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Nexx, an on-line social lending business being developed by four young entrepreneurs at business growth centre The ICEHOUSE, has raised $600,000 in funding from a group of angel investors led by the ICE Angels.
Nexx co-founder Ben Milsom says on-line social lending, which matches lenders with borrowers, is well established in North America and Europe through websites such as Zopa and Prosper. Like Zopa and Prosper, Nexx will earn revenue from a small percentage transaction fee on each loan.
He says Nexx will connect people who need money to people who have some to spare and are looking for a good rate of return. "We're an online money matchmaking service that allows borrowers to list their financial projects online and lenders to pledge funds at an interest rate acceptable to them - like an online auction.
"With no bank or finance company in the middle, the interest rate paid by borrowers is the same as the rate that lenders receive. Borrowers get flexibility and investors get good returns on their money with real transparency about where their money is going and the risk they are taking."
According to Wikipedia, social lending loans have grown from US$118 million in 2005 to US$647 million in 2007 and are projected to grow to billions of dollars by 2010.
Social lending cuts out banks and finance companies and is a natural next step following other successful internet businesses which remove traditional intermediaries, such as auction portals (e.g. Trade Me, e-Bay) which bring buyers and sellers together and employment portals (e.g. Seek, Monster) which bring employers and employees together.
A recent Guardian newspaper article says social lending could revolutionise financial markets: "The social networking phenomenon that has fuelled the rapid growth of websites such as YouTube and MySpace could be about to threaten the dominance of the big banks by transforming the way we borrow and save."
Milsom says the $600k funding will pay for development and promotion of the business which is currently awaiting regulatory approval. Milsom and his partners Glenn Riddell, James Wallace and Mark Catley expect to be able to launch their operation in early 2009.
* The ICEHOUSE is a business growth centre focused on "making a difference for New Zealand". Since 2001, The ICEHOUSE founders report they have has worked with 65 start-ups and just under 1,500 established businesses. They say Its guidance and mentoring has allowed businesses to raise close to $35m for start-ups.
