Startup to Unlock Potential of Rapidly Developing Online Direct Lending Market for Institutional Investors
New York, NY — December 5, 2013 — Orchard, an analytics and investment platform focused on the global online direct lending market, announced today that it has raised a $2.7 million series seed round. Orchard plans to use the funds to build and expand its platform to facilitate smart, fast, and profitable online lending for institutional investors. The investment round was led by venture capital firms Spark Capital and Canaan Partners, along with participation from several other funds and strategic angel investors.
Online Direct Lending, also known as “peer to peer lending”, allows borrowers to apply for loans online at interest rates that are often better than what could be obtained from traditional lenders. Investors can then choose to fund these loans and earn money on the principal and interest payments. This growing market has recently seen increased public awareness, as the major U.S. lending platforms, LendingClub and Prosper, are on track to originate $2 billion and $350 million of loan volume respectively in 2013, up from a combined $871 million in 2012 and just $332 million in 2011. Over the past several years, dozens of new Online Direct Lending platforms have launched both in the U.S. and abroad and are expanding into small business, real estate, automobile, and student loans.
“While online direct lending in the U.S. started as a primarily consumer phenomenon, there is a massive opportunity for innovation in other asset classes as well, especially in small business”, said Santo Politi of Spark Capital.
What began as a “peer to peer” market focused primarily on retail investors is now drawing increasing interest from institutional investors, attracted by the high yields and predictable returns of consumer credit.
“We are at a unique point in time where the forces of technology, globalization, and grass-roots consumer empowerment are converging to modernize lending – a multi-trillion dollar global industry,” said Matt Burton, Orchard Co-founder and CEO. “Institutional investors want access to Online Direct Lending but require an entirely new set of tools. At Orchard, we are focused on building the data, systems, and infrastructure to enable our clients to deploy large amounts of capital and ultimately to help Online Direct Lending scale into a mature financial market.”
Orchard offers institutional investors the ability to use advanced predictive models, high-speed and robust investment execution, and high-quality reporting to build an online lending portfolio at scale. Orchard also works with investors at various points in the investment lifecycle, for example, development of custom risk prediction models, validation and backtesting of investment strategies, custom reporting solutions, and advisory on capital structure and portfolio composition.
“The massive potential of this market is clear, as we’ve seen with LendingClub’s growth over the past several years, and we are only in the beginning stages,” said Dan Ciporin of Canaan Partners. “We’re excited by Orchard’s vision and leadership and know they have what it takes to take this space to the next level.”
Orchard is currently piloting its analytics platform on LendingClub and Prosper and plans to add additional exchanges in 2014. The company is also strongly focused on building community and advancing knowledge of credit among investors. Orchard hosts monthly “Online Direct Lending Meetups” in New York and San Francisco, which feature presentations from industry experts and facilitate networking among those in the space. Orchard also posts highly-analytical articles about credit on its own blog.
In addition to lead investors Santo Politi at Spark Capital and Dan Ciporin at Canaan Partners, other funds and strategic angel investors include:
Brooklyn Bridge Ventures, Charlie O’Donnell
Conversion Capital, Christian Lawless
Social Leverage Capital, Howard Lindzon
Doug Atkin of Guggenheim Partners
Ben Barokas, Co-founder of Admeld
Michael Barrett, Former CRO of Yahoo!
Tom Glocer, Former CEO of Reuters
Jennifer Hyman, CEO and Co-founder of Rent the Runway
“The members of the Orchard team have been involved in Online Direct Lending for years and also enjoy a long history of working together,” Burton continued. “We all share an enthusiasm for this new industry and are excited to apply our skills to help scale it.”
The Orchard platform enables institutional investors to scale their investment in Online Direct Lending by providing premier analytics, trade execution, and real time reporting. Online Direct Lending has grown exponentially over the past several years and is now a multi-billion-dollar industry. Orchard is focused on building the systems and infrastructure that will allow the space to scale into a major financial market. The company also runs the monthly Online Direct Lending Meetup (http://www.meetup.com/Peer-to-Peer-Lending-P2P/) and publishes a blog on its website exploring analytical and technical topics related to lending (http://www.orchardplatform.com/).
About Spark Capital
Spark Capital is a venture capital firm that partners with exceptional entrepreneurs seeking to build disruptive, world-changing companies. Founded in 2005, the firm manages approximately $1,500,000,000 across four funds. Headquartered in Boston, Spark maintains an office in New York and invests across the globe. The firm focuses on the following key categories: advertising & monetization, commerce & services, content & media, hardware & infrastructure, mobile and social. Spark Capital has backed notable companies including Twitter, Tumblr, Foursquare, AdMeld, OMGPOP, Warby Parker and Wayfair. For more information, visit www.sparkcapital.com.
About Canaan Partners
Canaan Partners invests in entrepreneurs and works alongside them to turn visionary ideas into valuable companies. Since 1987, the firm has catalyzed the growth of disruptive technology startups and healthcare companies revolutionizing the practice of medicine. With $3.4 billion under management and more than 95 acquisitions and 55 IPOs to date, Canaan has funded companies such as Acme Packet, Associated Content (acquired by YHOO), CommerceOne, DoubleClick (acquired by GOOG), ID Analytics (acquired by LOCK), SandForce (acquired by LSI), SuccessFactors (acquired by SAP), Tremor Video (TRMR) and Virsto Software (acquired by VMW). Current technology investments include Blurb, eBates, Kabam, Lending Club, SOASTA, and Zoosk in the U.S.; BharatMatrimony and UnitedLex in India; and PrimeSense and LiveU in Israel. Canaan maintains a presence in the global innovation hubs of Silicon Valley, New York City, India and Israel. For more information visit www.canaan.com.