As peer-to-peer lending â€" in which borrowers connect with lenders directly online â€" takes off, one of the biggest players in the field is taking advantage by raising more money.
Prosper plans to announce on Monday that it has raised $70 million in a new fundraising round, one led by the investment firm Francisco Partners. Two other venture capital firms, Institutional Venture Partners and Phenomen Partners, also participated.
The new round comes less than a year after the company raised $25 million in a round that included BlackRock, the money manager that was eager to serve as both investor and lender. And it comes as big financial firms are muscling into the peer-to-peer lending market, moving it further away from its roots of pairing up individuals for loans and make it a burgeoning new industry.
That growth has propelled the fortunes of big players like Prosper and Lending Club, the latter of which is the biggest peer-to-peer lender and expected to go public sometime this year.
Prosper hadn’t been looking for new money, its chief executive, Aaron Vermut, said in an interview. But at least one investment firm sent over a fully written term sheet several weeks ago, prompting the company to explore raising more money. Ultimately, the lending market place decided upon Francisco Partners, turning down some offers that offered a higher valuation because the firm promised the right mix of insight and money.
“Frankly, we went with Francisco because they were the perfect match,†Mr. Vermut said.
As part of the round, David Golob, an executive at Francisco, will become a director.
The financing also comes after Mr. Vermut and his team, including his father, took over Prosper last year to help rebuild a company that had stumbled for years while Lending Club had become the leader in the industry.
Now, however, Prosper claims to be the second-biggest peer-to-peer lending platform, with 35 percent of the market. Its platform has originated $1 billion worth of loans as of last month, and the company is aiming to double that by year end.
“The turnaround is complete,†Mr. Vermut said. “We’re actively growing.â€
With the new money, the company intends to continue growing. Some of the money will go toward an expanded marketing campaign, including online advertising, shifting away from primarily direct marketing focusing on debt consolidation.
The fund-raising will also go toward developing new kinds of loans, though executives have long made clear that they will remain focused on personal loans for the time being. That’s a different stance from Lending Club, which has been moving into new areas like small business loans.
The additional money will also help pay for growth at the company, including new corporate offices in San Francisco and more employees, including programmers.
“It gives us flexibility to take maximum advantage to grow,†Mr. Vermut said.
About $20 million of the round will help existing shareholders cash out as well.
The new round raised Prosper’s valuation sixfold from the last fund-raising effort, to about $600 million, according to a person briefed on the matter. Mr. Vermut declined to comment.
Though Lending Club is considering going public, Prosper is taking a more cautious approach, according to its chief executive. The company isn’t ready yet for an I.P.O. and is willing to let its rival test the waters of the public markets first.
“If it goes really well, it will be a validation for the space,†Mr. Vermut said of a Lending Club stock offering. “We’re not there yet. We’re just operators, building our business.â€
