Deal focus: Standard Chartered PE backs exceptional Dianrong

"It's much clearer than one year ago," says Soul Htite, CEO and founder of Chinese online P2P lending site Dianrong.com, and before that co-founder of US-listed Lending Club.

Last week, Dianrong had a funding breakthrough, completing a $207 million Series C round co-led by Standard Chartered Private Equity (SCPE) and China Fintech Fund - a financial technology-focused PE fund launched by Guangfa Securities, China Minsheng Investment and L.R. Capital. Shanghai-listed Bohai Leasing and exiting investors also participated.

It is unusual for SCPE, primarily a growth and expansion stage investor, to back a company at such an early stage. Wei Zhu, global co-head at SCPE, stressed that Dianrong is an exception, adding that his form would "only like to back the best and most differentiated company in the industry."

In the US, it is also unusual for traditional banks to invest in emerging online financial players because they are in competition with one another, according to Htite. However, there appears to be a degree of compromise in China.

"This is the first time a traditional bank has invested in an internet platform. They have witnessed the fast growth of the sector. I feel they want to partner with us, otherwise there would be a big fight between the internet players and offline institutions," he says. "We can leverage their networks and customers, as well as their understanding of the market and regulatory environment. The strategic value is much important than the capital."

Dianrong plans to the use the funds to boost its operations, products and brands. It will hire another 2,500 employees, double its current 18 branches and enter the personal wealth management space. The company wants to facilitate at least RMB1 billion in monthly transactions by October. Dianrong will also work with Standard Chartered bank to build an online finance platform in China and then expand it to other markets in the region.

The three-year-old start-up connects individual lenders with small-scale borrowers, meeting the needs of small and medium-sized enterprises that don't qualify for banking financing.

It differs from many Chinese P2P practitioners in that it is a pure intermediary - sourcing borrowers first and then putting them in front of prospective lenders - rather than behaving like a bank without a proper license. Hence Htite's positive response to the regulatory reforms.

"We have never collected money from the lenders without securing borrowers. Today as a lender on our platform, even if you want to invest just RMB1, you have to sign in a contract," Htite explains. "Lenders can also track payments and other information. Therefore they don't have to worry about where their money has gone."

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• Topics
• Financials
• Technology
• Greater China
• Expansion
• China
• Technology
• Financial Services
• Growth capital
• Standard Chartered Private Equity