Funding Circle raises $150m in new boost for London tech sector

Peer-to-peer lending platform Funding Circle has raised $150m from some of the world's leading investment groups, in one of the largest fundraising rounds by a British technology start-up.

The funding round was led by Russia's DST Global, the leading venture capital firm run by Yuri Milner, an early backer of Facebook, Airbnb and Alibaba.

The deal is another illustration of how London's tech companies are starting to attract the large cheques usually reserved for Silicon Valley groups.

The terms of the investment were not revealed, but people familiar with the matter said Funding Circle was valued at about $1bn.

Other groups to participate in the round include BlackRock, the world's largest asset manager, Singapore's state investment company Temasek, Edinburgh-based asset manager Baille Gifford and US investment group Sands Capital Ventures.

The company said that Goldman Sachs acted as an exclusive placement agent for the funding round it described as "oversubscribed".

Samir Desai, chief executive, told the Financial Times that the money would help to fuel expansion in the US and UK, as well as "new geographies" in the next 12-18 months.

"We didn't really need the money," he said. "But the opportunity to bring on investors [like these] doesn't come along every day.

"This makes us the best capitalised small business marketplace lender in the world and allows us to execute against our growth plans."

Funding Circle uses peer-to-peer technology to connect small businesses with lenders, often providing cheaper finance than high street banks without assuming the credit risk of holding loans on their balance sheets. Other pioneers in the peer-to-peer sector include the US market leader Lending Club and UK-based Zopa.

Money from the world's leading tech investors has been pouring into UK digital companies. This year TransferWise, the money transfer company, has received $58m in a fundraising led by Andreessen Horowitz, the prominent Californian venture capital group, valuing it at $1bn. Shazam, the music discovery app, also announced it had gained the same valuation after raising $30m from unnamed investors.

DST Global has already signalled its interest in the UK's digital scene, leading a $86m funding round in online luxury retailer Farfetch, valuing that company at about $1bn.

Financial technology groups in London have gained particular interest. In February, money transfer company WorldRemit raised $100m from Technology Crossover Ventures, an early backer of Facebook and Netflix.

Although fintech groups are seen as posing a threat to banks, some are choosing to work with these alternative finance companies. In June last year, Santander announced a deal where customers it cannot serve may be directed to Funding Circle.

Mr Desai said it will continue to pursue deals like these because "we want Funding Circle to just become part of the financial infrastructure".

According to the company, since its launch in 2010, Funding Circle has gained 38,000 investors who have lent money through the site, including individuals, financial institutions and the UK government. Collectively, they have invested $1bn in 8,000 businesses around the world, lending $80m each month.

Funding Circle also announced it had hired new executives, including David Yu, the former chief executive of Betfair, who joins as its global chief product officer.

Funding Circle has raised $288m in total, with existing investors including Index Ventures, Accel Partners, Union Square Ventures and Ribbit Capital.

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