On Tuesday Prosper.com, a person-to-person lending site that launched in February, will announce a couple of fairly significant milestones: 100,000 members and $20 million in funded loans.
They reached both milestones faster than UK-based competitor Zopa, which was recently named a Busines 2.0 “Disruptor.”
Prosper allows members to request loans of up to $25,000 (the average funded loan is $5,000), and then other members offer to fund the loan at various interest rates. Prosper breaks the loan up into multiple pieces to distribute risk, and then funds from the lenders offering the most attractive interest rates. Over 4,000 loans have been funded since the site launched in February 2006. Prosper earns revenue by taking 1% of the loan amount in fees from the borrower up front, and charging a 0.5% yearly loan maintenance fee to lenders.
Interesting fact: Benchmark invested in both Zopa and Prosper, and the two will soon be competeting directly as Zopa expands to the U.S. market.
Does Prosper send out a tiny, multi-colored, digital-icon man to chase you down (and possibly break your toe) if you default on your loan?
I think this is an excellent model for bootstrapping startups. Without an established audience, prototype, or monetizable product, it is tough to attract the deeper pockets of VCs and angel investors. Typically, small business loans are also out of the question with no revenue. And with development costs droping, this is a great way for some people to get in the game.
Our approach was to raise funds with family and friends and now we have development for Convos underway. Prosper could make these types of transactions more prevalent in the startup environment.
http://www.convos.com
Interesting thread on Fatwallet.com highlighting individual’s success and failures working with Prosper.com.
http://tinyurl.com/yghk6k
In addition, here is a table of lenders with more then 25 loans and their projected ROI.
http://tinyurl.com/ymrgnn
I like Prosper in theory, I signed up a while back, but the loans just don’t seem competitive if you have good credit.
Even though the idea is cool, how can they ever make money?
$20 million in funded loans at 1% means they made $200K, and then lets add the 0.5% maintenance fee for $100K per year. So in total they have made $300K.
I think that would pay the salary of just about 1 or 2 of the 7 people on their management team.
I agree with Alex, the money is very low right now, however, if they start to do house loans or bigger business loans, those numbers could change dramatically. I think they should do something like this for under developed countries where $500 goes a long way. Seems to me that those are the countries that are in desparate need of a credit system.
Prosper.com looks like a long term investment. I love the person to person idea.
“I think they should do something like this for under developed countries where $500 goes a long way. Seems to me that those are the countries that are in desperate need of a credit system.”
That’s an excellent idea, although the availability of the internet would hinder awareness and growth in those environments. Unless the system in question was designed to integrate into users current mobile banking accounts and accessed via SMS/IVR. Mobile banking is the most available and widespread platform in those areas from which to expand.
This is great. Maybe those guys from Nigeria whose uncle died with $10M can loan us some of that money through prosper.
Alex is right. It’s very hard to run a complex centralised operation at a profit.
Maybe Prosper should start thinking of itself as a platform for existing social groups to do lending, rather than an eBay-style marketplace between strangers.
The Prosper groups are an interesting start. Perhaps after a few credit shakeouts some of them will grow/merge into mini-asset managers.
thomasbarker.com
You gotta admit it’s not surprising they’ve beaten Zopa’s numbers.. since Zopa has a market that’s 5-8 times smaller. If you take that into account, I imagine Zopa are still doing a lot better.
Interesting how do they enforce the loans being paid? Are they responsible?
Is ‘busines 2.0 “Disruptor”‘ the british spelling?
Take a look at kiva.org – they have been bootstrapping startups for a year now…
I’ve signed up. I don’t think this will work in developing countries because of low internet penetration. Should be successful in the US.
I run the Apple User Group on Prosper, I have been lending since March with about $18,000 out in loans. I have to say it has been a very interesting experience. I think that there is a huge market, and in 5 years or so Prosper will be a common as Master Card or Visa… With 100,000 users Prosper has more users than American Express…
Visit our Group page http://maclenders.com
There have been a couple of questions on how Prosper enforces the loans. You can see the answer on our supporting Prosper community site Borrowlend.com here: http://www.borr...Q/questions/93/
There are over 230 other Prosper questions answered if anyone has any other questions.
They certainly do not have more users than American Express….
AXP, generated $24B+ in revenue in 2005, and has over 65,000 employees.
http://finance.....com/q/pr?s=AXP
You’ll note above that with what info we have, the best we can project is that Prosper.com has generated $300k in revenue, about as much as a small town 7/11 Store in the same time frame.
I’m not saying they can’t do very cool things with this, but for people going into the lending business, its important that you put things into perspective, and understand the risks involved, which includes looking at competitor info…..
-bruce
A couple of things. Normally, I wouldn’t be concerned how much the guy who started eLoan was making ($300k). But it’s interesting as there is a concern w/r/t what if they went into bankruptcy? Where do these loans end up then – that’s been covered elsewhere. But I also wouldn’t be surprised if these fees changed. What’s more difficult is getting those first 100k community members isn’t it?
Kiva.org – not really bootstrapping startups unless you meant startups in Latin America and Africa. They only offer the repayment of your loan right now, no interest. But that’s about to change. The blog I referenced has some links/articles about these details.
Lastly – Zopa & Prosper. Not quite apples to apples. Zopa has historically worked with “good” credit borrowers, so the interest rates naturally tend to be lower. Prosper runs the range between AA credit to High Risk to No Credit. That’s got to be a reason why 100,000 users signed up too. Have you seen some of the rates out at http://www.prosper.com? Well over 20% in some cases. Let’s face it, the US has an appetite for speculation and those kind of numbers tend to stir up interest.
Check out the detailed statistics on Prosper and the maps at
http://www.wiseclerk.com
You can see how much money the top 250 individual lenders have invested in loans (this information is not directly available at the prosper.com site)
I am curious if I can beat current rates…… Trying it out!
https://www.pro...listingID=57512
I think Prosper.com is great! So far every one has been very supportive. What a wonderful idea. I invite everyone to view my listing. Start bidding now!