Trade Me backs peer-to-peer idea with $7.7m for Harmoney

Robust investor interest meant peer-to-peer lending platform Harmoney could have easily tripled the size of its $10 million capital raising, says chief executive Neil Roberts.

The Auckland company's Series A funding round has closed after a $7.7 million investment from Trade Me, announced yesterday, which gave the auction website a 15 per cent stake in the firm.

Harmoney charges fees for the use of its online platform, which launched in September and matches lenders with borrowers. Retail investors who lend money through the platform earn returns from the interest rates paid by borrowers.

NZX-listed bank Heartland New Zealand - which has a 10 per cent equity stake in Harmoney, alongside Trade Me's 15 per cent - and an un-named United States investor also took part in the $10 million funding round.

Roberts said interest from other potential investors was so strong that the firm could have raised $30 million.

"There is very strong [investor] support for peer-to-peer and the concept of online lending," Roberts said.

US peer-to-peer company Lending Club raised US$870 million through a recent initial public offering and its shares surged by 67 per cent following a December 11 debut on the New York Stock Exchange, valuing the San Francisco firm at more than US$9 billion.

Roberts said it had been tempting to raise a larger war chest but the firm had decided it might end up with too much cash "sitting around".

Harmoney, which in July became the first peer-to-peer lending platform to receive a licence from the Financial Markets Authority, would use the new capital to employ staff and ramp up marketing, he said.

Trade Me chief executive Jon Macdonald said the auction website would be able to "cross-promote" Harmoney products "in a targeted and relevant way".

"To us it looks like an area of the market that will undergo a long-term structural shift online and we believe Harmoney is well-placed to take advantage of this," he said.

As part of the investment, Trade Me chief financial officer Jonathan Klouwens will join Harmoney's board of directors.

Roberts said $20 million had been lent through Harmoney's platform by December and it was on track to hit $100 million in this calendar year.

The company is currently the country's only licensed peer-to-peer lending platform but Britain's Ratesetter is reportedly preparing to launch in New Zealand this year, while two other firms - Squirrel Mortgages and Lending Crowd - have applied for FMA licences.

Harmoney has also secured a number of backers who are contributing funding lines to the lending platform.

Trade Me shares closed down 11c at $3.62 last night.