A developer of investment and analytics software for the online direct lending scene has raised some money of its own.
New York-based Orchard Platform on Tuesday announced it brought in $12 million in a Series A round led by Spark Capital and Canaan Partners, with participation from others. Orchard created software that enables institutional investors and the originators of loans to connect, says CEO and co-founder Matt Burton.
He says while Lending Club, Prosper, and other peer-to-peer lenders originate loans, his company strictly offers infrastructure, which includes back-office reporting, analytics, and order management systems. “We simply sit between institutional investors and the originators, providing technology that allows them to work together at scale,” Burton says. A loan originator oversees the processes and services related to applying for and securing financing, tasks typically performed by banks.
Peer-to-peer lending is a type of financing between two parties without a bank or other traditional institution handling the deal. Burton says this market is a scaled-up version of individuals providing personal loans. Now hedge funds and other entities are getting in on the action, offering larger amounts of capital. “All the systems that worked at a very small scale had to be re-imagined for this new world,” Burton says.
As peer-to-peer lending continues to grow, Orchard Platform believes it can provide the automation and systems necessary for the market. Burton says Lending Club in San Francisco proved out that consumer loans could be issued online at lower operating costs than traditional banks. “With [Lending Club’s] IPO set for a couple of weeks from now, it’s a defining moment for this space,” he says.
That public offering may help legitimize online peer-to-peer lending, Burton says, by showing the Internet can put on a new spin on finance and the way credit works. In addition to lending to consumers, peer-to-peer lending has reached the business loan sector through Funding Circle, OnDeck, and Kabbage, he says. LendingHome and Realty Mogul have done the same for real estate loans, Burton says. “As the disruption spread to different asset classes, it became clear there needed to be systems that stitched it all back together,” he says.
Orchard Platform was founded in July of 2013 to be that connective tissue, Burton says. Previously he was an early employee on the engineering team at online advertising exchange Admeld in New York, which was acquired by Google in 2011. During that deal’s antitrust review by regulators, Burton came across Lending Club and learned about the peer-to-peer lending sector.
Despite the differences at a macro level between loans and advertising, he saw a few fundamental parallels. “When you step back and look at how [ads and loans] are built and transacted online, it was relatively similar,” he says.
Burton left Admeld after the acquisition and then worked for a time with LiveRail, an online video advertising platform (which got snatched up this July by Facebook).
With the latest funding for Orchard Platform, which brings its total backing to $14.7 million, Burton says his company will offer its technology to more loan originators. The company also plans to hire, especially in engineering, operations, sales, and general counsel. “Additionally, we’re looking to expand to Europe over the next six months,” he says.
