Online P2P lending marketplace auxmoney has closed a $12 million (€9.2 million) round involving Index Ventures and Union Square Ventures. The Dusseldorf-based startup, the market leader in Germany, allows users to borrow cash directly from private investors.
Since being founded in 2007, auxmoney has seen more than 11,000 loans worth €45 million, more than half of which were in the past 12 months. It says its business model gives investors decent and predictable returns on their money while borrowers can grab better rates – or simply an alternative – to traditional bank loans.
The company will use the money to improve the product and “significantly” expand its 30-strong team. A recent revamp of the platform saw the launch of an upgraded user interface as well as the end to entry fees previously demanded of loan applicants, while a new Investor Cockpit is aimed at giving lenders a more transparent experience.
There are many peer-to-peer lending sites out there, including the likes of Zopa and YES-secure and in Germany eLolly and smava. The space offers better rates for borrowers and better returns for investors than traditional banks, but can carry a higher risk of default as it largely consists of unsecured loans and attracts those who can’t get funding elsewhere.
CEO Raffael Johnen co-founded auxmoney with Philipp Kriependorf and Philip Kamp, and he believes there is about to be a major shift in consumer behaviour towards peer-to-peer lending. He said: “As financial markets are undergoing structural changes, our strong financial backing supports our ambitious expansion plans and put us in an ideal position to further capitalize on the growing demand for crowdlending in Germany.”
The VC firms involved in the round are two of the biggest names and will now reportedly hold 21.8 percent of auxmoney. John Buttrick, a partner at Union Square Ventures (Twitter and US P2P lender Lending Club), said: “We believe loan marketplaces such as auxmoney, Lending Club and Funding Circle are a more efficient business model for both borrowers and investors.”
Neil Rimer, co-founder and partner at Index Ventures (Skype, Dropbox) said: “Auxmoney has already done a terrific job of building awareness and attracting a large customer base in Germany. On the back of auxmoney’s recent platform upgrades, which further improve the company’s services to both borrowers and lenders, we expect auxmoney to become a vital alternative to traditional bank loans in Germany.”