Prosper.com and who needs a bank?

image Person to person micro finance is a trend that is definitely catching on. One site that is getting a lot of attention is prosper.com. It connects borrowers with lenders, and is rapidly becoming a viable source of seed capital for startups and small businesses.

Previously, we have written about Kiva, the P2P micro finance system that is all the rage now.

imageThe prosper.com system works like a reverse auction. A borrower posts a listing for the amount that they’re interested in borrowing, the time that they need the money for, and the maximum interest rate that they are willing to pay.

Lenders bid the amount that they’re willing to lend along with the interest rate. At the end of the auction the lowest bids are accepted and combined into a single loan.

The point to note is that the lender is not really lending the money. The borrower is actually getting the loan from prosper.com. In turn Prosper is selling the loanto the lender.

prosper.com microfinance loan for startups small business

The prosper.com site charges only when funding is closed. Fees for the borrower range from 1% to 3% of the loan (or $25, whichever is greater) depending upon the riskiness of the loan. On the lender’s side, there is a 0% to 1% loan origination fee depending upon the credit worthiness of the borrower.

While the trend of micro-financing is pretty small for now, in time the banks will wake up and start to notice. Banks have long enjoyed having captive clients to whom they have extended personal loans, lines of credit and a host of other financial services. They’re not going to be happy to see novice lenders cut into their main business.

Lenders on the prosper.com site are even allowed to set up their own loan portfolios depending upon the amount of risk they are willing to take, with loans ranging from Conservative (estimated return of 7%) to the highly aggressive loan (which nets 10%). All of a sudden individual investors are beginning to look like institutions where they’re able to decide whether they want to be Wellsfargo or Washington Mutual.



Buzznet acquires music social network Qloud

image Buzznet, a Los Angeles based company has bought the music sharing social media company Qloud.

Qloud’s application embedded in social networks such as Friendster and Facebook, allows users to download unlimited amounts of free music.  Furthermore, members can discover and share music with each other. Qloud has been funded by Steve Case and several well-known music industry veterans.

image Buzznet is a multimedia social network where users generate content around their favorite singers and bands.  In the social network, members, photos and videos get "buzzed" (rated) and rise up the popularity charts. The site gets about 4 million visitors a month and carries content submitted by a million users.

Qloud’s MyMusic application on Facebook has 1.8 million users. The offerings of the two sites are clearly complementary ,and cater to the teen and twenty-something demographic.

Buzznet is rumored to be raising a further $25 million in funding, according to PaidContent, on top of the $6 million in Series B raised last year.



Constant Contact - what happened?

Constant contact has filed for a secondary offering following its IPO last year- but that is not good news.

image Constant contact is a provider of direct marketing e-mail software. We were a bit surprised when the company filed for its IPO in July of last year. The very first day the company’s stock rose to over $30 a share, well above the initial pricing of $16 per share, putting its market cap at $200 million with 67 million shares sold. This was one of the hot tech IPOs to watch in 2007. Since then the stock has fallen to $14 per share.

Recently Constant Contact registered to sell 4.2 million shares from current stockholders.  Ironically, the stock is being sold to pay the expenses for the offering! 658,620 additional shares are expected to be floated this time around. It appears that insiders are selling after the expiration of the lock-up period.

So what happened to Constant Contact? Back in February of this year Kris Tuttle of Seeking Alpha had predicted that  after the end of the lockup period, prices would come down to a more realistic $10 to $12 per share. Some of the reasons he had were:

1.The  earning expectations for the company are much higher than would be expected of a SAAS company.

2. Customer acquisition costs are pretty high.

3. The e-mail marketing game is very crowded an expectation of 40 month customer lifetime is not realistic

4. The expectation of return on invested capital is low.

Looks like that prediction was on the money!



The Forbes billions

And so are we in a recession?  You wouldn’t know it from the latest Forbes billionaires list which now boasts of 1,125 members, breaking four digits for the first time.

imageBill Gates is down at number three, giving up the number one spot to his good buddy Warren Buffett , at $62 billion - with a 6x surge in net worth since last year, thanks to flying shares of Berkshire Hathaway. The number two spot now belongs to Carlos Slim Helu of the Mexican wireless telephone company, America Movil.

Interestingly, the Ambani family of the Indian company the Reliance group might have come in first on the richest list with a combined worth of $85 billion, except that the warring Ambani brothers Mukesh and Anil split up their fortune and showed up in fifth and sixth positions respectively, with individual net worths of $43B and $42B.

And how about the youngest self made billionaire? Yes, you guessed it - it is 23 year old Facebook genius Mark Zukerberg who is worth $1.5 billion. Of course this number is based upon Microsoft paying $240 million last October for  a 1.6% stake in the company, which pegged Facebook’s value at a whopping 15 billion. Not many believe this huge valuation, and the story going around is that Microsoft paid up not necessarily because it believes that the company is worth as much, but more to keep out those who might be thinking about taking over all of Facebook!

While on unnamed suitors for Facebook, Google founders Larry Page and Sergei Brin made the top of the Forbes thirtysomething list with $19 billion apiece.

 

 

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