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Podcast 06: A Chat with Reflective-Rupee – One of Prosper’s Largest Individual Investors

by Peter Renton on February 21, 2014

Before February 2013 Prosper included screen names for investors and third party sites like Prosper-Stats and Lendstats provided information about those investors. Since 2009 the name Reflective-Rupee was always near the top of the list of largest investors. And when I started investing in Prosper in 2010 he was always the #1 largest investor.

I have always wanted to meet the person or organization behind the screen name so I was delighted when late last year the person we have known as Reflective-Rupee reached out to me. After a few back and forth emails he agreed to come on the podcast and go public with his investment strategy for the first time.

In this podcast you will learn all about this large Prosper investor:

  • How and why he decided to enter the p2p lending space.
  • How his initial interest in Prosper led to a kind of obsession.
  • The big difference between Prosper 1.0 and Prosper 2.0.
  • Why he chose Prosper over Lending Club.
  • Why his statistics on Lendstats and Prosper-Stats are wrong.
  • His internal rate of return since he started investing.
  • Why he has moved his focus to the Prosper secondary market.
  • The two pieces of information that make the secondary market attractive.
  • How he is able to achieve large scale for investing on Prosper’s secondary market.
  • The risk to buying a note at a premium on the secondary market.
  • How he invested on the primary market.
  • His actual strategy for investing in the secondary market.

The Man Behind Reflective-Rupee

Brett Byers, age 50, lives in the San Francisco area. He is a professional investor with over a decade of experience leading the venture capital activities of an institutional investment firm, VCFA Group. He formerly served, primarily in the information technology industry, as a senior executive, corporate attorney, and engineer. Brett holds a J.D. from Yale Law School and a B.S. in electrical engineering from Cornell University.

Since retiring from VCFA Group, Brett has focused on his personal investing (both venture capital equity investments and peer-to-peer lending), his family, and saving rainforest, via which he in primarily focused on prevention of the massive releases of CO2 from destruction of rainforest. During the past year, he has personally financed projects to save over 1,000,000 acres of tropical rainforest, and has joined the board of the Rainforest Trust. He encourages others to save acres of rainforest (and prevent emissions of 1000 tons of CO2) by donating the cost of a cup of coffee here:  http://www.rainforesttrust.org/acres-for-50cents/.

You can subscribe to the Lend Academy Podcast via iTunes or Stitcher. There is an audio player directly below or you can download the MP3 file here.

{ 9 comments… read them below or add one }

Chris February 25, 2014 at 1:15 pm

Finally! The “Reflective-Rupee” is no longer anonymous! =)

Listening to this podcast did in fact remind me of the “good ole days” when both of the platforms were still trying to figure things out. I used to love the ability to private message other investors (which was how I met worth-blanket2). Plus, it was nice to get ideas of how you were performing “against the market” when everyone’s screen name data was publicly available. I also find it ironic that Brett, Peter, and I refer to the good ole days like eons ago, but all of the radical changes mentioned in the podcast happened only over a few years and not decades. 2008/2009 wasn’t that long ago! But enough walking down memory lane…

One other item that caught my attention in this quite informative podcast (good job Peter) was how huge of a secondary market player Brett is. If the percentage of auction wins mentioned in the podcast is accurate, Brett is quite literally a market maker. Both an impressive and very much needed service.

Overall, the podcast was well worth the time listening and learning. Kudo’s Peter! And nice to finally meet you Brett!

Reply

Peter Renton February 25, 2014 at 11:18 pm

Thanks Chris. Always good to hear your comments. Whenever I have gone on the Prosper secondary market I always see Reflective Rupee – he clearly is a market maker.

Reply

Brett Byers February 26, 2014 at 12:04 am

Thanks for the kind words, Chris, and great to meet you as well!

Reply

Rufus D. February 25, 2014 at 10:04 pm

Extremely interesting. I am new to this and learning about the evolution of prosper from a major investor’s perspective is very informative. It sounds like one of the services like quick invest or proper premier is about the only way for retail investors to participate at this point. Thanks for posting.

Reply

Peter Renton February 25, 2014 at 11:21 pm

Hi Rufus, Individual investors can still pick loans by hand but you do have to be quick – you should login at 9am or 5pm PT on weekdays (noon on weekends) when new loans are added for the best loan selection. Some individual investors are investing through the API but these days you can also invest successfully through Quick Invest or Prosper Premier.

Reply

Keltset February 26, 2014 at 9:26 am

Peter, have you considered a nice consolidated link on the site for your podcasts? I don’t normally listen to podcasts and have no desire to download some other software to track and keep up with podcasts. However, I have enjoyed listening to this one and had to search to get to the other few you had posted which was cumbersome. A consolidated updated list, if it doesn’t already exist and I missed it, would be very helpful as it would be easy to locate and check for updates or scrape…

Reply

Peter Renton February 26, 2014 at 9:50 pm

Here is a link for all podcasts:
http://www.lendacademy.com/category/podcast/

Good idea on putting a link on the forum. I have included it in the News section now in the top right of the page.

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Chris February 26, 2014 at 3:41 pm

One other major takeaway I received from this podcast was that I learned Brett was not the only person that contacted potential borrows to discuss/negotiate terms. I used to do this as well and was crestfallen when Prosper removed the ability to communicate with borrowers. Lending Club did a similar thing when they removed the ability to ask the borrower custom questions – another feature sorely missed.

All of this has made me wonder if Prosper and/or Lending Club would consider offering the following feature: Would it be possible to work some type or arrangement with the platforms such that if you (or your business) is responsible for bringing a borrower to the platform, why not give this “lending recruiter” the ability to fund as much of the loan as possible and then any remaining balance of the loan could be funded by the other investors? In other words, list the loan to the “recruiter” first, and then after the recruiter investor takes a position, the balance of the loan (if any) can be listed on the platform in order to complete the funding.

Personally speaking, I would LOVE the ability to direct friends, family, customers, and anyone else I know in need of a loan to a recruiter system such as this as it would afford NUMEROUS benefits:

1. The recruiter would be able to test their own creditworthiness assumptions of the borrower against an established platform that would have full access to more credit related data.
2. The recruiter would have the protection of in-house and third party collections agencies should the borrower not pay on time.
3. The borrower would get the benefit of ensuring his/her loan would be fully funded instead of only receiving partial funds from reluctant or low resource friends/family.
4. The borrower would get the benefit of an improved credit score if paid in full and would not receive this benefit if borrowing the funds directly from friend/family.
5. The recruiter investor would have the assurance of knowing the actual person requesting the funds and would feel more comfortable in taking a larger position in the loan.
6. The recruiter investor would know that all the work to bring the borrower to the platform would not be in vain as the platform would give the recruiter investor first access to the loan before the rest of the market could fully fund it in seconds.

Knowing that LC and Prosper have bigger projects on their mind, I doubt they would add this feature anytime soon. BUT consider all of the small sized finance firms that could simply hand over their risk assessments to LC/Prosper by simply putting their own clients on the platforms, without worrying about the other platform investors taking the loan right out from under them if they are not fast enough to fund it. Plus this would increase the supply side (which is a huge problem) by having more people and businesses work to recruit more loans to the platforms.

If LC/Prosper would not be willing to take up this feature, I wonder if another firm or platform would???

Food for thought,
Chris

Reply

Peter Renton February 26, 2014 at 9:54 pm

Food for thought indeed. I would be very surprised if Lending Club or Prosper did something like this. While they need borrowers this would seem too disruptive to their existing systems.

What I think is this – at the industry matures there will be all kinds of opportunities for new ideas to be implemented. Just this week I received an email from an entrepreneur who is looking to build a friends and family p2p lending platform that would look something similar to what you describe. Now, I get emails from entrepreneurs almost every week these days and most I never hear from again. But my point is there are a lot people thinking deeply about this space and all sorts of new ideas will be implemented in coming years.

It is going to be fun seeing which ideas get traction.

Reply

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