Looking at LendIt 2016


One of the must-attend FinTech events is LendIt USA, which took place April 11-12 here in San Francisco. LendIt is a key conference where a cadre of investors, executives and startups get together to learn, network and do deals in the non-bank lending space.

I caught up with three pioneers coming to LendIt: Ron Suber, President of Prosper; AdaPia d’Errico, CMO of Patch of Land, and Brendan Ross, CEO of Direct Lending Investments to talk about LendIt and talk about their involvement.

“Lendit is an annual event by which many measure time, progress or growth. I expect to see venture investors, funds and others looking for high quality, alternative finance and lending companies to evaluate for investment and partnership,” d’Errico says.

At Prosper’s offices in San Francisco, CEO Ron Suber comes across as highly confident in the prospects of the industry he represents, as one of the leading marketplace lenders.

“How have you been?” I learned is Ron’s general greeting, even when meeting someone for the first time; he introduced me to Aaron Vermut, a friend of Andy Bond, a NYC-based former colleague of mine at Scient, but focused our conversation on MaxMyInterest.

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Since the New York Times was waiting for him after we spoke, we did speak about P2P, but mostly chatted about his angel investments, including Patch of Land and Apple Pie Capital (watch its 2015 LendIt Presentation), a rival to fintech company Funding Wonder I was an advisor to prior to joining MaxMyInterest.

Prosper is one of the Platinum sponsor of LendIt USA 2016 and announced its ending its relationship with Citi, which was a big partnership announcement last year.

While companies such as Prosper garner attention (given their position as one of the largest FinTech firms, with a private valuation of $1.8B), I found a lot of insight speaking to smaller, innovative firms that were able to say more about where alt lending is headed.

Direct Lending Investments CEO Ross says: “I’ve been at LendIt from the beginning, when few people were attending. Going now is like a reunion, where you see people you’ve known for a long time.”

In 2016, Ross says alternative lending faces the challenges of having too many lenders vs. borrowers, and finding customers without direct mail or paying for brokers. That will be one of the key conversations to follow at LendIt 2016.

DLIHow is Direct Lending Investments succeeding?  Ross says “we add  value by focusing on profitable niche markets. Being a fund vs. a web site trying to do everything has been critical,” Ross says, adding that DLI “adds value for our investors by sourcing unique dealflow – being focused on areas of lending that are not served well by banks.”

Ross brings a range set of experience across wealth management, as a turnaround CEO, along with expertise in private credit having purchased over $1 billion in loans and receivables from non-bank lenders (more than any other investor worldwide).

But he credits success to his team, including Dr. Bryce Mason, DLI’s Chief Investment Officer, with deep experience in independent loan scoring models and loan portfolios. James Alexander – a former banker from Goldman –  rounds out the management team.


Patch of Land’s CMO d’Errico told me LendIt has “been a pivotal event for me and Patch of Land since our first appearance in 2014.”

This year, she was a mentor for PitchIt, where she work with startups in alternative lending space. “I can already tell by working with the finalists that the level at which these startups are operating is world-class,” she says.

D’Errico also shared that Patch of Land hit two milestones: having  originated over $100 million in short-term loans for real estate professionals who purchase, rehabilitate and refinance undervalued residential and commercial properties; and returned over $25 million in principal and interest to its investors.

What’s remarkable about this news is that Patch of Land is still 85% crowdfunded, unlike a lot of firms like Prosper  that receive most of their funding from institutional investors.

One big piece of news this year is the decision by SoFi to stay away from LendIt. They are #notabank and also #notatlendit, causing some to speculate why. A common theory is SoFi is looking to separate itself from the category of lender, as it works to promote itself as a broader provider of services with a more unique positioning.

Overall, the reaction from many at LendIt USA 2016 was that the event was quite different from 2015, when the euphoria over the Lending Club IPO was still dominant, and many providers were trumpeting their recent funding rounds.

This year’s LendIt was still a great event, but as one noted, it’s more like an asset-backed lending conference (just without the banks, and with a hefty dose of startups that you might otherwise see at Money 20/20 or Finovate).

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Talking vs. Doing

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CEO of Nerdwallet, Tim Chen, Speaking to VC in San Francisco

Even though Home Depot moved on from its slogan of “Less Talking, More Doing” I’ve been thinking about that statement in the context of FinTech. There are so many conferences and places to network, it’s easy to spend too much time listening to experts versus doing the hard work of growing a business.

Reinforcing this, Level 39’s Head of Ecosystem Development, made this point at SIBOS last week in Singapore (see tweet).

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It’s not that events are a waste of time – it’s just critical to focus on what you do at them, i.e. focus on learning and giving back to partners and others.

As CoreVC‘s Kathleen Utech said, events like Money 20/20 are valuable in part for one-on-one conversations you set up, so make sure you plan them.

Buzz vs. Buzzkill

While there’s still a lot of buzz associated with financial services tech startups, with the latest news being the planned IPO for Square, a successful Los Angeles-based private investor in FinTech told me, “I’m sure a good percentage of startups with huge private valuations will never seen a liquidity event.”

We agreed that well-known startups are suspect, especially in some categories, e.g. robo advisors and online lenders. I’m bullish on the big names in the startup space, such as Prosper, but wonder about the second and third tier.


I recently sat down with Ron Suber of Prosper the other day and talked about innovation. I think the BillGuard deal was a very smart move. Prior to meeting him, I’d read the Stanford GSB Case Study on Prosper. It’s striking to see the similarities between today’s fascination with FinTech and the earlier euphoria  over E-Loan in the period during the last dot-com boom.

I recommend the case study to see the difference between a good idea and execution, and the key role of regulators. Another important lesson is that VC’s are not the final answer: It’s up to you as the entrepreneur to make smart decisions.

Being Smart: Investing vs. Paying the Price Later

I saw Bill McKnight, Head of Product and Technology at RealtyMogul the other day. It was interesting to see the energy of the office, which was quite different from offices of places like Prosper, which have more of a tech company environment.

realtymogulThe office atmosphere reflected the high percentage of employees who come from a real estate finance background, resulting in a mix between a tech company and a traditional lender.

Bill spoke to me about the importance of moving fast, yet being smart about investments in engineering to avoid “technical debt” later.

Transparency: Metrics that Matter

Another player in the real estate space within FinTech is Patch of Land. I met the CEO, Jason Fritton and CMO, AdaPia d’Errico, on a recent trip to Los Angeles. A somewhat earlier-stage startup than RealtyMogul, I was struck by the strengths of the team in terms of client and market focus.

I’ve also been impressed by Patch of Land’s ability to build a community through its social media efforts. Would be winners in FinTech would be smart to look at how AdaPia’s team uses SM to bolster growth.

Here’s some comparative metrics for Patch of Land (on top) vs. Lending Club. It’s clear from the SM metrics that the objectives are different, with one being more of a broadcast model vs. means for community engagement, but the figures are striking.


Screen Shot 2015-10-20 at 2.58.28 PMScreen Shot 2015-10-20 at 2.54.09 PM
Screen Shot 2015-10-20 at 2.58.14 PM       Screen Shot 2015-10-20 at 2.55.38 PM


Steady Growth

Tim Chen, CEO of NerdWallet spoke to a packed house of about three hundred members of the SF FinTech Meetup at its offices in San Francisco recently.

nerdwalletPersonally, I was impressed by Tim’s modesty as he spoke of growing NerdWallet from tough early days when it made very little money. He won the crowd over with his timeline showing user growth matched by the SEO work to grow reach (building links and creating content).

Talking to others in the world of FinTech is useful, since I think each and every interaction with others can be a learning opportunity, but beware attending too many conferences on FinTech, when you could be building something.

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In a world in which Google’s reorganizing itself to boost transparency into its main business, I thought it would be a good week to talk about transparency.

I’m a big fan of a transparency. A former boss, now chief operating officer of Morgan Stanley’s technology division, used to remind me that sunlight is the best antiseptic.

He used the term referring to dashboards on financials, projects and risk – but I’m using in a context of being transparent with your customers about your value and pricing.

In my experience, banks, are less transparent than startups. I think a reason is that banks have a lot of different constituents – and less of a singular value proposition – but startups and banks can fall short.


Consider Lending Club. A former employee told someone it saves the average borrower only 1.5% after factoring in all its fees.

It’s still decent savings, yet the company plays up the gap between savings account rates (<1%) and credit card rates, as if it were passing along savings of that magnitude.

prosper logo(This issue isn’t limited to Lending Club. As reported by Bloomberg, a disclosure by Citi on securities from Prosper gave a forecast return of 5.48% on low risk loans; total losses were forecast at 8%; 13.2% average APR)

Lending Club and its peers are great models, but I think they could be more transparent. I’m optimistic about marketplace lending. But to help make it better, I encourage everyone to provide feedback to the U.S. Treasury’s RFI on this sector. Comments are due on Sept. 3rd.

I just read Morgan Stanley’s Smittipon Srethapramote set a target of $24 for Lending Club (60% above from its current price).

I’ve not spoken to Smittipon since the IPO, but read he was bullish given acquisition cost trends and growth ‘runway’: I was glad given my upbeat take on Lending Club in TheStreet.com.

Another topic I’ve been thinking about lately is this chart:

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Created by the Financial Brand team, including FinTech Mafia member, Jim Marous, it was well worth sharing. It does speak to both how banks may have their heads in the sand, and also the marketing work that remains to be done at some startups.

As an advisor to startups, I’ve seen how difficult it is to break out into even the level of awareness of firms in the table, despite the increase in venture funding for FinTech.


I’d like to mention a startup, LoanNow, which is early stage and seeking to break out. I recently spoke with Miron Lulic, President of LoanNow, a ‘white hat’ (or responsible) online lender.

Similar to LendUp, key differences with LoanNow is it offers installment loans vs. revolving credit, and provides higher loan amounts. I admire Lulic’s goal to make lending better via technology, which he observed was pretty appalling in the payday lending industry.

LoanNow wants to bring better technology and an improved user experience (UX) to an antiquated, category of lenders that they also believe charges its borrowers too much.

We Help Good People Get Better Loans

LoanNow offers ‘gamification’ (e.g. challenges to meet in order to lower the APR), but one innovation unveiled at Finovate was ‘group signing’, or micro co-signing by your friends,  to lower your interest rate (similar to Vouch).

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LoanNow has the potential to succeed since it’s motivated to do the right thing for its clients, and is laser-focused on its target customers.

It’s a tough market for startups without backers from the biggest names, but I wish them well – and think they’ll be successful.

Several VC’s are staying clear of online lending (seeing it is ‘too hot’ as Emergence Capital told me, or in conflict with prior investments, as First Round Capital and CrossLink Capital indicated).

But it’s good to see Andreessen Horowitz is embracing FinTech with its recent appointment of Alex Rampell, former CEO of Trial Pay, as a new partner focus on opportunities in FinTech.

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Still, some startups may have to bypass VC’s and emulate Patch of Land, that grew with the help of several  accredited investors and a credit line, before gaining larger investors.

Embrace transparency

Here are my two closing suggestions for other early-stage firms in the online lending space.

  1. Be true to audience and brand. If you’re targeting the lower end of the market, i.e. payday loans, don’t use a web design firm to make your site look like you’re Stripe (targeting developers) or LendingClub (targeting prime borrowers). Be yourself – don’t try to be like someone else.
  2. Embrace transparency.  Be very upfront about your value vs. other options that exist, i.e. don’t knock the banks as being ‘not lending’ since 2008 or ‘ignoring the SMB market’ when recent published figures don’t support this. Tell the truth, and you’ll win with customers.

Up’s & Down’s in FinTech


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

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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.


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


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.

And the Winner Is …

socal blog pic

Inspired by last night’s Academy Awards, I wanted to link this week’s post to a couple of related themes, namely Los Angeles area startups (including those in FinTech), and explore the concept of winners vs. losers in the FinTech category.

But to kick off, as far as this year’s Oscars, I think John Battelle said it all:

So damn over

Yes, the awards show was a bit of a let down – but having just returned from a trip last week to Los Angeles, where I’d lived for about five years, I wanted to talk a little bit about the area (not traditionally known for its startup scene).

Last month, I was excited to hear the news that that my friend, Bill McKnight, had joined RealtyMogul as SVP of Product.

realtymogulI’ve known Bill since 2006 when he was at Rent.com (acquired and later spun out of eBay). RealtyMogul is a FinTech success story, but will write more about real estate in a future post.


But since the focus is on Los Angeles, I have to call out another innovator in this space that’s more focused on lending (vs. buying an ownerships stake in a building) and with a slightly greater emphasis on residential vs. commercial property: Patch of Land.

patchThey get a lot of buzz in the FinTech circles, and should have a break out year in 2015.

Beyond RealtyMogul, other local FinTech firms to track are Zest Finance, FastPay, CapLinked, and StockR.

Later I’ll write a more detailed overview of these, but one SoCal company I’d like to call out for special attention is Acorns.


To me, Acorns is one of the better FinTech stories out there. It combines many things that I believe in. First, the move away from a “unified app” view of the world, i.e. the idea that’s championed by the big banks out there that you need to sign into your bank account  to do anything. I think in today’s world, it’s far better to have a focused app strategy.

Second, Acorns employs good “behavioral science” to actual problems. Specifically, most people say they want to save, but due to inertia or banks making it hard, people often don’t do the right thing. Prof. Schiller from Yale has written persuasively on this, leading to simple but effective changes, such as auto enrollment of people into 401k plans (vs. requiring filling out forms).

I’m also a fan that they take something somewhat arcane, i.e. the Markowitz portfolio theory of investments (which was maybe my favorite concept from B-school) and make it simple to understand and apply to real life.

By encouraging savings (“pay yourself first’), making it inexpensive and smart, I think Acorns has a lot of potential to do real social good, which is the other reason I like Acorns, with the last being its a mobile first business. Check them out!

FinTech startups or banks should check out LA-based startup, Prevoty.


Winners vs. Losers?

Sticking with the Oscar theme, a question I’ve been thinking a lot about of late is who are the winners and losers in FinTech. What’s striking to me is the recent focus on which regions will win.

I was intrigued by a recent claim by a UK newspaper that 50k people work in FinTech in London. The article didn’t say, but I think the figure makes sense only if you include tech workers at banks (e.g. Barclays) and related providers (e.g. IBM).

This table shows the SF / Silicon Valley FinTech players ranked by employees (adapted from recent SF Business Times article).

FinTech SF : SV

While I’ve seen lots of lists of “most innovative” players in FinTech, I would like to see this table showing actual employment for other cities (e.g. London, New York).

It’s a Wrap

As an Oscar night-inspired post, I’d like to give a shout out to those based in Los Angeles I admire:  Gary Braitman, a colleague from Scient, now EVP at Wells Fargo. Jason Farmer, at Dollar Shave Club. Bridget Baker at Baker Media (ex NBC Universal).  Robert Cerny, investor and lawyer at Hinshow & Culbertson. Drew Planting, real estate investor.  Bennett Pozil at East-West Bank.

In terms of FinTech VC’s, there is of course CoreVC, which is one of the best, led by Arjan Schutte, who founded Core after leaving CFSI. I’m also a fan of Kat Utecht at CoreVC. It’s good there are other tech-oriented VC’s like Upfront Ventures in Santa Monica.

It’s appropriate that I wrap up this Oscar inspired post with a short video: Just in case you missed it, here’s the short commercial narrated by Martin Scorcese from last night’s ceremony (reportedly made entirely on an iPad 2): Roll tape (link)

Good night!