Prosper Raises $25 Million in New Round, Adding BlackRock as a Backer

The business of peer-to-peer loans is drawing still more high-profile investors.

Prosper Marketplace, one of the biggest companies in the business, disclosed on Tuesday that it has raised $25 million in a new round of financing. The new investment was led by Sequoia Capital and includes BlackRock, the giant money manager, as a new backer.

It comes nine months after Prosper’s last financing round, which raised $20 million.

The latest financing reflects the continued interest from Wall Street and the venture capital community in peer-to-peer lending, in which borrowers can connect with lenders online. The most prominent player in the industry, Lending Club, recently drew in Google as an investor, in a transaction that valued Lending Club at $1.55 billion.

“The space has gotten a lot of recognition and acceptance,” Stephan Vermut, Prosper’s chief executive, told DealBook in a telephone interview. “I think there’s an appreciation of peer-to-peer lending that it is providing true value to borrowers and to lenders.”

To many investors, the attraction of such companies is that they enable an entirely new avenue of finance and threaten to shake up traditional lenders like banks.

“We’ve been intrigued by this market since 2005,” said Pat Grady, a partner at Sequoia. “At a fundamental level, it makes so much sense. There’s so much inefficiency in the traditional bank model.”

Prosper says that the majority of the loans that originated on its platform, about 65 percent, are for debt consolidation, primarily for paying off credit card debt. The bar for borrowing is fairly high: the minimum FICO credit score is about 640, though the average score is about 710. The average loan is about $10,500.

The latest financing round had long been part of Mr. Vermut’s plans to turn around Prosper, which helped create the industry in 2006 but stumbled for a number of years while Lending Club passed it in prominence. Mr. Vermut and his team joined in January with the aim of rebuilding the company over 12 to 18 months.

Part of the plan was an additional round of financing, which the management team sought to finish in the later part of the year. A person briefed on the matter said that a large number of investors pushed to get into the round, with many turned away.

“This financing was not about valuation,” Mr. Vermut said. “Our goal was to work with Sequoia and BlackRock and existing venture capital firms.”

Brian Stern, a managing director at BlackRock and a senior member of BlackRock Alternative Investors, said in an interview that the money management giant had long been interested in the business model and in the broader market of peer-to-peer lending.

Beyond its participation as an equity investor, BlackRock is likely to lend money directly to borrowers as well.

“We’re excited about investing in Prosper and see them as a leader in this emerging category,” he said.

Though Lending Club has made no secret of its plans to go public as soon as next year, Mr. Vermut said that Prosper currently isn’t thinking about following suit. Instead, it is focused on growing and adding more types of consumer loans, potentially including those for individuals who want to borrow to pay for vacations, weddings and other high-ticket uses.

Mr. Grady added that business loans would also make sense, since 10 percent of loans made on Prosper end up financing customers’ ventures.

“We’ll continue to position the company to bring on more borrowers and more lenders,” Mr. Vermut said.