It was the worst kept secret in fintech. There were rumors flying around during LendIt Fintech earlier this month and then Bloomberg published this story a couple of weeks ago about the pending deal. Well, today it became official. In a press release this morning it was confirmed that Kabbage, the leading tech-focused small business lender, will acquire Orchard.
I met Matt Burton, the CEO and Co-founder of Orchard, at the very first P2P lending meetup in New York in early 2013. This was before Orchard even existed but right away it was clear that we both shared a true passion for the burgeoning online lending space. I invited Matt and his fellow co-founder, Angela Ceresnie, to speak at the very first LendIt in June of that year. I still remember their presentation on institutional investing and how they were building tools to make the investing process easier. Orchard was officially founded in August 2013 and since then they have gone on to become the leading connector of capital between loan originators and institutional investors.
It was back in February when I first heard rumors that Orchard was for sale. I was a bit surprised because they had closed a $15 million Series C just a few months before. They had also recently released their new Deals platform to facilitate both primary and secondary market loan transactions. But from what I have heard, and the Bloomberg article seems to confirm this, their new platform has failed to get the traction they had hoped.
So, what will become of Matt Burton and his team? Some clues are provided in the press release:
Orchard’s CEO and co-founder, Matt Burton, as well as Chief Analytics Officer and co-founder, David Snitkof, will both join Kabbage in leadership roles upon the closing, helping oversee technology integrations and future innovations. In total, Kabbage will add more than twenty Orchard employees who are predominantly focused on advanced analytics, data science and engineering to its New York City office.
I chatted with the CEO of Kabbage, Rob Frohwein, earlier today to discuss his reasons for this acquisition. He first said that Kabbage has had a long history with Orchard and he has always valued the reporting and analytics that the company provides.
“Orchard has built significant expertise in understanding and analyzing loan portfolios. They can also identify opportunities within loan portfolios and they can help Kabbage better manage the capital markets side of their business,” Rob said in our discussion. He added that “the Orchard platform has applicability beyond what they have done in the past.” He would not elaborate on what kinds of things they were thinking about.
In an interview in American Banker Rob’s fellow co-founder, Kathryn Petralia said that “the acquisition will help the company diversify its business and offer more data-driven services to small businesses and financial institutions.” The article also shared that the Orchard brand will be retired and at closing Orchard will become Kabbage. Their business of providing portfolio analysis and analytics to other online lenders will be discontinued.
My Take
I am glad with Matt will be staying on with Kabbage. His knowledge of the inner workings of the online lending industry is second to none. He is one of the founding fathers of this space and as we joked a couple of weeks ago at LendIt in San Francisco, that was his 10th LendIt event, having spoken at our events in all three locations (USA, Europe and China).
Orchard has provided an extremely useful service to the online lending industry, helping new platforms scale and even bringing onboard offline platforms and providing them with capital. Without Orchard the space would not have grown the way it has.
But now a new chapter begins and Kabbage will take this expertise and run with it. I will be very interested to see what new initiatives come to fruition as a result of this deal.
