OFF3R Index

OFF3R Index: Another Record Breaking Year for Alernative Finance Platforms

Aisling Browne
Written by Aisling Browne

Amidst the uncertainty felt throughout the majority of last year, with the inauguration of Trump and myriad of terrorist attacks, the world’s stock markets hit new peaks to make 2017 a year to remember. On the 29th December, the Guardian reported that in 2017 world stocks rose every single month and avoided a monthly decline for the first time in history. There is no doubt that this was aided by countless tax reforms in the US, the rise in the price of oil and possibly the acceptance and acceleration of Bitcoin. This momentum filtered down to alternative finance also, as the latest OFF3R Index data revealed that Peer-to-Peer (P2P) Lending and Equity Crowdfunding platforms saw strong figures in 2017.


Peer-to-Peer Lending 

Figure 1 – Total amount lent in 2017 by the 9 P2P lending platforms from the OFF3R Index (Source: OFF3R Index Data 2017/2016)

total of £3.7 billion was lent by the 9 P2P Lending platforms that make up the OFF3R Index (Funding Circle, LendingWorks, Ratesetter, ThinCats, Landbay, Zopa, Market Invoice, LendingCrowd and Assetz Capital), confirming a £1.1 billion increase on 2016 data.

Figure 2 – Total amount lent in 2016 and 2017 by the 9 P2P lending platforms from the OFF3R Index (Source: OFF3R Index Data 2017/2016)

This growth was expected, as our previous report revealed: “over £1.8 billion was lent in the first half of 2017…representing an increase of over £350 million from the previous half year period”. It is clear that some of this growth was due to the introduction of the Innovative Finance ISA (IFISA), which enables P2P Lending platforms, much like traditional lenders, to benefit from ISA season. Lending Works is just one example of how the IFISA helped P2P platform’s growth in 2017, as they hit the £1m limit within just 24 hours of launching their IFISA in February 2017. 

This prosperity should continue into 2018, as we finally start to see more of the larger providers launch an IFISA. In December 2017, Assetz Capital was one of the first of these ‘larger providers’ to gain IFISA permissions, with their CEO, Stuart Lunn, commenting “the IFISA is set to grow in popularity this year now that all of the large P2P lenders have full permissions. In fact, we expect that the amount invested in the IFISA could easily be 20 or 30 times this figure by the end of the 2017/18 tax year, and with further growth again the following year.”

An extremely successful Q4 topped 2017 off to make it the best performance we’ve seen to date. Certain companies in the market such as Funding Circle celebrated a global record-breaking month in October and reportedly took a market share from the dominant high-street banks. Whilst in November, Zopa became the first consumer P2P network to lend £100m in a monthAs a number of “smaller” P2P platforms, such as Landbay, secured investment to strengthen their position to compete with larger providers last year, we should certainly see more performances like this in 2018. 


Equity Crowdfunding

Figure 3 – Total amount invested in 2016 and 2017 by the 6 Equity Crowdfunding platforms from the OFF3R Index (Source: OFF3R Index Data 2017/2016)

Although the hype surrounding Crowdfunding died down in 2017 –  Equity Crowdfunding platforms continued to exceed expectations. A total of £292 million was raised by the 6 platforms that make up the 2017 Equity Crowdfunding OFF3R Index (Angels Den, Syndicate Room, Crowdcube, Seedrs, Property Partner and Envestors), revealing a £86.4 million increase on 2016 results.

Figure 4 – Total amount invested in 2017 by the 6 Equity Crowdfunding platforms from the OFF3R Index (Source: OFF3R Index Data 2017)

Equity Crowdfunding continues to attract a huge of variety companies and industries, as OFF3R data revealed in Business Insider’s 20 Biggest Crowdfunding Campaigns of 2017. The article acknowledged a variety of different companies opting for equity crowdfunding as an investment stream, ranging from; a molecular diagnostics company, to a heavy duty plasterboard fixing manufacturer, to a challenger bank. 

The strength of the sector has been supported by a large number of companies returning to equity crowdfunding after successful investment rounds. Monzo chose Crowdcube to facilitate their second equity crowdfunding raise in March 2017 after their record-breaking campaign in 2016 where they raised £1 million in just 96 seconds. Things were not so different this time around, as Monzo went on to attract more than 6,000 investors to their crowdfunding campaign, securing £2.5 million of their £8 million investment through Crowdcube. Hibergene Diagnostics also went on to secure a sizable £5.2 million investment through Syndicate Room in March. Investment rounds such as these made March the best performing month in 2017 – a 56% increase on 2016’s largest investment.

The Secondary Market….

Platforms such as Crowdcube and Seedrs drastically improved their product offering in 2017, by introducing a secondary market. This did not only give investors more freedom by allowing them to buy and sell shares, it facilitated two company level exits in 2017. Since June 2017, a total of 884 share lots were traded in 166 different businesses on the Seedrs Secondary Market. Many investors achieved impressive returns from these exits, including early investors into Welsh e-commerce provider Veeqo who released up to 19x returns on a tax-adjusted basis. Blow LTD secured £3.5 million investment from Unilever Ventures to expand their services just one year after raising £1.3 million through Seedrs. Success stories such as these will continue to promote equity crowdfunding as a viable option for companies raising funds and investors deploying capital.

Thomas Davies, Chief Investment Officer at Seedrs, says: “We are delighted with the success of the Secondary Market so far. To have facilitated 884 investor exits in 166 different businesses has been extremely exciting. Secondary Markets are challenging to operate successfully, and we are always consciously delivering the best possible experience to our investors, which is why 2018 will be focused on development as we look to open out the market to more possibilities.”

Those that frequently scrutinize alternative finance could argue that the rise of Bitcoin and other cryptocurrencies in 2017, paved the way for this growth. However, it is clear from the data presented above, that investors and lenders are choosing P2P Lending and Equity Crowdfunding because of their individual achievements. We must not forget that these platforms are successful in their own right.

 

The information in this article refers to the past performance of the P2P Lending and Equity Crowdfunding platforms that make up the OFF3R Index. Please be aware that past performance is not a reliable indicator of any future result.


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About the author

Aisling Browne

Aisling Browne

Aisling is the partnerships manager at OFF3R. Prior to OFF3R, she spent time working in New York at a property development business and subsequently for the British Red Cross in London. Aisling has a BA in Politics and International Relations.