 5.4% per year, as per the NDP, and the ability of the South African economy to fund that growth.
Naidoo believes that financial services providers and advisers have a vital responsibility to promote a savings culture via collaborative advice and financial literacy efforts.
Just three months in and Barbados’ sole peer-to-peer lending company, Carilend, is seeing tremendous success with 100 percent of its loans.
With over 900 registered users on the site to date, the team at Carilend has been amazed at the response they have received.
Carilend reported their “average” Borrower is borrowing $8,617 for 43 months at an average interest rate of 11.34%. Whilst all applications receive an answer in one working day, Carilend recently approved a brand new Borrower in 2 hours; 22 minutes from receipt of their initial application.