Funding Circle is a “company from here doing rather well over there”.


By Bernard Lunn

If that headline resonates, you have been carbon dated. You must be old enough to remember Hanson Trust (or enjoy business history). This BBC obituary for Lord Hanson explains why that was Hanson Trust’s advertising slogan.

“CBI director general Digby Jones said Lord Hanson’s cross investments in the US, with Lord White, would be his “lasting legacy”.

“The two of them really did do something very special about investing in America,” he told BBC Radio Five Live.

“Today we invest more in America than the rest of Europe put together and a lot of that was down to this pioneering spirit.

“The old advertising slogan was ‘ A company from here doing rather well over there’ – and I think that really does epitomise the trend he set.”

Look at the Crunchbase profile to see why this applies to Funding Circle. You see San Francisco listed as the Head Office.

On the company’s own website you see San Francisco listed before the London office.

Yet Funding Circle was founded in the UK.

Israeli ventures, such as Checkpoint, pioneered this strategy. They appeared in America like an American company with an R&D center in Israel.

When you look at GDP per country you can see why this makes sense (in $ billions):

Israel 299
UK 2,864
USA 17,968

UK maybe a lot bigger than Israel, but it is still tiny compared to USA.

Sure, this is the Asian Century, but you still need to make it in America first because America is where the expertise lies to scale companies. With that expertise comes the capital. If you conquer the US market you will have the capital and expertise to take on the much more complex markets in Asia. The US market is relatively homogenous (the differences between States are very minor compared to the differences between countries in Asia).

Funding Circle has Temasek as an investor, so when the time comes to move into Asia, they will be well connected.

Funding Circle looks like it is joining the really big Lending Marketplaces such as Prosper and Lending Club. As this marketplace is in hyper growth phase with maybe 5-10% penetration of a massive market, this is a huge opportunity for Funding Circle. They have one big advantage – Funding Circle focus has always been on small business lending rather than consumer and as our research showed in November 2014, that is were the action is.

So it looks like Funding Circle could be one of those big winners that London needs in order to earn its coveted Fintech Capital of the World status. Lots of exciting new ventures is not enough. London needs a couple that scale to be global winners (like Hanson Trust). To do that, they need to win big in America.

Funding Circle is already using acquisitions to scale in Europe (buying the German marketplace Zencap)

The question for Funding Circle is, when they get to that stage, do they IPO in America or the UK? In the days when Israeli ventures pioneered the “American flip” (switch to look like an American company) there was no choice – you did your IPO in America. Since Worldpay did their IPO in America, the choice has opened up.

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.

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