LANDBAY

Idea

Introduction

Landbay is a marketplace lender focused on prime residential mortgages.

We direct-match investors’ funds to loans using the resource and capital efficiency of peer-to-peer. Lending with us is quick and simple and provides direct, online access to an asset class that was previously only available to a select few.

It's been two years since we first raised investment on Seedrs - we're now the UK's fastest growing peer-to-peer platform* and have the team, relationships and infrastructure in place to evolve into a leading online mortgage lender.

*2015 growth rates via the Liberum Altfi Volume Index UK

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This Seedrs fundraise is part of a wider current funding – an additional six-figure investment has been committed by FTSE 250 constituent Zoopla Property Group plc, via a Convertible Equity at a 15% discount, as part of a long-term strategic partnership deal.

Intended impact

VISION

We’re building a challenger brand on the back of three clear objectives:

1. To be the UK’s most innovative mortgage lender.

2. To offer the lowest risk investment option in peer-to-peer, thereby building trust and brand equity over time.

3. To develop an investment eco-system where people with savings fund the mortgages of a new generation of property owners, helping them move up the property ladder, build prosperity, and in time, unlock asset wealth in order to repeat the cycle.

PRODUCT

We offer mortgage borrowers a responsive alternative to the banks, while offering retail investors a higher rate of return than they would receive from traditional, FSCS-backed savings products. Our investments become ISA eligible from April 2016.

For institutional investors (such as pension funds) we unlock access to mortgage assets at higher yields than those offered by traditional mortgage-backed securities – one of the world’s biggest asset classes. We achieve this by providing direct flow, minus the significant costs of formal securitisation.

COMPETITIVE ADVANTAGE

We believe that the regulatory and technology framework that we are developing will, in time, crystallise a speed and pricing advantage over incumbent lenders within the niches we target. These incumbents, predominantly banks and building societies, are subject to significant capital adequacy requirements and remain tied to legacy infrastructure – think old technology and expensive branch networks.

We aim to exploit this opportunity by:

- Complementing broker-sourced mortgages with those originated directly via strategic partnerships;

- Utilising technology to streamline the mortgage application, approval and conveyancing process;

- Dynamically matching mortgages to both retail and institutional investors, reducing our cost of funds as our database grows and at the same time disintermediating traditional capital markets by selling our loans direct to the ultimate end buyer.

Substantial accomplishments to date

The UK’s fastest growing P2P lender with loan book growth of over 1,000% in 2015 (Altfi).

63 mortgages totalling £9.4M were completed in Q4, 2015.

Pipeline stood at 178 mortgages (£30.2M) as at 31/12/15 - with committed funding in place.

STRATEGIC

Agreed to a long term partnership with Zoopla Property Group plc to promote our products and services.

The company has also made a convertible equity investment.

ORIGINATION

Distribution agreements in place with some of the UK’s largest specialist mortgage brokers. Direct channels offer additional opportunities to originate online.

FUNDING

Replaced Aldermore Bank as the major funder of Keystone Buy to Let Mortgages. These mortgages are now transferred into an AA rated Senior Bank Warehouse via one of our funding partners (who also provides the Junior Note).

£40M Mortgage Distribution Agreement held for 2016.

MOU signed (and formal DD underway) with a UK investment fund who wish to deploy £10M - £20M per quarter.

Monetisation strategy

OVERVIEW

The nature of our mortgages and their correlation with our investments mean that both sides of our ledger – invest and borrow – are relevant at all stages of our customers' financial lifecycle.

Examples of this symmetry include:

First Time Buyers –
Invest = save for a first home deposit.
Borrow = secure a first mortgage.

Core Demographic –
Invest = build a retirement nest egg.
Borrow = move up the property ladder / build a property portfolio.

Retirees –
Invest = earn stable monthly income.
Borrow = release equity from their home to enjoy retirement.

MONETISING OUR MORTGAGES

Landbay charges borrowers a fee at the time of funds being drawn down, typically 2.00% of the loan amount (based on our current mortgage offering). In addition we take a margin between the Lender and Borrower rate, currently 0.94% on a blended basis.

As our loan book grows we will build significant annuity income in the business (as the trail margin we receive layers up month-on-month). We see this as a major point-of-difference within P2P where most platforms have churning, short term loans and are therefore more reliant on writing new business to offset amortisation.

NEW REVENUE OPPORTUNITIES

New Mortgage Products.
We are exploring a number of new mortgage products to attack underserved niches within the broader UK mortgage market.

Bolt-on Services
New services, including Landbay Legal (conveyancing), Protect (life, home/contents and landlord insurance) and Move (moving/switching services), will be launched in 2016 and will enable us to further monetise higher margin products, such as BTL lending; and supplement new and lower margin mortgage products, such as residential home loans.

Creating Origination
Our framework can be applied to other forms of investment, including direct ownership. Landbay is uniquely placed to offer 'leveraged syndicates' in partnership with existing property companies. However, we do not envisage looking at this opportunity for some time.

Use of proceeds

We intend to use the proceeds of this funding round for general working capital purposes as we continue to grow the business. Our expenses will roughly break down as follows:

Technology - 50%
Marketing & Brand Development - 25%
General Operating Expenses - 25%

This fundraise will enable us to evolve our mortgage / ancillary product offering and continue to scale our loan book, both of which are considered likely to enhance our value proposition.

**Please Note**
There are currently 3 outstanding convertible equity agreements, totalling £904,900, which will convert at a 15% discount if the Company raises the £1 million target. This includes the strategic partnership convertible mentioned above. The other two instruments relate to convertible equity campaigns previously run by Landbay on Seedrs. The conversion of these instruments to equity has not been factored into the headline valuation/equity on offer.

In addition, as part of the long term strategic partnership, Zoopla Property Group plc shall be offered a warrant for further equity in the company, exercisable over 4 years, subject to performance metrics. The full terms cannot be disclosed at this stage due to commercial sensitivity, but draft terms have been disclosed to Seedrs. The founders and directors believe the warrant to be in the best interests of the company in the context of the partnership as a whole.