Prosper has raised 20 million US$ from Sequoia Capital. Prosper also announced it has appointed Stephan Vermut as Chief Executive Officer and member of the board of directors. Prospers management team is undergoing change after several persons left in December (e.g. David Silverman, Larry Cheng, Jeffrey Jacobs). The SEC recently approved Prospers new ProsperFunding LLC, a legal structure set up to offer bankruptcy protection for investors in the event of an bankruptcy of Prosper Marketplace Inc.
Ratesetter yesterday introduced a new sellout function that allows lenders to exit their contracts early.
How does it work? Lenders request the amount they wish to have returned to their Ratesetter Holding Account. Ratesetter works out whether this is possible and calculates the cost of doing so. The Lender confirms their wish to go ahead and then Ratesetter processes all the necessary assignments. The Borrower will remain entirely unaffected by this.
What are the costs involved in exiting early? Ratesetter charges a fee made up of three elements: •   The exiting Lender’s interest is reduced to the level they would have received based on the length of time they have ended up lending for. This is based on the Market Rate and products available on the day they originally lent. So, for example, if the lender had lent into the 5 Year Income market nine months ago and choose to exit now, the lender would only receive the interest the lender would have got from lending in the Monthly Access market for that period of time; if the lender had lent 13 months ago the lender would only receive what the lender would have got from lending in the 1 Year Bond market; if the lender had lent 37 months ago, the lender would only receive what the lender would have got from lending in the 3 Year Income market. With regard to an early exit from the Monthly Access market, the cost is that the lender forgoes all the interest for that month. The purpose of this charge is to ensure there is no incentive to lend for five years if the intention is only to lend for two years; •   A fixed charge for administering the exit which is 0.25% of the oustanding contract amount (currently waived for existing Lenders for a period of one month) •   An “Assignment Fee†to ensure that if the interest rate in the relevant Ratesetter market has gone up the exiting Lender can still exit. This will calculate and deduct from the exiting Lender the amount required to be added to the interest rate to ensure the incoming Lender gets what they expect. In circumstances where interest rates are the same or lower there will be no Assignment Fee.
Can the lender choose which individual contracts I sell? No, the contracts will be automatically selected, starting with the most recent contracts.
Where does the incoming Lender come from? From the same market as the exiting Lender.
Are there any circumstance when the lender would be unable to exit early? It is Ratesetter’s intention that the lender will be able to exit all contracts at any time. However, it may not always be possible to do so: •   If there are insufficient funds in the relevant market. This will be determined by a “buffer†of available funds (of which the amount in each market will be periodically reviewed) designed to keep the smooth running of the Ratesetter markets. •   If an individual contract is less than £10, the current minimum reinvesment size.
Offering a secondary market (regardless in which form) is becoming a basic functionality that lenders expect as a core feature from a p2p lending service. The 3 major British services Zopa, Ratesetter, Fundingcircle as well as American Lending Club and Prosper now offer the ability to sell loans. In other countries regulation makes the setup of a secondary market difficult.
In January 2012 I wrote down my predictions for p2p lending developments in 2012. The black text is my original prediction, with the review added in green and yellow.
Deeper integration of mobile (probability <25%) Can you use a p2p lending service from a Smartphone? Sure. Some even have special apps for that purpose. But that’s not what we are talking about here. We are at the advent of a couple years timespan where several players (compare this infographic) will be fighting over market shares in the developing mobile payment market. If there is a role for p2p lending services, it is yet undiscovered (aside from the use p2p microfinance makes of it in underdeveloped countries). No action so far.Continue reading →
Roughly a year ago I came across an idea that sounded extreme. There was a crowdfunding pitch for a startup that had no team and no idea. What? Well the idea was that the startup once founded would use the ‘Design Thinking’ method to develop the idea and the business model in the first months after funding and company foundation. The pitch was for 100,000 CHF. It had a strange appeal to me, so I invested a small amount. The pitch did fully fun and 4 applicants – students of the university of St. Gallen, Switzerland – were recruited as founders and off they went. The founders are not paid a salary but compensated in shares for their work.
Soon the appropriately named ‘ Design Thinking Startup AG’ was incorporated.
One year of development
As investor I received nearly weekly updates newsletter-style on what the team was currently up to. Through 38 of these reports I was fascinated by successes, drawbacks, ideas and lots of work done. Initially the team sought idea and coaching, used the Design Thinking method to identify problems (needfinding) and did market research. Finally around week 11 one of the ideas substantiated into the idea that was developed.
In between there were events for investors and shareholder meetings approving the decisions proposed by the team.
Then a prototype was built, a development company contracted, the team moved office to Zurich and a second funding round was raised (again through crowdinvesting). During the last weeks the product was presented, tested and finalized in a closed beta.
Rothschild, through its RIT Capital Ltd investment trust, invested into p2p lending service Zopa. Their VC fund Augmentum Capital has led a “multi-million pound” round which for Zopa is the series D round. Forward Venture Partners as well as previous backers Bessemer Venture Partners and Wellington Partners participated in the investment. Details of the transaction were not disclosed.
Two month ago, when p2p lending service Isepankur opened up to investors from all EU countries, I started lending there. In this post I look at the status of the portfolio I have built so far.
I have deposited 4,000 Euro (approx. 5,200 US$) over the past weeks. The account currently has 254 Euro in cash, 215 Euro waiting in bids on loans to close and the majority of 3,580 Euro is invested in loans. I invested usually between 10 and 35 Euro per loan. The average interest rate of the loans is 25% and loan terms are between 1 and 36 months with most loans running for 24 months or longer. Most of the investments were done using the automatic bidding feature: About two thirds of the loans are fully funded by automatic bids the minute they appear on the marketplace. It is therefore necessary to use the automatic bidding, or these loans will be missed investment opportunities.
Screenshot of Account Overview
Repayments
So far nearly all repayments came on time. Of the few who missed a payment date, all but two repaid the next day. Currently only one loan (10 Euro) of my portfolio is a few days overdue. One loan was fully repaid early after only one month. In December I have scheduled repayments of 149 Euro which consist of 91 Euro principal and 58 Euro interest. In January – with more loans reaching first repayment date – repayments will rise to over 250 Euro. Isepankur offers monthly and daily charts forecasting cash flow.
Screenshot of Isepankur cashflow view for my portfolio showing payment dates and amounts in December
Statistics
The portfolio management has a statistics section that daily calculates the return on investment. Continue reading →
