Thinking About Thinking

Prosper Marketplace: Changing The World

Posted in Venture Capital by larrycheng on July 13, 2009

It is with great pride that I congratulate Prosper Marketplace on successfully completing their SEC registration process pioneering the first true auction marketplace for person-to-person lending (Prosper’s blog post). 

At the highest level, I believe this ushers in a fundamentally new model for auctioning all kinds of securities that will lead to tremendous innovation in the 21st century.  For Prosper, it is great to be back in business after a long quiet period working with the SEC (when we stopped lending).  Before the quiet period, we were growing at a torrid pace having enabled $178 million in loans to transact between millions of individuals in the United States.  Needless to say, we are excited to be back in business and back to the aid of consumers during this difficult financial time.  I would like to thank the SEC for working closely with Prosper and embracing innovation as regulators.

I am personally pleased to see Prosper back up and running because my Prosper portfolio was my top performing asset in 2008.  While economists agree that virtually every asset class excluding gold declined materially in 2008 – stocks, bonds, real estate, etc. – they missed one asset class: person-to-person lending.  I leant to Americans, and they paid me back reliably even during the downturn.  It seems every other day I get an email from Prosper saying those magic words: “One of your notes is paid in full”.  And now it gets even better.  Thanks to the SEC’s blessing, Prosper has now enabled lenders to re-sell existing notes to other buyers through a secondary market giving instant liquidity.  It’s a beautiful thing.

Finally, I would like to thank the Prosper management team and in particular Chris Larsen, founder and CEO.  When we invested in Prosper before the company launched, we thought Prosper had the potential to change the world.  We also knew we were trying to do something so audacious and so big, that there would be ups and downs along the way.  We have certainly had ups.  We have had some downs.  But, today, we are one big step closer to changing the world.  Congratulations.


5 Responses

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  1. Stephen J said, on July 13, 2009 at 10:31 pm

    Congrats to Prospers team, Chris and the board (and Larry). Best of luck with the exchange.

  2. Dan Dykens said, on July 14, 2009 at 12:08 am

    Larry congratulations on a great investment. I found Prosper a couple of years ago when I was approached by a peer to peer lending start up to invest in their angel round. As part of my due diligence I took a loan through Prosper and also made loans. I declined to invest in the other company because I didn’t think that they would be able to compete with Prosper and I have been a huge fan ever since. I agree with you. I think that Prosper is changing the world.

  3. Xenon481 said, on July 14, 2009 at 8:27 am

    The real question is whether or not the risk is worth the potential reward. And the risks are numerous.

    – Borrower does not repay (the default rate of the historical data is approximately 40%)
    – Borrower fraud (Prosper found that 37.7% of the small number of attempted borrower verifications did not supply satisfactory information and yet did nothing other ~80% of loans that went unverified even while knowing that over 1/3rd of those would not have passed verification)
    – Prosper’s admitted conflict of interest in regards to its identity theft program which it has refused to enforce over the past few years.
    – The fact that new notes are obligations of Prosper, not obligations of the borrower, so if Prosper goes bankrupt but the borrowers are still repaying, the “Investors” don’t get a penny.
    – And many many more issues.

  4. NewHorizon said, on July 15, 2009 at 12:17 pm

    “Before the quiet period, we were growing at a torrid pace having enabled $178 million in loans …”

    Well to be fair, loan growth was declining for 4 consecutive months (June-Sept) prior to the quiet period – with the Sept ’08 seeing the lowest level of loan grown since Sept ’07.,

  5. NewHorizon said, on April 25, 2011 at 3:46 pm

    Fast-forward a little under 2 years. Why so quiet in the interim about this “tremendous innovation”? (Or did I miss other Prosper Marketplace posts?)

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