You Spin Me Right Round, Baby

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What's going on?

On Monday, Funding Circle – a UK fintech company that crowdsources loans for small businesses – announced plans for an initial public offering (IPO) that could value the company at a unicorn-tastic $2 billion.

What does this mean?

Founded in 2010, Funding Circle’s a peer-to-peer lender. Small companies borrow money that comes from Funding Circle’s 75,000 investors – who receive interest on the loans. The company’s raised over $400 million so far and hopes to raise another $390 million through its IPO – it plans to use the money to crack the US market (tweet this).

In the last six months, Funding Circle’s revenue grew 54% to $81 million (fun). But its losses grew, too (less fun). That won’t stop its listing, though – investors seem to love loss-making companies as much as the profit-making ones.

Why should I care?

For markets: US investors might be nervous.

US investors are probably familiar with Lending Club and OnDeck Capital, two similar companies to Funding Circle. Since “going public” in 2014, both have struggled to turn a profit – leading their share prices to fall (as well as being accused of “deceiving customers”). Funding Circle’s already won one major investor – a Danish billionaire who’s also backed online fashion retailers, ASOS and Zalando (he’ll buy 10% of the new shares sold). It likely hopes it’ll help encourage other investors to join the party.

The bigger picture: A big win for venture capital investors.

One of Funding Circle’s biggest investors is venture capital firm, Index Ventures, which owns about 20% of the company. It’s set to have a baller summer, pocketing around $2 billion from bets on fintech startups. Index invested in payments tech firm, iZettle, which was bought by PayPal in May. Not to mention payments processor, Adyen, which went public in June to much fanfare – its stock price doubled on its first day of trading.

Originally posted as part of the Finimize daily email.

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