A good friend of mine told me he had been playing the investor on
Lending Club, a crowdfunding site where people in need of a loan can connect with people (maybe lots of people) willing to lend to them. He was excited by the fact that he could look at the investment possibilities (people who need a loan) and see their credit history, their story and other information and he could make his own decision about whether or not to lend to them. So far, he's making an excellent return!
Lending Club was number 20 on
Forbes' list of the 100 most promising companies in America. As of the beginning of this month lending club has originated more than $430 million in loans and investors on the site have made more than $36 million in interest. Sounds pretty good! No wonder my friend is happy.
Another crowdfunding site that is getting some press these days is
CrowdCube. Crowd Cube claims to be the world's first crowd sourced equity finance for private businesses.
The Rushmore Group raised one million pounds sterling in equity financing on the site. Rushmore Group is the sixth deal to close on Crowd Cube.
It might be possible to do this kind of thing in the United States before too long. The House Bill that passed in November, The Entrepreneur Access to Capital Act, is now in the Senate. It's been renamed The Democratizing Access to Capital Act of 2011 and is numbered S1791. Scott Walker, a lawyer wrote an excellent blog post on
What StartUps Should Know About the U.S. Crowdfunding Bill. The bill had a
hearing in the Senate Banking Committee on December 1st.
Great overview on the state of the crowdfunding industry, Rachel. I had never heard of any of these companies, and I am both amazed and encouraged by their level of success. Can't wait to see where we go with this in the US...
ReplyDeleteI have heard about the new crowdfunding bill, mainly as it relates to our local solar industry. In Washington, we have a "Community Solar" program that allows groups of investors to bundle their money and get extra incentives for building solar projects together. Unfortunately, there is a debilitating amount of restrictions being imposed by the SEC right now. Apparently this bill will lift those restrictions and should breath new life in to our community solar program.
Soo happy to hear that your friend has been enjoying his experience with Lending Club. My team has been researching them quite a bit lately. We have been looking at the difference between their model and Prosper's. From what we have gathered, depending on the borrowers and lenders involved, sometimes one has better rates for both borrowers and lenders than the other. Do you know how your friend chose Lending Club?
ReplyDelete@Liz, My friend hadn't heard of Prosper so didn't make that "choice." I haven't done a serious comparison but I wonder if the transparency on one is significantly stronger than on the other.
ReplyDeleteRachel, thanks for your work on this. Between your marketing project this quarter and your blog I've learned a lot about the parameters and policy issues with crowdfunding. I'm looking forward to solid policy that supports this common sense way of raising money!
ReplyDeleteRachel, in a day and age when talking about finance can be such a downer, your blog is a breath of fresh air. Crowdfunding is a refreshing idea as well, one of those 'too good to be true' ideas that is being made workable by some very inspiring people. Thanks for shining a light on this.
ReplyDeleteRachel, I really hope you keep up this blog after this class, as it is so useful to have you tracking the developments in this exciting arena. And I echo Steve's comment: truly a breath of fresher air!
ReplyDeleteMike and Steve, Thank you! I do plan to continue with this blog. My plan is to post at least once a week so keep watching!
ReplyDeleteRachel, I will add my name to the list of people excited by your blog and learning a lot from it. Thank you for sharing the resources and keeping us all informed about the developments in the crowdfunding area. It is indeed an exciting development that could shift our investment models quite a bit since it steers away from wall street and the banks.
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