It was exactly five years ago today that I launched Lend Academy. Well, actually back then the site was called Social Lending Network with a different URL (www.sociallending.net). I rebranded the site to Lend Academy in 2012. Anyway, I officially launched my P2P lending blog on November 30, 2010.
Today, I am going to reflect a little on what the industry was like back then and the changes we have seen over the past five years.
I launched Lend Academy with a three part series on the State of P2P Lending in the USA. The first part focused on Lending Club and Prosper, part two was on emerging companies and part three focused on student loans (pre-SoFi and CommonBond). Going back and reading these three posts reminds me just how very far we have come in five years.
Back in November 2010, Lending Club had issued less than $200 million in total loans and was focused primarily on retail investors. Prosper had issued more loans than Lending Club (just over $200 million) and they still operated under the reverse auction model, although they would move to the fixed price model the following month.
When I started writing about this space I did it because I was personally invested and I loved the whole idea of P2P lending. I had no background in finance but I had recently sold my business and I was looking for a career change. I had always enjoyed investing and I felt like P2P lending had a lot of potential. Although I must admit I had no idea it was going to take off the way it has.
I had no grand business plan but I wanted to make a successful business in this industry. I had the luxury of being able to work full time and not have to generate an income. At the time I remember saying to my wife that I will give this three years of effort. If it doesn’t look like this P2P lending thing is panning out in that time period I will stop and go do something else.
I doubt anyone could have predicted back then where we would be in late 2015. Maybe Renaud at Lending Club had some idea but the way this industry has just exploded in the last year or two has certainly taken me and many others by surprise.
Major Milestones of the Past Five Years
So, how did we get here? Two words: institutional investors. While many retail investors lamented the arrival of these large investors, without them the industry in this country would only be a fraction of the size it is today. Lending Club was the first to seize on this opportunity when it launched LC Advisors in February 2011.
At the time I didn’t even cover the launch of LC Advisors because I was far more focused on the retail investor. I first noted the changing investor environment back in March 2011 when it became clear to me that institutional investors were going to be a part of this industry.
The arrival of LC Advisors proved to be a seminal moment because it allowed Lending Club to attract large investors, thereby scaling far more quickly. Around that same time Prosper hired a capital markets person and within a few months they had signed their first institutional investor with the biggest commitment ever to this industry.
The launch of the first hedge fund dedicated to this space was also an important milestone. This came back in late 2012 when Eaglewood launched their first Lending Club fund. Another pivotal moment came in early 2013 when a new executive team took over at Prosper and recapitalized the business. Back then Prosper was struggling but since the arrival of Ron Suber and Aaron and Steve Vermut Prosper has been a major success story.
Perhaps the most important moment in our industry’s history, as far as raising awareness of marketplace lending, had to be the Lending Club IPO. Taking place on December 11 last year it signified a coming of age of our industry. We were no longer this curiosity that could be ignored – real businesses with rapid growth trajectories were being created here.
It would probably be remiss of me not to mention the founding of LendIt, the industry’s first and largest conference, as an important evolution of the industry over the past five years. As one of the co-founders, I clearly have a vested interest in this conference, but I also see it as one of the barometers on the growth of the industry as a whole. Our first conference in June 2013 in New York had 350 people, our second conference had 950 people and earlier this year our third conference had 2,500 people. Like many industry participants LendIt has mirrored the increasing interest in the space.
Cheers to the Next Five Years
As I reflect now on the past five years I am struck by one thing. While we have certainly come a long way as an industry as I have pointed out above, we have so much more still to do. If we are to be considered a true asset class we need easier ways for investors to deploy their money. This means mutual funds and ETFs from some of the large fund companies (Schwab, Fidelity, etc.) as well as a plug ‘n’ play solution for financial advisors. We need an index fund that gives people exposure to the entire asset class and people should be able to check a box on their 401k enrollment application to deploy some of their retirement money to this industry.
We are not there yet and these things will not all happen next year or even the year after the that. But I will be very surprised if, when it comes time to write my 10-year Lend Academy birthday post, all these things haven’t come to pass by then.
So, cheers to the next five years. It is going to be a very interesting ride.