Lending Marketplace Prosper Locks Down $25M From Sequoia, BlackRock

Today Prosper, a peer-to-peer lending platform announced that it has raised an additional $25 million. The round was led by Sequoia, a longtime investor in the company, and was participated in by BlackRock.

The $25 million raise might feel oddly timed, as Prosper raised $20 million this January, a month that also saw it shake up its leadership team, including the installation of a new chief executive officer. Prosper, launched in 2006, had raised $94.9 million prior to today’s new cash infusion. Including the new funds, Prosper has accepted a total of $119.9 million in outside money.

According to the company, today’s funding was not raised out of duress, but was instead a component to the new direction it kicked off in earlier this year.

Taken narratively, I think that the Prosper story is simple: The $20 million and new management team that came this January were bets that its business model had legs, and was worth pursuing. If things went well, more funds would be made available. And, following a period of strong growth, Sequoia was willing to hand over more.

Loans executed on the Prosper platform totalled $9 million in the month of January this year. In August that figure had risen to $32 million. That is almost a quadrupling in under a year. On a twelve month run rate basis, Prosper is seeing loans executed of more than $360 million on its platform. Prosper’s website claims that it has lent a total of $630 million in its life. So, the company’s current yearly pace is essentially half its lifetime total.

Prosper claims that it intends to use the new $25 million in cash to “accelerate the company’s growth.” That’s generic funding verbiage, but in this case, given the company’s rapid lending rate ramp, it is probably true.

As a company, Prosper competes with Lending Club, and to an extent, Kiva. The public’s willingness to take part in services such as Prosper appears to be increasing with time. Where else can you lock in a 9% return on your funds? And with little to no tapering of the current Federal QE program in sight, other non-equity returns are not likely to move much, keeping Prosper and Lending Club attractive as potentially lucrative, if unconventional and higher-risk investments for normal folks.

A fair question is how large the total pool of potential capital is that Prosper and Lending Club are currently competing for, and if it is large enough for the pair to sustain growth over the next, say, half decade. I think that so long as the Federal Reserve keeps traditional lending rates low using its overnight rate lever, the pool is deep indeed.

Top Image Credit: Tax Credits