Industry stakeholders have shared their views on when peer-to-peer lending platforms should look to undergo an equity fundraise.
During a panel at the P2P Leaders Forum, an industry event hosted by Peer2Peer Finance News, industry experts agreed that platforms should generally seek equity funding “when they don’t need it.”
The online event, held under Chatham House rules, attracted C-level executives from P2P firms, regulators, consultants and investors, with this particular panel featuring a law firm, a large corporate M&A service and a P2P institutional investor.
One speaker said platforms should seek to fundraise when they are at a point in their journey when they have a clear articulation of what they plan to do with the money.
Read more: P2P fundraising: Show me the money
“Whist there is plenty of capital around people don’t want to throw money at things and it’s about demonstrating what your differentiations are and what you’re going to do and how you have a value proposition and the key metrics venture capital investors are looking for,” the panellist said.
“There is a huge amount of funding available at the moment and it’s coming from lots of different sources.
“I think that presents some incredible opportunities for fintech and P2P lenders at the moment and often that optionality can become overwhelming.
“Maybe the first thing people want to think about when raising equity funding is are they assessing the range of options out there and which one is their best fit?”
Another speaker said that the short answer to when platforms should look to equity fundraise is “when you don’t need it”.
“I think the best time to raise is when you don’t need to because you’re under no pressure and the investors see they’ll need to give you a good deal to get into the round,” the panel member said.
“A normal fundraise should get the company to clear milestones and enable them to get to the next round of funding if that’s applicable. There’s a particular question of how much you need to get to the next milestone and is that justified by the commerciality of the business?”
One panellist said that an initial public listing (IPO) makes sense if the platform needs the money but pointed out there is a huge amount of private capital available.
“Companies are growing and enjoying the availability of that without being forced to become a listed company,” the stakeholder said.
Another panel member said that platforms can plan for an IPO at any point but can also look elsewhere for funds from family offices.
“It’s about creating options,” the stakeholder said.
“You can plan for an IPO at any point in time but we see family offices have a lot of money and are going into fintech. We haven’t seen that before. Their risk willingness is absolutely increasing.”