SAN FRANCISCO (Reuters) - For proof financial-services startups are having something of an investor moment, consider AvantCredit, a startup that said Thursday it has closed $225 million in funding from Tiger Global Management, PayPal co-founder Peter Thiel, and others.
The announcement comes as Lending Club, the giant peer-to-peer lender, holds an initial public offering that could raise almost $700 million. Meanwhile, start-ups in financial services have raised $765.9 million through the third quarter this year, over a third more than for the whole of 2013, according to the National Venture Capital Association.
Chicago-based AvantCredit specializes in loans to borrowers whose credit scores generally lie in the 600 range, just a step above high risk. Unlike peer-to-peer service LendingClub, which connects borrowers with willing lenders, AvantCredit makes loans using its own funds.
While it charges high interest rates, averaging around 36 percent, those rates are lower than its borrowers might have to pay at alternative sources, such as payday-loan operators. Terms run from one to four years.
Other financial-services companies to raise large chunks of cash this year include wealth-management company Addepar, which raised $50 million in May; LendingClub competitor Prosper, which raised $70 million in May; and wealth-management company Personal Capital, which raised $50 million in October.
AvantCredit last raised money in July with a $75 million investment, also led by Tiger Global. Earlier in the year, the company secured two credit facilities totaling $400 million.
The latest funding round was co-led by August Capital, with participation from DFJ Growth, RRE Ventures, KKR & Co., and Thiel. All the funding was primary, meaning it is going directly to the company rather than to buy out early investors and employee shareholders.
Reporting by Sarah McBride