For many of us, our home is by far our greatest asset, and in the world of fintech, that leads to a logical extension: when you need money, borrow against that most important asset. Today, a London fintech called Selinawhich provides flexible capital to consumers over five years against up to 85% of the value of their home – so-called Home Equity Line of Credit (HELOC) loans – announces $150 million in funding after making $100 million in homeowner loans.
The $35 million Series B share portion is led by Lightrock, with participation from former backers Picus Capital and Global Founders Capital. (The latter two companies are partly related to the Samwer brothers, who also built the Rocket Internet e-commerce incubator in Berlin.) The remaining $115 million comes from Goldman Sachs and GGC debt. Hubert Fenwick, the CEO who co-founded the company with COO Leonard Benning, said Selina was not disclosing its valuation with this round, but a source said it was based on standard Series B dilution. , which equates to approximately $140 million.
Selina plans to use the funding to continue to expand its business in the UK before considering how to tackle other markets in Europe, which Fenwick has called “white space” because of the way whose HELOC market is nascent there; and to launch more products around its lending business, including a credit card it will launch this year that will draw funds from a customer’s loan to make funds more accessible.
The UK market is ripe for the taking and its size is huge,” said Fenwick, estimating the potential asset base for homes in the country at $30 billion. “We need a war chest to unlock that, so we think the cash flow will support the UK business very quickly, but we also need capital to expand into international markets.”
When we last covered Selina, in July 2020, the company was innovating in the UK and had just raised $53 million to bring its HELOC service to SMEs, not individual consumers. Fenwick tells me consumers were always in its sights, but the company needed to get regulatory clearance first.
“The real opportunity was consumers,” he said. This happened in late 2020, and now 90% of Selina’s business is consumer lending, he said.
In both cases, the gap in the market is the same: people who need capital for a large project, for example the renovation of a building or for educational purposes, could otherwise apply for a loan from a bank, or they could refinance their home to recover some extra cash. Selina’s HELOC approach differs from these in part because of the speed at which its loans are approved – money can be available as quickly as 24 hours – and the fact that funds are distributed as needed, which means that consumers only pay interest on the part they finally withdraw.
These could be seen as rivals to mortgage refinance, but in fact Fenwick said it’s the opposite: Banks are strong partners for Selina, as they are always looking for ways to prevent customers from Forgoing their mortgages and refinancing to get cash is often one of the ways their clients turn away. Offering these customers a HELOC is one way to keep them from touching their mortgages. But this is not an area that banks would necessarily touch on their own, he said.
“HELOC is the preserve of specialty lenders marrying credit card-like fees with mortgage security,” Fenwick said. “You have to manage liquidity in a different way. The main mortgage market is much larger, so banks prefer to partner with smaller companies and retain the mortgage customer [as is] rather than entering a new market.
Fenwick notes that Selina typically analyzes a mix of its own and third-party data to determine someone’s eligibility for a loan and manage different aspects of the business, and that data science creates another barrier to entry for others to compete. “Our algorithms are proprietary and specialized for the loans we make,” he said. “The stack is very long.”
Selina calculates that because you only pay interest when you withdraw funds, the rates you pay back each month won’t be as high as someone who borrows and withdraws a lump sum. A comparison chart on a £50,000 loan shows how it works:
HELOCs are relatively common in the United States, Fenwick points out, where the market is estimated at $150 billion, with some of the biggest names in the space including Blend (which is now public), Noah and Hometap. The approach is relatively new in the UK, although Fenwick thinks it is likely (and quickly) to evolve not just because HELOC companies like Selina’s are being given the green light, but because of the ubiquity of the home ownership; and the fact that more people, as they travel less due to the pandemic, have turned their attention to spending more on things like home renovations or less frequent but much larger vacations.
“Historically, homeowners across the UK have been underserved when it comes to accessing the wealth created from their greatest asset – their home,” said Ash Puri, growth investor at Lightrock. , in a press release. “The Selina team has achieved impressive growth with over $100 million in loans issued since its inception in 2019. Lightrock is thrilled to support such an innovative team and looks forward to supporting Selina as it disrupts traditionally inflexible lenders. “
“Selina Finance’s HELOC product is innovative and bridges the gap between the consumer credit and mortgage markets,” added Anna Montvai, executive director at Goldman Sachs. “We are delighted to support the Selina Finance team in growing their business and loan portfolio.”