StreetShares Nabs Series A for Small-Business Loans

When Mark Rockefeller, co-founder and chief executive of online lender StreetShares Inc., was in the military, he said he noticed that payday lenders would often set up operations in strip malls right outside the gates of military bases in the US

“They were there to prey on young troops who didn’t know any better,” said Mr. Rockefeller.

A few years after returning from serving in Iraq, Mr. Rockefeller created StreetShares along with Michael Konson, previously an executive with Capital One , to offer loans to small businesses, most of which are run by veterans. It offers loans and lines of credit of $2,000 to $100,000 for up to three years.

The startup was one of the few online lenders that managed to raise venture capital funding this year, at a time when venture investor sentiment toward the sector cooled sharply.

Reston, Va.-based StreetShares has closed on $4.5 million in new equity in the first tranche of its Series A round, Mr. Rockefeller told VentureWire. Financial-technology venture firm Fenway Summer, founded by Raj Date, former deputy director of the US Consumer Financial Protection Bureau, is leading the round. Endeavor Equity Holdings and Pivot Investments also participated in the deal. The round is still open.

StreetShares involves veterans not just as borrowers but also as lenders, who provide portions of each loan through a marketplace lending platform. The idea, which Mr. Rockefeller calls “affinity group lending,” is that such loans carry lower risks as borrowers are more likely to repay when they know their lenders aren’t just big banks but veterans like them. That approach is reminiscent of the microlending strategy called solidarity lending that was popularized by Grameen Bank.

Mr. Rockefeller hopes that StreetShares’ relationships with military organizations such as American Legion will help it stand out in a market saturated with pitches from other online lenders and brokers that have much more capital to spend on marketing. Online lenders received massive investments from venture capitalists, especially in 2015, stoking competition and the costs of reaching borrowers.

Read the full article on StreetShares’ retail-investor fund and other aspects of its business in VentureWire.

Write to Yuliya Chernova at yuliya.chernova@wsj.com. Follow her on Twitter at @ychernova