Recently in P2P Lending Category

Here are the news headlines posted this week on Twitter (follow our feed here).

MoneyAisle appears in Kiplinger's Retirement Report (print only). The story appears in the June issue and explains the new "auto loan search" features at MoneyAisle. More from MoneyAisle at http://bit.ly/FINOVATE671

BBVA Compass Bank replaces West Bank as SmartyPig's banking partner. BBVA Compass is the 15th largest bank in America. http://bit.ly/FINOVATE672

Kapitall unveils "search by brand" feature. The new search helps investors to identify the parent company of their favorite brands. http://bit.ly/FINOVATE681 or www.kapitall.com

SecondMarket CEO Barry Silbert interviewed by Dan Rather [vid]. See more on SecondMarket's management of "illiquid assets." http://bit.ly/FINOVATE691

MoneyAisle featured in Wallet Pop. Read more about shopping for an auto loan from MoneyAisle at http://bit.ly/FINOVATE692.

SmartCredit.com featured on the Oprah Winfrey Show. See SmartCredit.com at work with Oprah and Jean Chatzky as part of the "Debt Diet" series on the program. http://bit.ly/FINOVATE693

Ebay recognizes Outright.com as most innovative app. Outright.com received an award for most innovative application at the Ebay developer's conference. http://bit.ly/FINOVATE6101

MPower Ventures in the running for Business Week's "Most Promising Social Entrepreneurs." Twenty-five companies are finalists. Read more at http://bit.ly/FINOVATE6102 or www.mpowerlabs.com.

Micronotes raises another $1.6 million in funding. Yahoo Business reports on the startup's fund raising success. http://bit.ly/FINOVATE6103

TransFS.com helps merchants shop for better credit-card processing. TransFS claims that user merchants can save up to 40% by shopping around for merchant services. http://bit.ly/FINOVATE6111

Billeo expands merchant directory. Billeo users can now pay their bills online with more than 10,000 merchants. http://bit.ly/FINOVATE6112

Peer-to-Peer lender Prosper.com seeks regulation as a lender to avoid SEC. Prosper has asked to become regulated as a lender to ease the regulatory burden of being regulated as an investment firm. http://bit.ly/FINOVATE6113

On May 10, 2010 Lending Club began offering five-year, peer-to-peer loans targeted primarily at prospective auto loan clients.

At this time, users can select the option of three or five year loans, however according to Rob Garcia, later this may be limited to those stating intent to finance a car purchase and then offered to those who reject 3-year notes for other purposes, but this will depend on investor interest in the five year loans.

Unlike a traditional auto loan, this will be an unsecured personal loan with no lien on the title of the vehicle. This appeals to used-car buyers who will want to go to the dealership with cash-in-hand and negotiate from there. It also provides buyers the option of borrowing against their vehicle value in the future.

In an effort to keep P2P lenders interested in longer-term investments, the service fee on the five-year notes will remain 1% and the interest rates for all but the lowest risk borrowers will be slightly higher than the three-year notes. Assuming the same default rate, this will provide P2P investors with a higher average return than a similar three-year note.

Five Year Notes

All Lending Club loans are limited to highly-qualified borrowers and FICO scores of 665 or higher. The company grades all loan applicants according to risk, assigning letter grades A through G. A-classified borrowers will receive the same interest rate on the three- and five-year notes, B-classified borrowers will receive an interest rate two grades higher for a five-year term, and C and below borrowers will get an interest rate five grades higher. But even with the higher rates, monthly payments will be substantially lower with the longer loan term.

Illustration of the same loan as either three or five years

This is the first 5-year P2P loan in the US market, but in the United Kingdom, Zopa has five-year notes available.

A recent blog post from Lending Club's Senior Director of Project Strategy Rob Garcia highlights the recent market opportunity that Lending Club has been able to take advantage of--the tightening of personal credit from traditional financial institutions, even for qualified borrowers.

As a result, Lending Club is growing rapidly, closing $9.5 million in peer-to-peer loans in April 2010 and $114 million since inception. Recently, volumes have been growing 5 to 10% each month.

Lending Club by the Numbers

The peer-to-peer lending sector just received an encouraging boost of $40 million in new venture capital. The two primary U.S. P2P lenders, Finovate alums Lending Club and Prosper, recently received venture capital infusions (Finovate videos: here and here). The total invested in the two firms now tops $100 million.

Lending Club raised $24.5 million in a C round from Foundation Capital, Morgenthaler Ventures, Northwest Venture Partners, and Canaan Partners.

Lending Club says it will use the capital for new loan products, new investment tools, and website enhancements. The company said the funds would also help it reach a larger pool of customers. The lender has funded more than $105 million in loans.

In its series D round, Prosper raised $14.7 million from its previous investors - Accel Partners, Benchmark Capital, DAG Ventures, Meritech Capital Partners, Omidyar Network, QED Investor, and Volition Capital (formerly Fidelity Ventures) - and two new ones, TomorrowVentures, and CompuCredit Holdings.

TomorrowVentures is the investment vehicle for Google CEO Eric Schmidt and Omidyar Network was established by Pierre Omidyar, the founder of eBay. Court Coursey, managing partner at Tomorrow Ventures, will join Prosper's board.

Prosper CEO Chris Larsen said that the funding would help the company bring peer-to-peer lending into the mainstream. The company has nearly one million members and has funded more than 32,000 loans valued at nearly $200 million.

History of VC investment in Lending Club and Prosper

(all dollar amounts in millions)

Investment Round		Lending Club	Prosper1
Angel	Date	May 2007	--
	Amount	$2.0	--
Series A	Date	Aug. 2007	Apr. 2005
	Amount	$10.3	$7.5
Series B	Date	Mar. 2009	Feb. 2006
	Amount	$12.0	$12.5
Series C	Date	Apr. 2010	June 2007
	Amount	$24.5	$20.0
Series D	Date	--	Apr. 2010
	Amount	--	$14.5
Total:		$48.8	$54.5

Source: CrunchBase, April 20, 2010

1. Prosper also raised $1 million in November 2009 by selling a convertible promissory note to QED Investors.

A look at the investors¹

Investor	Invested In:	Interests	Founded
Accel Partners	Prosper	Multi-stage; Internet technology	1983
Benchmark Capital	Prosper	Early-stage; technology	1995
Canaan Partners	Lending Club	Early-stage; technology & healthcare	1987
DAG Ventures	Prosper	IT, energy & life sciences
Foundation Capital	Lending Club	Technology	1995
Meritech Capital  Partners	Prosper	Late-stage; IT and medical	1999
Morgenthaler   Ventures	Lending Club	IT & life sciences	1968
Northwest Venture   Partners	Lending Club	Multi-stage; Internet, technology & media	1961
Omidyar Network	Prosper	Financial & media	2004
QED Investor	Prosper	Information companies
Volition Capital	Prosper	Technology	2010
TomorrowVentures	Prosper	Seed and early-stage	2009

Sources: CrunchBase; Caanan.com; Morgenthaler.com; nvp.com; volitioncapital.com

1. CompuCredit Holdings, which invested in Prosper, is not a VC company.

According to Compete, Lending Club had about 90,000 unique U.S. visitors per month over the last two months. Prosper averaged around 150,000 per month for the same period.

Source: Compete.com, April 21, 2010

Peer-to-peer lending company Lending Club hit a major milestone this week: $100 million in loans funded. Based on current monthly volume, they are the leading P2P lender in the U.S. and are running head to head with Zopa UK for the top spot worldwide. Lending Club is the third P2P lender to reach this level, following fellow Finovate alums Zopa and Prosper.

Recent Milestones

Lending Club recently marked a number of milestones. On March 18, the company funded loan number 10,000. The company also recently surpassed $1 billion in loan applications.

Other highlights from Lending Club's history show it:

• was founded in 2006 and officially launched in 2007
• made its industry debut at the first Finovate conference (video here).
• issued $3 million in loans in its first three months
• registered with the SEC in 2008
• raised $12 million in investment capital in Mar. 2009
• rolled out its new look in Feb. 2010
• has paid out $6.9 million in interest to investors

Many of the company's accomplishments have been covered by our Netbanker blog (Lending Club posts available here).

Website remodel

Lending Club also recently updated its visual style by changing its logo and redesigning its website.

The old site (see screenshot #1, below) presented the reader with a lot of text, including news, information, and endorsements. The new site (screenshot #2) achieves a cleaner, less cluttered look by presenting visitors with two large boxes - one for investors and one for borrowers. It highlights only a few key data points such as average investor returns.

According to Lending Club's director of product strategy, Rob Garcia (statement here), the new look is intended to be "smart and simple," reflecting the concept of Lending Club.

Over the past year, Lending Club saw about 100,000 unique U.S. visitors each month, with a significant spike in December and slight decline last month.

#1 Lending Club's previous look...

#2 ... and the company's new look (as of 31 Mar 2010)

 

Finovate Best of Show winner Prosper has just launched Talk Taboo, a new social website where users share stories about their finances. Since the site caters to those interested in improving their financial situation, it will hopefully bring Prosper a targeted audience for its peer-to-peer lending services. (FinovateStartup2009 conference video here).

The Talk Taboo website claims that discussing finances is one of our culture's last remaining social taboos. By creating a place to bring financial discussions out into the open, Prosper is creating a social venue where it can encourage P2P lending.

The site provides a simple interface for visitors to post their stories. Users simply enter their first name, email address, an optional photo, and a personal story. Prosper is also offering a $1,000 sweepstakes to encourage visitors to post their stories. The winner will be selected in April.

Will the Taboo site drive traffic to Prosper? The Talk Taboo landing page includes a link to the Prosper site, encouraging consumers to consolidate their debt with a Prosper loan (screenshot #1). The stories page, where readers can find personal stories posted, has an endorsement from a Prosper borrower (screenshot #2). Both pages also contain a link to a Debt Consolidation Guide, which, among other possibilities, recommends peer-to-peer marketplaces like Prosper.

While the Talk Taboo site promotes Prosper, the reverse does not appear to be true. Aside from the blog entry announcing Taboo's launch, there is no mention of it at prosper.com. However, the Stories tab on the homepage seems a likely candidate for a future linkage.

Talk Taboo isn't Prosper's first experience with social sites. In 2007, the company had a thriving forum community with more than 280,000 posts (see Netbanker story here). Prosper also uses social tools to allow family and friends to endorse borrowers and display how much of the loan they are willing to fund.

In February, the number of unique U.S. visitors at Prosper's website fell to 145,000, as compared to 219,000 in the previous month (see March 23, 2010 update, below). Traffic data is not yet available for Talk Taboo.

Traffic data from Compete.com, March 2010

# 1. The Talk Taboo Site - Note the Link to Prosper

 

#2. Talk Taboo stories

 

Update: March 23, 2010:

We’ve received an update on Prosper’s web traffic numbers. According to data from Google Analytics, provided to us from Prosper, the site had 210,000 unique visitors in January and 158,000 in February.