Prosper Marketplace Inc., the peer-to-peer lender that until last year was struggling to stay in business amid investor lawsuits and regulatory burdens, is now valued at $650 million, according to a person with knowledge of the company.
Prosper said today that it raised $70 million from Francisco Partners, Institutional Venture Partners and Phenomen Ventures. The funding includes $50 million to the company and $20 million for early investors, said the person, who asked not to be identified because the terms haven’t been disclosed.
Investors are piling into peer-to-peer lending, a business that lets consumers get online loans that are funded by other individuals as well as non-bank financial firms. LendingClub Corp., Prosper’s larger rival, raised $65 million last month at a $3.75 billion valuation, while Social Finance Inc. (SoFi), which refinances student loans, reeled in $80 million.
Executives from Prosper, LendingClub and SoFi are speaking today at the second annual LendIt Conference in San Francisco, where all three firms are based.
Like LendingClub, Prosper issues loans for three to five years of as much as $35,000 for debt consolidation, home repairs and vacations, among other things. The company will originate more than $1 billion in loans this year, topping the total amount it had issued in its history from 2005 through 2013, said Chief Executive Officer Aaron Vermut.
“There’s a lot of enthusiasm and optimism around the space,” Vermut said in an interview. “This money is to be used for expansion and growth.”
In particular, the company expects to almost double its staff this year to 150, open a processing center for loan applications in Phoenix and expand in San Francisco, Vermut said.
Prosper generated $15.2 million in net revenue last year on $357.4 million of loan originations, compared with LendingClub’s $98 million in revenue on $2.06 billion of loans. The debt is purchased by retail and institutional investors on the companies’ websites.
Until 2013, Prosper was on a very different path. Founded in 2005, the company was the first U.S. peer-to-peer lender. In 2008, the service shut down and was sent a cease-and-desist letter by the U.S. Securities and Exchange Commission, alleging the company was selling unregistered securities.
By the time Prosper gained regulatory compliance, it had fallen behind LendingClub and was hampered by a class-action lawsuit from disgruntled investors.
Vermut, his father Stephan and Ron Suber took over the company in January 2013 and brought with them $20 million in funding from Sequoia Capital. Six months later, they settled the lawsuit, with Prosper agreeing to pay $10 million over a period of years.
The Vermuts and Suber, who previously sold a prime brokerage firm to Wells Fargo & Co., raised $25 million for Prosper in September at a valuation of about $100 million. BlackRock Inc. (BLK) was among the investors. Last month, Prosper hired Macy Lee, the former chief financial officer of EBay Inc.’s Australia unit, as its CFO.
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