The Risk of a Vicious Funding Circle in Fintech
High hopes and valuations have a habit of bumping into reality.
Inside the circle.
Photographer: Simon Dawson/BloombergThere are fintechs, and then there are fintechs. Cheerleaders point to payments startups like Jack Dorsey’s Square Inc., whose stock has soared 242 percent in a year, as evidence of a Silicon-Valley-style revolution in the making. But there are sob stories, too: Loan platforms LendingClub Corp. and On Deck Capital Inc. are still trading well below their IPO prices. Promises of breakneck expansion often crash into the reality of regulated finance.
Funding Circle Ltd., Britain’s biggest provider of online loans, hopes to break the curse of its U.S. peers. The company said on Monday it is preparing an IPO that may value it at as much as 1.7 billion pounds ($2.1 billion) — the highest valuation that Danish billionaire Anders Holch Povlsen is prepared to accept in return for buying a 10 percent stake in the IPO.