Nate Ritter (NR): Please introduce yourself and how you got involved with Prosper.com.
Chris Larsen (CR): My name is Chris Larsen and I am the co-founder and CEO of Prosper.com. We launched Prosper after the sale of E-Loan, which I co-founded and where I served as CEO for 8 years. Leveraging my experience with on-line consumer lending at E-Loan, we set out to create an even more transparent and open lending marketplace that was built entirely by and for consumers. With Prosper, we combined some of the things that worked in traditional American capital markets – liquidity, diversification – with age-old lending concepts from other cultures where personal reputation and community are key. We developed the idea for a people-to-people lending platform that was based on the concept of groups of people borrowing money from their online peers.
NR: What does Prosper.com do?
CR: Prosper is a people-to-people marketplace that connects individuals seeking to borrow money and those interested in lending it. Prosper’s role is to provide a safe and secure marketplace where any person can post a loan listing (as long as they pass strict fraud and ID verifications) and any person with as little as $50 can lend. Because money is flowing directly between people with money and those that need it, rather than through the many intermediaries of the capital markets, borrowers should get more competitive rates while those lending money should receive a higher rate of return. Importantly, we have found that both borrowers and lenders have gravitated to the site not just for more attractive rates but also because of the undeniable social element that binds everyone together. Borrowers are forming groups with their peers to give them more borrowing power while lenders are seeking loans that are rewarding not only financially, but also personally.
NR: How does Prosper.com make money?
CR: Prosper receives a nominal percentage fee from each loan that is successfully funded on Prosper and collects a small annual servicing fee from each lender.
NR: Does a lender receive interest back on their loans?
CR: Yes, lenders bid on loans listings in an interest rate auction for a portion of the requested loan amount. If the loan is successfully funded at that rate, the lender receives monthly repayments from the borrower for principal and interest over the life of the three-year loan. You can view current average interest rates for each credit grade on Prosper by clicking on the “Borrow” tab from the Prosper home page at www.prosper.com.
NR: When does a lender receive repayment?
CR: Monthly repayments from each loan, including principal and interest, are deposited directly into the lender’s Prosper account.
NR: How many people have been assisted through Prosper.com so far?
CR: Since it’s inception in February of 2006 through today, Prosper has over 85,000 registered users, and 3,800 loans for a total dollar amount of more than $18.2 million.
NR: When did Prosper.com begin?
CR: The company launched in February of 2006.
NR: What are your dreams for the future for Prosper.com?
CR: Our goal is to create the de facto marketplace for people-to-people lending that allows borrowers and lenders to trade money safely and efficiently at the best rates possible. An important part of meeting that goal is allowing all the people and communities that participate in Prosper to be able to identify for themselves which aspects of trading money are most important. This means not only traditional measures of risk and return, but also what each participant in the marketplace defines as most important to them.
I want to thank Chris Larsen for taking the time out of his busy day to speak with me. I appreciate his availability and ingenuity in person-to-person lending.
[tags]chris larsen, prosper.com, interview, lending, microfinance, microlending, micro[/tags]