Harmoney, with $30m on hand, wants to be cash-flow neutral before raising new funds

Harmoney chief executive Neil Roberts

Harmoney Corp, New Zealand's first and biggest peer-to-peer lender, has raised $30 million of working capital as it steps up plans to launch in Australia this year, but doesn't anticipate seeking more funds until it's cash-flow neutral.

The Auckland-based company this month sold $8.8 million of new shares to Stone Ridge Ventures and P2P Global Investments, taking total funds raised to $30 million. Co-chief executive and its biggest shareholder Neil Roberts told BusinessDesk the company will have to raise more funds at some stage if it's to develop into a large-scale business, but it wants to do so from a position of strength.

"That means for us getting as quickly as we can to cash-flow neutrality, and that's what we're focusing on right now," he said. "We've got massive aspirations for this business so I wouldn't be surprised at some stage where we raise again."

Harmoney facilitated more than $100 million of loans through its peer-to-peer platform in its first year of operation, and is closing in on $200 million just five months later. However, while still having first-mover advantage, it now faces a wave of competition with three others licensed platforms - Squirrel Money, LendMe and Lending Crowd - having launched their services and crowd-funding platform PledgeMe applying for a licence.

The competition at home comes as Harmoney prepares to launch into Australia, where it has already achieved the appropriate licences, becoming the first trans-Tasman peer-to-peer lender.

Roberts said the firm hasn't settled on a formal launch for Australia yet, but will introduce an invite-only period across the Tasman in the coming weeks. That will let Harmoney iron out any issues before the hard-launch.

The company currently employs 80 staff, of which 25 engineers are based in Parnell and five senior people in Australia. Roberts said the company will beef up its sales and marketing team in Australia once it launches across the Tasman, but that the firm plans to keep its development group local having already tried outsourcing to India before bringing it in-house.

Roberts said the company is focusing on maintaining strong governance and management, meeting compliance obligations, generating positive cash flow, and being in control of its market and revenue, all features he says would prepare Harmoney for an initial public offering.

"We certainly wouldn't rule out an IPO, but what we're concentrating predominantly on are the ingredients a company would need to be operating at a level that it could float," he said. "I think we've done a good job so far. We need to grow and get better. At some point we really do believe the value proposition has got mass market appeal."

Harmoney is currently looking for a new director to replace former chairman Rob Campbell, who departed in December, and Roberts said they will interview prospective candidates next month before announcing a new chair in April.

The new director will need a background in financial services, and while some Australian experience would be beneficial, Roberts said they want a New Zealand domiciled chair.

Roberts spent four months out of the board room last year, which he said was to meet the terms of the shareholders agreement after the series A fund raising round, which he also used to take time away from the business. He rejoined the board in December.

"Coming back it was an opportune time, the board wanted me back as a director, so I rejoined the board when I got back from my leave," he said.


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A little surprised how well Harmoney has done. Be interested to know what their default rate is like; if it's low, you have to wonder whether the banks need to look at relaxing their own lending criteria, especially, when they're flush with funds.

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Harmony publishes default rates here https://www.harmoney.co.nz/investors/marketplace-statistics
They vary by loan grade and have been tracking lower than forecast.

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I think the default rates are low because the credit model is a sound one. Globally the two things which allow P2P businesses to succeed are a good credit model and a short time to approve and fulfil borrowers. The retail finance experience of the founders are key here.

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