Inside Bond Street’s content marketing strategy
4 essential presentations on marketplace lending
WTF is marketplace lending?
Swipe for charity: How mobile apps are enabling a future of giving
Peter Renton on How the Lending Club IPO changes everything
On the inaugural This Week in Crowdfunding podcast, David Stark and Zack Miller discuss all things crowdfunding.
First up, we do a hard-punching news roundup. We chat about Kickstarter’s recent rule changes, why the real estate crowdfunding industry is currently receiving so much PR, and a recent study that sheds some light on optimizing crowdfunding campaigns.
We interview Peter Renton of LendAcademy and the Lendit conference, who’s a true pioneer in the marketplace lending industry. We ask Peter on where the industry is headed. Pay attention to Peter’s description of the rumored, upcoming Lending Club IPO and how he expects this to be a seminal moment in the crowdfunding industry.
Lastly, in our product review section of the podcast, we take a closer look at NickelSteamroller which is a great site to both analyze the marketplace (p2p) lending industry in general, as well as analyze individual securities at the portfolio level.
That’s a wrap for the first of what we hope to be incredibly engaging and informational podcasts we’ll be publishing weekly.
Listen to the FULL episode
Investing in people with potential — with Upstart’s Dave Girouard
What if you’re a recent Stanford college grad with a computer sci degree and need to borrow money? (crickets)
What if you’re an investor and would like to be able to loan to these (future) high performers? (Upstart…)
Dave Girouard, co-founder and CEO of Upstart, joins us on the Tradestreaming Podcast today to talk about how his firm is enabling lending to — and investing in — young, high potential people who haven’t had enough time to build out a long credit history.
Listen to the FULL episode
About Dave Girouard
Dave is the co-founder and CEO of Upstart.
More resources
Even More Resources
Get off the investment roller coaster by getting the Lending Club gospel
Lending Club produced a nice new video I liked and thought you’d appreciate seeing.
In 5 years, the firm has underwritten over $1B in peer-to-peer loans and is on fire. As I’ve written before, I believe the direct personal loan is on its way to becoming a new asset class in investor portfolios, thanks to Lending Club.
Additional resources
- Listen to my interview with Lending Club founder and CEO, Renaud Laplanche
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Lending Club grabs the moola, gets Meeker
Looks like I’m not the only converted believer in the rise of peer to peer lending as an asset class…
Lending Club, which commands about 75% of the market for p2p loans, landed a strategic investor today. Mary Meeker, formerly the technology axe for Morgan Stanley and now a partner at Kleiner Perkins (KPCB), is leading a $15M investment and will join the firm’s board.
Why is this important?
- Lending Club has now raised over $100M
- this brings LC’s total unrestricted cash to almost $50M
- LC has originated over $650M in loans and is adding something like $135 million each quarter
- it’s just a huge approbation to the viability of LC and the p2p lending industry in general
Lending Club’s CEO, Renaud Laplanche (who’s scheduled for a future episode of Tradestreaming Radio) had this to say about Meeker:
“Kleiner Perkins is virtually synonymous with breakthrough brands we love like Amazon.com, Google, and Twitter. Mary’s unique depth of experience across both the financial industry and with the Internet’s category leaders will be instrumental in Lending Club’s continued growth and mainstream adoption,” said Laplanche. “We are thrilled to welcome both Kleiner Perkins and Mary as our new partners.”
I love it when things get interesting.
9 ways to improve your investing performance in P2P loans
Yesterday, I discussed why I’m now a believer in peer-to-peer loans as a new asset class for investors.
Now, I’d like to look at how investors can lower their risks of defaults on these types of loans and boost their overall returns.
The problem with P2P loans
Like in most areas where information is asymmetrical between two parties entering a transaction, p2p loans present an informational problem.
Borrowers know a lot more about their potential to repay a loan than those making the loan.
In a traditional banking relationship, banks have resources to attach a number (a credit score) to a loan. Given experience and data, banks can estimate the probability that a borrower with that number will default. It’s an imperfect solution but works (at least, most of the time).
Borrowers on p2p marketplaces like Prosper.com aren’t given an actual credit score. Instead, they’re grouped into categories of credit worthiness which further complicates our ability as investors to assess their ability to pay us back.
Also, because multiple investors invest in the same loan, each individual investor may lack the incentive to do proper research (free rider problem). That’s according to Do Social Networks Solve Information Problems for Peer-to-Peer Lending? Evidence from Prosper.com
How social networks help investors better their returns
To mitigate this problem, p2p loan marketplaces have created their own versions of social networks where borrowers can friend people and organizations.
And you guessed it — these groups are key to helping us investors determine the chance that our investments pay off (or don’t).
Why? Because research has shown that borrowers with friends on these investment platforms are:
- more likely to get their loans funded (not necessarily a good thing — we want borrowers to get funded and be more likely to pay).
- less likely to default on their loans (bingo!)
Why? It’s all about signaling.
The results suggest that verifiable friendships help consummate loans because they are credible signals of credit quality
We want to invest in loans that provide us with a good return but are also the “right” type of borrower. Using friends and endorsements are key to solving this issue.
We show that borrowers with online friends on the Prosper.com platform have better ex-ante outcomes. This effect is more pronounced when friendships are verifiable and friends are of the types that are more likely to signal better credit quality. The results are consistent with the joint hypothesis that friendship ties act as a signal of credit quality, and that individual investors understand this relationship and incorporate it into their lending decisions. To further pin down why friendships matter, we examine whether friendships are related to ex-post loan outcomes. We find that borrowers with friends, especially of the sort that are more likely to be credible signals of credit quality, are less likely to default.
9 ways to improve our chances investing in P2P loans
Continue reading “9 ways to improve your investing performance in P2P loans”
Why I’m a converted believer in investing in P2P loans
If you’re like millions of people, you’re probably worried about your net worth.
Pretty worried.
The market’s up and then, it’s down. Jobs are being created and lost. Banks are stable and then they lose $3B seemingly overnight. And politicians? Nobody seems to have a strong plan to get us through and certainly not the political will to see it through.
It’s not entirely clear if the economy is recovering or not.
Investments: riskier, less diverse, zero confidence
If you have investments, you’re probably experiencing the following:
Volatility spikes: The market has the great ability to lull people into a false sense of security and then, wham! You get periods like the beginning of May where it feels like the world is ending. Nothing looks good right now. Nothing feels right, either.
Diversification doesn’t seem to be working: It may be exchange traded funds doing it or just a general move towards passive investing, but all types of investments are moving more in tandem. When stocks go down, they bring down other “safer” assets. The theory of diversification isn’t providing the benefits it promised. That’s where we are — when things are bad, it seems that there is nowhere to hide.
Lack of confidence in reaching financial goals: Many investors are just throwing up their hands. No más. They feel the stock market is rigged (it is, somewhat) and don’t want a part of it. But in an environment where bonds and CDs pay so little, underfunded-for-retirement investors need to reach for more risky assets and are forced to play a game that they don’t want to play.
What if I could tell you that you can triple the returns on the fixed income (bonds) part of your portfolio without taking on more risk?
Continue reading “Why I’m a converted believer in investing in P2P loans”