San Francisco-based Affirm Inc., a financial services firm platform that provides consumer lending services, has raised $200 million in a Series E round led by Singapore’s sovereign wealth fund GIC, according to a report by The Wall Street Journal.
The round values Affirm at $1.5-2 billion, double its valuation of about $800 million in 2016. Proceeds from the latest funding round will be used for international expansion and the opening of an office in New York City.
Return backers, including Khosla Ventures and Spark Capital, also participated in the latest round.
According to data compiled by Crunchbase, Affirm has previously raised a $100-million debt financing round in October 2016 from JP Morgan and closed a $100-million Series D equity investment led by Founders Fund in April. This latest round brings its aggregate funding raised to $720 million.
In its 2016 report, GIC indicated that 34 per cent of its asset portfolio is allocated to the US market. Data from the Sovereign Wealth Center indicates that the state fund has $398 billion in assets under management (AUM).
Previous investments in financial services firm this year saw it join affiliates of private equity investor Hellman & Friedman to purchase global financial technology business Allfunds Bank for €1.8 billion ($2.11 billion), while in November it announced the acquisition of a 10 per cent stake in British challenger bank OakNorth.
Founded in 2012, Affirm is led by PayPal co-founder Max Levchin and provides Buy with Affirm, a closed-end instalment loan product through a platform. This permits users to buy goods or services offered by online merchants and pay off those purchases in fixed monthly payments. Currently, it works with a network of more than 1000 retailers, both online and in stores.
The company targets its services towards younger people seeking to finance the transaction of products such as computers or smartphones, with loans that have fixed annual percentage rates ranging from 10 per cent to 30 per cent, depending on the borrower’s creditworthiness.
In an exchange with TechCrunch, Levchin indicated that the company’s growth “has been excellent”, despite the capital-intensive nature of the business. As at December 2017, it claims to have facilitated more than 1.5 million loans, with its loan origination volume for 2017 four times larger than last year. Separate from its equity financing, it has raised $630 million in debt to finance the loans.
Recently, it rolled out a mobile app that can function as a virtual credit card, as part of a move to simplify its expansion beyond the e-commerce realm into in-store purchases, as part of a strategy that will see it expand its network of merchant partners.
The firm is part of a larger wave of businesses that are seeking to build alternatives to credit cards and caters to North American consumers – many of whom live in inland regions of the US – who are choosing to avoid or minimise the use of credit cards due to concerns over debt levels.