Wonga.com Ltd., the U.K. provider of online loans, ended talks to acquire U.S. small-business lender On Deck Capital Inc. after the two sides failed to agree on a price, according to people familiar with the situation.
Wonga and On Deck, based in New York, had been in discussions about a deal that could have been valued at just less than $250 million late last year, the people said, asking not to be identified discussing a private matter.
The transaction would have given Wonga, based in London, a foothold in the U.S., where people familiar with the matter have said it may seek an initial public offering this year. It would also have given Wonga access to technology that would help make smarter decisions on the creditworthiness of small businesses.
John Moorwood, a Wonga spokesman, declined to comment. Andrea Gellert, senior vice president of marketing at On Deck, didn’t immediately respond to a request for comment.
Wonga’s founder, South African-born entrepreneur Errol Damelin, has been praised and derided for his site, which lends amounts of as much as 400 pounds ($630) to first-time borrowers, taking the repayment directly from their bank accounts when it’s due.
British lawmakers have criticized the site’s fees, which include a “representative” annual interest rate of 4,214 percent. Damelin has said the rate, which the site must reveal to customers by law, is inaccurate because Wonga doesn’t loan money for long periods. He also said it’s lower than the interest charged for a bank overdraft. Wonga began to make loans to small businesses in the U.K. in May.
Still, Wonga may be on its way to becoming one of the most successful companies to emerge from London’s vibrant startup scene. The company is one of the likeliest in Europe to reach a $1 billion valuation this year, alongside “Angry Birds” game developer Rovio Entertainment Oy and Klarna AB, an electronic payment platform, according to technology advisory firm Magister Advisors.
Wonga’s investors include venture-capital firms Accel Partners, Balderton Capital and Greylock Partners. New York-based On Deck is backed by investors including SAP Ventures, an arm of SAP AG, and Khosla Ventures, the investment vehicle of Sun Microsystems founder Vinod Khosla.
Both companies pitch fast service to customers, with Wonga’s loans often released within minutes and On Deck offering loans as much as $150,000 approved in as little as one business day.
On Deck is part of a growing crop of U.S. venture-backed financial startups. In the past two weeks, online lenders BillFloat Inc. and Prosper Marketplace Inc. have raised money, along with PayNearMe Inc., a cash-based service targeted at clients who don’t have bank accounts.