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A venture capitalist’s view on investing in peer to peer lending

wiseclerk

When a VC talks about peer to peer lending he is not talking about achieving a good ROI by lending to borrowers. He is talking about the chances he sees in investing in the p2p lending company.

Paul Jozefak, Managing Partner at Neuhaus Partners, did just that as a side note in an interview he gave ReadWriteWeb. Neuhaus Partner invested in the second VC funding round of German Smava.de six month ago.

In the interview Jozefak says, that:

  1. Smava is at the right time in the right place (current economic situation)
  2. he sees an upswing in lender and borrower interest; assesses that the model has proven itself
  3. Their competitors in the US are doing quite well and he expects that Prosper will resolve it’s issues with the SEC.

I agree with the first point, but in my view it is too early to judge whether the Smava model really has proven itself (even the oldest loans are only through two thirds of their loan term). And the last point, I find an optimistic assessment of the situation. One could say that Lending Club is doing well, but Prosper and Loanio are in a situation that could at least be described as challenging.

Lending Club receives 12 million US$ VC funding

wiseclerk

Lending Club announced today that they have closed another funding round. Excerpt from the press release:

… closed a $12 million Series B round of funding. Morgenthaler Ventures led the round and is joined by existing investors, Norwest Venture Partners and Canaan Partners. Rebecca Lynn, a Morgenthaler Principal, is joining Lending Club’s board of directors.

Lending Club also announced today that it has added Pamela Kramer as Chief Marketing Officer. Ms. Kramer is an established marketing veteran … . She was most recently Chief Marketing Officer of MarketTools, Inc and, before that, spent 9 years in leadership roles with E*TRADE Financial … .

MYC4 providers react on high default rates

wiseclerk 2 Comments

Over the last months it became clear that MYC4.com loans default at a much higher percentage then expected. MYC4 management states several growth and quality problems that led to the situation. Better training of the local providers, partner ratings, spot audits and a license system are measures that shall improve the quality in loan selection and management in the future.

Currently one challenge is to deal with the failing loans issued in the past. The earlier problems with Ivory coast loans continue. About half of the issued loans were insured by the organisation MISCOCI against defaults. MISCOCI failed today and is reported to be bankrupt. MYC4 has announced a few minutes ago, that they will publish until March 20th, what this means for the lenders on the defaulted Ivory Coast loans (MISCOCI covered 242 loans with an outstanding balance of 388,644 Euro).

NotreNation, one of the providers in Ivory Coast, yesterday named poor selection of borrowers by inexperienced credit agents and the difficult economic situation in Ivory Coast as reasons for high default rates.

GrowthAfrica, a provider in Kenya with a high portfolio at risk rate (PAR) has announced yesterday that it will buy back 65 very poorly performing loans at 95 percent of the balance from the lenders. This step was taken as GrowthAfrica felt they share responsibility for the poorly performing loan portfolio. GrowthAfrica expects to buy back loans for more then 125,000 Euro in total.

Pertuity Direct starts affiliate program

wiseclerk 3 Comments

P2P Lending service Pertuity Direct has launched an affiliate program. The new referral marketing campaign of Pertuity Direct pays:

  • 35 US$ for each referred completed and approved borrower application for a loan
  • 50 US$ for each completed investor application
  • performance incentives for websites that generate at least 5 leads per month

The campaign runs at affiliate network CJ, where Lending Club does administrate it’s affiliate program, too. Lending Club pays 35 US$ commission for each loan application and 60 US$ per lender registration plus performance incentives.

See earlier posts about p2p lending services using affiliate marketing.