I hear from a lot of entrepreneurs who want to start a marketplace lending platform. They range from ambitious students with an idea through to seasoned entrepreneurs on their third or fourth startup. One of the questions I get asked most often is what are the most important things to focus on as a new platform in order to be successful.
I have learned a great deal from having conversations with the CEOs and co-founders of the most successful platforms in this industry. I also talk with large investors (both debt and equity) and discover what they look for when evaluating new platforms. Through all these conversations I have come up with what I consider to be the five keys to success for new marketplace lending platforms.
1. Credit Risk
We are in the lending business. This is the core of what every platform does. So, if this part of the business is not a primary focus then the platform has a limited chance of long-term success. By this I mean there should be, at the very least, a senior credit person on staff. Someone with not years, but decades of experience. This person should have assessed credit risk in a senior position at a bank or other finance institution. [Read more…]