(Jonathan at My Money Blog has a very in-depth two part review of Prosper.com. My Money Blog is one of my favorite sites, which is why it's in my blog roll and feed reader. It's worth familiarizing yourself with that article before continuing here with my rebuttals.)
At a couple of points, Jonathan mentions the prospect of Prosper (try saying "prospect of Prosper" 5 times fast) going out of business. DINKs Finance has mentioned this before. In James and Miel's analysis, Prosper needs to be making a minimum of $560K while they were only at $380K. They determine from the conservative estimates that Prosper "would be starting to make a profit once they reach the $30M mark in loans." Prosper passed the $30M some time ago. Prosper are now making $800K a year according to Jonathan's analysis.
I'd say that James and Miel are very conservative with their estimates. In San Francisco the salaries are probably double the $50K suggestion and cost at least 1M a year, so I suspect there is a still a deficit. If there were ever a money crunch they would only need to employ enough people to keep the servers up and running. The business model is that of a market maker - they ship no product and carry no inventory. They don't need warehouses and can scale by adding more central servers. Pets.com, Kozmo.com, and Webvan.com couldn't claim that. You don't need a business degree to realize that this is one of the most efficient businesses imaginable. In addition, Prosper has no competitors in the US (Zopa is supposedly coming at some point).
If we were to assume that Prosper still have $200K yearly burn rate from payroll and other experiences, it's worth figuring out how long they can last before they'd go out of business. According to Prosper's own website they are "Prosper has raised approximately $20 million.". Using a third party source we find that Prosper "has raised about $12 million in a second round of funding... Prosper's funding comes after a $7.5 million first round a year ago. Fidelity Ventures led round, which included existing investors Accel Partners and Benchmark Capital. Omidyar Network also came in as a new investor." Hmmm, so that's nearly 20M spread over a 200K a year burn rate, which gives them... nearly 100 years before they go out of business. I'm sure that some of that money has been spent already, so maybe they only 75 years left.
Let's go back and look at the Prosper's growth. When DINKs Finance had posted, Prosper had only an estimated $380K revenue. Five months later My Money Blog estimates that they have $800K - more than double. It may be hard to continue that huge growth rate, but I haven't seen a sign of slowing down. Is it still growing? According to the Prosper Developer APIs, they have $45.5M as of 3/20, just 18 days after Jonathan used the $40M number. So suddenly instead of having a burn rate of 1M-800K (or 200K) it's 1M-900K (or 100K). With the burn rate cut even further they can now last for over 125 years. Looking at the numbers, they should be profitable by May.
The more I look at it, betting that Prosper goes out business is like betting that the Yankees don't win a game this year. Both are possible, but no one would take those bets.
Even though I just finished making the huge argument why Prosper won't go out of business, it's worth noting that lenders get the promissory note for each loan. The borrowers are directly in debt to the lenders. Yes, it would be impractical to go get $50 from 100 different accounts across the country, but you should be able to do so if necessary.
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