http://www.nytimes.com/2015/04/09/business/dealbook/prosper-marketplace-raises-165-million-in-latest-funding-round.html?_r=0
APRIL 8, 2015
SAN FRANCISCO — To keep propelling its growth, Prosper Marketplace is turning to a new round of investors — including several banks that once could be seen as competitors.
Prosper, an online loan marketplace, plans to announce on Thursday that it has raised $165 million in new financing. The investment was led by Credit Suisse NEXT Investors, an arm of the Swiss bank, and was joined by other banks like JPMorgan Chase, SunTrust Banks, USAA and BBVA Ventures.
Other investors included Neuberger Berman, Passport Capital and Breyer Capital.
“They represent really strategic investors for us in the long term,” Aaron Vermut, Prosper’s chief executive, told DealBook in a telephone interview. “In the past, our investor makeup was primarily venture capital and private equity, so branching out into strategic investors is new for us and very exciting.”
The new round, which valued Prosper at $1.7 billion excluding the investment — more than double its valuation this time last year — continues to highlight the continued interest in loan marketplaces, which match would-be borrowers with willing lenders through the Internet using sophisticated computer algorithms. (Though the industry began under the name “peer-to-peer,” its members have gravitated toward the moniker “marketplace lending,” in part because so many of the investors in loans originated by the business are now huge financial institutions.)
Lending Club, Prosper’s biggest competitor, went public last year in one of the more prominent stock debuts of 2014. Lending Club’s initial offering — the first in the industry — raised more than $870 million, exceeding expectations, and it now trades at a market value of about $7 billion.
Prosper, once the leading member of its industry before a series of management problems, is deep into a multiyear turnaround. The company said that it originated nearly $600 million worth of loans in its first fiscal quarter, up some 300 percent from the same time a year ago.
Over all, the company pulled in $80 million in revenue on $1.6 billion in loan originations last year, compared with $19 million in revenue on $360 million in loans in 2013.
And this year, the company believes it is on track to more than double its revenue, to $180 million. (One thing it is not focused on yet is profit, choosing to invest in growing the business instead of getting into the black.)
“We’ve changed the company so much, it’s unrecognizable,” said Mr. Vermut, who took over the company with a group of investors in 2013. “This is a real business.”
That sort of growth has drawn interest from traditional lenders that once would have made the kind of loans that companies like Prosper now put together. New regulations have made these kinds of loans, which are meant primarily to refinance credit card debt, too unprofitable for bigger institutions.
Among those that showed high interest were banks like Credit Suisse and JPMorgan, which have forged relationships with Prosper through some of their other businesses. Credit Suisse’s asset management arm, for example, allows some investors to buy parts of loans originated on Prosper’s market.
So strongly does the Swiss bank believe in the viability of marketplace lending that it approached Prosper last year, offering to help the company find suitable investors for its next fund-raising effort.
Its investment is being made through Credit Suisse’s NEXT fund, a part of its asset management arm that focuses on financial services start-ups. Among the other companies that the fund has invested in are the data analysis firm Palantir and the financial derivatives pricing company Markit.
“This is a financial innovation where the consumers and the lenders are benefiting,” Alan Freudenstein, co-head of the NEXT fund, said in a telephone interview of marketplace lending. “It’s a material, innovative step forward in finance.”
These loan marketplaces have begun branching out into other forms of consumer debt. Earlier this year, Prosper bought AmericanHealthCare Lending, which helps patients borrow money to pay for elective medical procedures like cosmetic dentistry, for about $21 million.
“We believe Prosper is bringing much-needed innovation to financial services, and we applaud their efforts to build a product for consumers built on trust, transparency and excellent customer service,” Vic Pascucci III, the head of corporate development at USAA, said in a statement.
With the new money, Mr. Vermut said that his company planned to continue growing both its user base and the kinds of loan services is has to offer.
But while Lending Club has now been public for more than three months, Prosper still has plenty of work to do, its chief executive said. Later this year, it plans to embark on a huge promotional push to raise awareness of its brand and improve its user experience.
Though the company is technically big enough to go public now, and it has completed a three-year audit by the accounting firm Deloitte — a necessary step for an I.P.O. — it won’t pursue a public stock listing this year.
“We probably have a little more work to do,” Mr. Vermut said. “Ringing that bell seems great, but that’s not the main goal.”