Up’s & Down’s in FinTech

up_and_down

What’s up with (or rather what’s driving down) Lending Club these days?

Screen Shot 2015-07-27 at 3.10.52 PM

As someone who is optimistic about Lending Club’s prospects (as I had written in Jim Cramer’s TheStreet.com), I was surprised by the slump after its lock up.

My view is the stock suffers from fears of regulation, a reversal of halo effect on its stock from time of its IPO, and concerns about its numerous competitors.

Time will tell, but It’s striking that its Chief Risk Officer just sold $2m in shares at a price of around 50% off its high (and below its IPO price).

Looking at other players in the alternative lending space, there’s a lot of growth, with Patch of Land being one example.

Patch-of-Land-new-logo

I recently spoke with Patch of Land’s AdaPia d’Errico, CMO and early employee who joined co-founders Jason and Brian Fritton and Carlo Tabibi, to talk about the startups recent growth.

Patch of Land has seen huge growth serving “residential lending crowd funding enabled by the JOBS Act,” according to d’Errico.

By pre-funding its deals, a feature that started from its genesis as a business, she notes they combine a crowdfunding model with an ability to move quickly – a key requirement in real estate.

Patch of Land provides loans for those seeking credit for real estate purchases that often involve a plan to renovate, so it  furthers the goal of founder, Jason Fritton, who envisioned restoring communities devastated by the real estate crash.

Fritton lobbied for rules to democratize capital formation for new business that were ultimately written into 2012 JOBS Act (Jumpstart Our Business Startups Act). I’ll explore Patch of Land more in 2015, when I discuss real estate crowd funding in more depth, but its recent progress speaks volumes about its and the broader FinTech industry’s potential.

Cumulative Loans Facilitated by Patch of Land

Patch-of-Land-Graph-May-2015

On a related note, it’s fascinating how despite the ink spilled over whether London, New York or Silicon Valley is “winning”,  how many startups and investors are emerging in Los Angeles (e.g. Patch of Land, Realty Mogul, CoreVC).

Recently, Santa Monica-based writer and investor, Chance Barnett, observed how FinTech investments have quadrupled. It’s well worth reading his article in Forbes.

In thinking more globally about the various segments of the industry, it’s useful to explore the the myriad visualizations out there trying to capture all the startup companies in this space.

I think there’s a clear role for easy-to-follow visualizations such such as CB Insight’s “Periodical Table of FinTech” (see at this link), but I recently generated a network diagram view of two hundred FinTech startups using Quid Explorer’s intelligence platform used by private company investors, media firms and consultants like McKinsey & BCG.

The visualization of the FinTech ecosystem uses implied relationships between companies from keyword analysis to generate clusters of similar companies within the broader category.

Screen Shot 2015-07-27 at 2.36.18 PMPayments companies like Stripe are the largest cluster in light blue (bottom right) and blur into the dark blue category (where you’ll find vendors like Zuora).

At the far right, in yellow, you see  the bitcoin related companies.

Patch of Land is there at the very top, in the dark blue  real estate cluster. Equity crowd funding businesses like Angellist and CircleUp are the purple cluster.

The tool didn’t put all online lenders in one category, with SMB lenders (such as Kabbage) in the red cluster, while consumer lenders, such as SoFi, shown in orange at bottom left. (In reality, many of these operate in both segments.)

Lending Cluster

The other green shaded clusters show capital markets focused startups like Xignite in dark green, while the light shaded cluster is where you’ll find startups like Betterment and MaxMyInterest, focused on savings and investments.

These charts show the challenges in defining the FinTech space – given its diversity. But I found it interesting to see the complex relationships within and across sub sectors of the broader category.

As some of you already know, I’ve recently joined a FinTech startup and could not be more excited about its prospects. Look for more on that topic to come, but for now – since I’ve been away for a couple of weeks – I just wanted to say welcome back.

Thanks for your readership – which is now up to over 10k readers per month. I also hope you have enjoyed recent posts on Goldman Sach’s FinTech strategy, LendUp and LOYAL3 (which generated a lot of interest).

Look for more to come and enjoy the rest of your summer.

One thought on “Up’s & Down’s in FinTech

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