Peer-to-peer lending platform bosses have spoken out about venture capital (VC) firms’ investment approach and have deemed it incompatible with the industry.
VC firms typically invest in early-stage businesses they believe to have long-term growth potential. But industry executives say that they demand “aggressive growth” and quick profits that do not necessarily fit with the P2P scale-up model.
“I’ve spoken with everyone, angel investors and VCs, typically they want to see high growth and if you cannot demonstrate you can scale the company with aggressive growth, you’re not suitable for them,” said Filip Karadaghi, managing director and co-founder of LandlordInvest.
“Lending can be very risky and if a lender goes through dynamic growth, that’s a risk for the business. We’ve seen that in the P2P space.
“Very few platforms have raised money from VCs. We know it doesn’t always work out too well.”
There are other sources of funding for P2P platforms, such as family offices, high-net-worth investors and equity crowdfunding.
Shojin Property Partners prefers to target family offices and individual investors to raise money, as it prepares for an upcoming Series A funding round.
“All fintechs say avoid venture capital money,” said Jatin Ondhia, chief executive and co-founder of Shojin Property Partners.
“In the US, venture capital firms understand it, but in Europe they don’t get it and want you to make a profit too quickly.
“Obviously it’s important to make a profit in the long-term, but you need VCs who can run those losses for longer.”
Ondhia said that his property investment platform is looking to raise £10m over the summer, which will be a split of £5m from individuals in Shojin’s existing community and £5m from family offices worldwide.
“Family offices are good as they get the long-term play,” he added. “They control their own cash and back firms not just on technicals but on fundamentals.”
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