Funding Circle IPO: Squaring the circle
Funding Circle demonstrates the pitfalls of IPO-ing a marketplace lender.
The story of small business lender Funding Circle’s IPO in October was in some ways a surprise – and in other ways entirely predictable.
When the IPO was launched at the beginning of September there was feverish speculation that the firm, which chalked up revenue of £63 million in the first half of this year but has yet to make a profit, could be valued at more than £1.65 billion. This was the upper valuation limit set by Heartland, the private holding company of Danish billionaire Anders Holch Povlsen, which had pledged to buy 10% of the deal.
The ink was hardly dry on a strategic partnership that the lender had signed with Alcentra, under which the BNY Mellon-owned specialist loan manager will buy $1 billion loans from Funding Circle’s US business over the next three years.
Revenue for the full year 2017 was £95 million, so the first half 2018 numbers looked encouraging. The firm has now lent £5 billion globally since it launched in 2010 and is a high-profile poster child for alternative lending in the UK. Established with VC backing from Index Ventures and Union Square Ventures, backers now also include Accel Partners, Baillie Gifford, BlackRock, DST Global, Ribbit Capital, Sands Capital and Temasek.