At German Smava.de the volume of newly originated p2p loans continues to fall and reached a record low of approx. 700K Euro in January. That’s only about one-third of the volume Smava funded on its peak-time in mid-2010. Smava changed its business model in spring 2012, since then focusing on brokering bank loans and the aim to rely on the commissions paid by the banks as main source of revenue rather than the p2p lending transaction fees. There are no public figures available on the volume of bank loans brokered by Smava. I do wonder if they will reach break even by pursuing that model as competition in that market is fierce.
Prosper Raises $20M from Sequoia; Appoints New CEO
Prosper has raised 20 million US$ 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.
(Sources: press release & other)
Lenders Can Use New Sellout Function to Exit Loans Early at Ratesetter
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.
Review of My P2P Lending Predictions for 2012
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
Extreme Crowdinvesting Experiment – How I invested in a Startup that had no Idea
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.
The result
Last Friday Stablish.me went live. Stablish.me has set itself the goal to redefine the résumé. Further, the company aims to replace it through it’s social endorsement network in the
long term. Continue reading
Rothschild Invests into Zopa
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.
Sources: Financial Times, Techcrunch