A few weeks ago, I caught up with Chris Larsen, CEO & founder of Prosper. I’ve been a huge fan of his work for more than a decade. His ventures,
E-Loan and Prosper, have been pioneers in the lending space, both earning OBR Best of Web awards and Prosper also taking Best of Show in our first Finovate in Oct. 2007 (note 1).
But it’s been a rocky few years for Prosper (see Netbanker archives), as it’s been for most consumer lenders. The company even lost its lead in the U.S. P2P loan space to Lending Club, which is currently originating about three times as many loans.
But Prosper survived and appears to be back on a path to live up to its name. Some recent milestones:
- Its first private equity lender (updated 16 June, 2011, per comment below) is coming on board, pledging $150 million to fund loans on the Prosper platform. This is an important development and fulfills a goal that the company sought since its 2006 launch. It will also help Prosper keep up with Lending Club which has had major institutional investors for a while. Prosper hopes to keep a healthy mix of retail and institutional investment (“50/50 would be fine”).
- $17.2 million in new venture funding from Draper Fisher Jurvetson and Crosslink Capital (announced 7 June, link)
- Achieving double-digit returns for investors, a far cry from the negative returns some lenders experienced in the “trial & error” era before (note 4)
- Achieving large year-over-year loan growth, although the company is still running less than half the pace of the pre-SEC days (note 3)
Prosper loan growth
Source: Eric’s Credit Community, 15 June 2011
Prosper’s homepage is a model of Web 2.0 simplicity
Note: New lenders are offered an iPad for investing $20,000 or more (15 June 2011)
Both Prosper and Lending Club are averaging about 200,000 monthly unique visitors
Source: Compete, 19 May 2011
1. E-Loan was named OBR Best of the Web in July 1997 for launching the first online mortgage brokerage.
2. Prosper was named OBR Best of the Web in March 2006 for launching the first P2P loan service in the United States, and the first anywhere to use competitive bidding to set rates, a model they recently abandoned.
3. Before the SEC forced the company to restructure its business as a securities issuer in Oct 2008.
4. The average total return for the 2006 to 2008 loans (most of which are now off the books) was a negative 5.4%