Video Of The Week: Crowd Lending at Le Web

It's not often that there is a panel discussion where all the entrepreneurs on the panel are USV portfolio companies. That happened last week at LeWeb. The discussion was crowd lending and the portfolio companies on the panel were Lending Club, Funding Circle, and Auxmoney.

If you want to understand what is going on in crowd lending and why USV has not one, but three bets in this category, watch this discussion. It's about 30 mins long.


Comments (Archived):

  1. JimHirshfield

    Typo in title…lebweb.

    1. jason wright

      but it does rhymn.

      1. Ellie Kesselman

        I saw that too! Lebweb! I giggled. Then I saw the still shot of the video, and misread it as “Nina Does Santos”. She looks like Elizabeth Montgomery.* I’m not complaining. Better we should see a pleasant-looking, nicely coiffed lady than, well, the usual stars of the bleeding edge of crypto-currency and crowd lending.

        1. LE

          ‘”misread it as “Nina Does Santos”‘High school commencement speaker (the Valedictorian) the other night talking about college said “you are all worried about who you are going to do” when she meant “you are all worried about what you are going to do”.

          1. Matt A. Myers

            Oh boy..

    2. fredwilson

      Ha! Will fix. Thanks


        Fred, wouldn’t those companies be ankle biters? A company that copies another company that was there first?

        1. fredwilson

          Prosper was shut down for a while because they weren’t complying with regulationsLending Club took a different tack by working within the regulatory guidelines and won the marketi am not sure how to categorize thatgood question

  2. Vineeth Kariappa

    Any other link with the video?

    1. fredwilson

      Hu? You aren’t seeing video in the post?

      1. Vineeth Kariappa

        No. Not sure why. Any other link available?

  3. pointsnfigures

    In the 1998 book, The Capital Markets Revolution-Patrick Young hypothesized the end to the traditional investment banking system. Said they would be disintermediated.

    1. Tom Labus

      What did he say about M&A work?It’s a long way from Goldman turning down hostile M&A deals to the Abacus trade

      1. pointsnfigures

        You have to remember, this book was written in 1998. I can’t remember precisely what Patrick said about M&A. But, as the internet has evolved, a single person could build a brand around a particular investment banking skill. With social media/crowd sourced ratings system; they could get credibility and then form “pods” that went from deal to deal.Investment banks certainly perform necessary functions-where I get ticked is when those functions are used to create risk free arbitrage opportunities within the bank so they make free money off your hard work.Investment banks might be the original ankle biters.

  4. Dave W Baldwin

    Thumbs up. Crowd lending/funding will have a dramatic impact. When options become more dinner table discussion towards 2017-20 matched with where Bitcoin will be, we’ll achieve a much different landscape.

    1. fredwilson

      Hope so. There are some nascent BTC crowd lending services

      1. jason wright


        1. fredwilson

          i saw one in brazil

      2. Dave W Baldwin

        Yeah and a Crowd Funder start up was recently announced out of Springfield, MO

  5. jason wright

    Samir likes regulation = consumer protection= barrier to entry

    1. Matt A. Myers

      Smart strategy if it really does increase barrier to entry, though as they said they were working within the framework of the regulated market anyway. So not sure how much further of a barrier to entry there would be, other than knowing regulations — but you’d want to have someone who pretty solidly understands those anyway.

      1. jason wright

        one of the three (i forget which one it was – it may have been Samir) said that his company is in ongoing discussions with the regulator (i think he said they speak to each other every two to three weeks) about a framework of regulation for the peer to peer lending industry.VCs like defensibility. it’s a subordinate and often overlooked clause of Fred’s headline grabbing thesis (“large network of engaged users”). if a first mover in a nascent market can work with a regulator to shape regulation of that market to their advantage..they will. it helps to shake off the ankle biters. it’s like wearing a pair of these;

    2. William Mougayar

      A bit of regulation also increases consumer confidence in using the service.

  6. jason wright

    US credit card APR is 16-18 %. what is the % saving to the consumer with peer lending?

    1. fredwilson

      roughly 5%. avg borrowing rates on lending club are around 11%

      1. Matt A. Myers

        Quite a no-brainer.

      2. PhilipSugar

        The interest rate spread on the lending rate seems to be about the same.I’m sure a huge part of this is taking the cost out of the equation. Living in Delaware land of the credit cards I see these costs.I suppose the other part is cream skimming. No offense meant there as when all you care about is getting huge you take as many loans as possible. 10% acceptance seems low (and good)I’ll set a hypothetical since I don’t want to get too personal. Its seems that if you have more than $20k to invest you can get a fair amount of diversity but there still is quite a bit of volatility in the returns. If you were going to do how would you structure? (and not take too much time)BTW: Until this post I just didn’t get it. I thought it was about lending money to people that couldn’t get loans. My bad.

  7. Alejandro Cosentino

    I started the first LatAm P2P lending in Argentina. Now we´re in process to expand to LatAm. Challenges are regulatory and efficient operation scale. It´s not a copy-cut model. It´s a new way to operate without middle man. It´s just the beginning. There are new kind of products to be developed under these platforms. The main opportunity is that banks need to see real people to operate with them and we don´t. Fred, which is the best way to reach you to evaluate an investment opportunity on us?

    1. fredwilson

      send me an email. but we are pretty heavily invested in p2p lending. we might be done for a while

  8. Dave Pinsen

    Sounded like Nina said “crab funding”.

  9. Matt A. Myers

    I love financial disruption, and USV’s investments have painted a clear picture as to why they are so important and now can extrapolate how that will affect everything else. Loving how the sharing economy was brought into the discussion early on to help frame it all.The more I think about it I really want @fredwilson:disqus’s job of researching for emerging markets and then making plays, though for now I’ll continue to work that same R&D strategy into my own company… and then I’ll probably just become addicted to building companies and stick with my even grander business plans.

  10. Meir Ukeles

    Fred – any thoughts on applied crowdfunding models like Sunfunder?

  11. ShanaC

    i find crowd lending super intriguing in terms of the banking system remaking itself. This is in theory is what banks should be doing – but they aren’t.

  12. george

    I really like the Le Webb forum, they are emerging into the tech spotlight. Congrats on your portfolio leadership in this area…Nina Dos Santos is brilliant as well.

  13. Kirsten Lambertsen

    I didn’t know exactly what Lending Club did until I watched this. Love it.

  14. Alex Feldman

    Fred, looks like you making a big push on crowdfunding. With the three lending platforms above, CircleUp on the equity side, and KickStarter on the reward side. Putting them together and you can get rid of the banks :)If anybody is into debt crowdfunding there is going to be a big conference on this in NYC on June 20, I’m not involved in it, just wanted to share.

    1. fredwilson

      Yes. We’ve approached it like we did social media in 2007-2009 (twitter, tumblr, zynga, foursquare, and a few others)

      1. Alex Feldman

        Fred, since you are into crowdfunding I wanted to personally invite you to crowdfunding meetup I recently created for the NYC community.

  15. William Mougayar

    What struck me the most is to learn that banks leverage their loans 1:8 vs. P2P being strict at 1:1, i.e. for each available dollar you can only loan against that same dollar.

    1. Matt A. Myers

      It’s when one country tries to out compete with other countries, providing money that shouldn’t be available so then local companies can out pace foreign competition – however the natural way to increase spending in a safer way is to have more successful companies, and then recycle their profits into the ecosystem. Making smart decisions doesn’t scale of course, which is why crowd lending / micro-investing is really what’s needed to help facilitate proper / healthy investing.

      1. William Mougayar

        Good points.

    2. Richard

      It was 40:1 ! Take a look at BASEL III if you want to know more.

      1. William Mougayar

        Wow. They were confusing banking with gambling.

    3. Andy Yelland

      Have been thinking about how to do disruption in the financial sector, ever since the 2008 crash; it’s a healthier exercise than just going “that’s not fair”. It is hard to achieve disruption of the banks though, because of their advantage with fractional-reserve, where they can lend e.g. 8:1 on each $, and that’s why my P2P plans did not proceed. Without being able to disrupt, then you’re left with a niche, similar to “green” options in other sectors, where you appeal to people with a conscience at a premium.Now to get a level playing field, either we need to go the Libertarian route of a return to the gold-standard, or we need to allow individuals to leverage their micro-loans – both would (probably) require legislative support. From a macro-economic PoV, at the moment I’m favouring the later – as ultimately fractional-reserve has allowed anyone to have money who wants it (so long as someone else has said they’ll cover any downside of the loan going bad). That leads to more rapid progress, where there is no constraint on the money supply.But, presuming you could get the Fed to lend to your P2P firm, how can you pool the lender’s funds across a substantial enough portfolio of loans, that statistics would allow that leverage level, while still keeping it P2P where there’s a connection between lender and borrower?I still feel there is likely a “solution” out there to disrupt this status quo that’s brought the world to its knees, but for the moment I don’t see it. Am still continuing to search…

  16. pointsnfigures

    My other worry about this space is govt. regulation. Dodd Frank could shut them down if they really started eating into established player profits. Regulators are not without bias, they are capricious. Unless they figure out a way to make money off of it-they won’t allow themselves to be disintermediated.

  17. alisacohn

    Fred – have you become a “lender” (or borrower) on these sites, either because the return is better than cash in the bank or just to check out the user experience?

  18. Matt A. Myers

    It’s worth watching / reading about (if there is a transcript).

  19. Kirsten Lambertsen

    I never have time for anything. What I do is just *listen* to these while I’m brushing my teeth and getting dressed, repairing permissions on my Mac, etc. 🙂