Thu, 01/01/2015 - 09:00
“If you are a hedge fund and you’ve got USD50-100 million in “peer-to-peer” loans, you may well find the analysis and monitoring of those loans takes up a significant portion of your firm’s resources. What Lendvious does is minimise the amount of human input and, thereby, minimise cost and errors,” explains Adam Braggs (pictured), Managing Director (Europe) of Crowdnetic.
Crowdnetic is an innovative platform that is able to aggregate data from two fast-growing areas of the marketplace: crowdfunded equities and marketplace lending (or peer-to-peer lending). This is proving to be a highly effective analysis tool for institutional investors as they start to allocate more capital to these new asset classes. On the lending side, the solution is called Lendvious, whilst on the crowdfunded equities side is called CrowdWatch US and CrowdWatch UK.
The two founders of the firm are Luan Cox and Srikanth Goteti. Prior to establishing Crowdnetic, Cox and Goteti served as General Manager and Senior Director of Technology respectively of Interactive Data Managed Solutions – Americas. Here both founders worked together to create and integrate, highly intricate bespoke solutions to leading financial institutions. Shortly after Pearson sold its controlling stake of Interactive Data to private equity firms Warburg Pincus and Silver Lake. Cox and Goteti decided to set up a crowdfunding platform.
However, the JOBS Act in the US, made them realize that their experience in financial data technology would fill the information void presented by desperate platforms presenting various offerings with varying degrees of transparency. “We knew this would be a data nightmare,” says Cox. “For this asset class to reach its full potential and to provide the much needed transparency that the online private markets were promising, there needed to be a central platform to take in and normalize this information so that investors could make better investment decisions.”
So the decision was made: Cox and Goteti would set up a platform to become the market data leader in the burgeoning space of equity crowdfunding and P2P loans. The result was Crowdnetic.
“The company operates under two verticals: CrowdWatch supports equity crowdfunding, providing a real time connection to private companies publicly raising capital in the US and the UK. All of the data is aggregated and presented in an array of dashboards from such portals as AngelList, Crowdfunder, EarlyShares and SeedInvest in the US and Seedrs, Crowdcube, Syndicate Room, Property Moose and more in the UK.
Investors who use CrowdWatch can glean all manner of insights such as comparing the average valuation of a UK crowdfunder versus a US crowdfunder; to see how long it takes a crowdfunder on average to reach their target; to learn what percentage of firms reach their target versus those that don’t in the UK and the US; and, various other factors. All presented for enhanced comprehension by users.
Crowdnetic’s other area of focus in the crowdfinance space is marketplace lending, with two institutional-level products. Lendvious is a centralised hub for investors within which they can run investment models and analyse which loans would be the most suitable for their strategies. The other product is YieldMaster®, which runs on Lendvious and is designed to help investors manage their liquidity in marketplace lending, or run analytics on portfolios to examine loss-adjusted cash flow projections at any investment stage.
At the moment, Lendvious aggregates marketplace-lending data from the two biggest US loan platforms, Lending Club and Prosper. More platforms are in the process of being added.
“It’s an analysis tool at the end of the day for investors to seek out loans that best meet their criteria and to build out a diversified portfolio of marketplace-lending loans,” says Braggs, who continues:
“It’s very easy to invest in a few loans, but when you start to scale up, what happens in fund management companies is that they tend to hire more people to analysis Excel spreadsheets; download data in a CSV file from one lender and another file format from another and potentially a third format from the next lender. All data needs to be to be normalised, which is further complicated by the lenders each having different reporting periods, among other factors. The fast answer is to throw bodies at it, to the point where a large team exists doing manually intensive work.
“Crowdnetic’s services have been designed reduce the manual work and take the analysis and reporting burden off the fund manager.”
The Crowdnetic platform has arrived at a time when investors are seriously ramping up their interest, especially in marketplace lending. In the UK, for example, it took from 2005 to 2013 to raise the first GBP 1 billion in marketplace lending. By the end of 2014, it had already raised the second GBP 1 billion. This is an asset class that is disrupting the traditional bank lending model and heading one way: upwards.
“We think the value of a 7 to 12 per cent (annualized) cash flow over a three- to five-year period is more valuable than the equity upside in one of these platforms,” Brian Weinstein, Principal at Blue Elephant Capital Management, told Hedgeweek recently (http://www.hedgeweek.com/features/bloomberg/lending-club’s-usd9bn-ipo-...).
“In total, we are connected for data from seven different platforms (US and Europe) with a similar number in testing. What Lendvious is doing is giving investors the ability to more easily analyse loans, manage portfolios and report on them in a more automated fashion,” states Braggs.
The dashboard components of Lendvious that is starting to be used in its own right as a standalone product by clients is its reporting function.
“Lendvious allows you to allocate capital to the most suitable loans some managers they only require the reporting capability of Lendvious, which some are now buying as a standalone product,” says Braggs in conclusion.
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