lendit master deck final wn canaan partners

8/18/2019 Lendit Master Deck Final WN Canaan Partners

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Copyright © Canaan Partners 2016, All rights reserved.

The Characteristics of Capital

in theMarketplace Lending World

Dan Ciporin


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Marketplace Lending: Historical Landscape

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

2005Zopa incorporatedin UK as first P2P

marketplace

2008Lending Clubreceives SEC

registration

2008-2012Retail/HNW

individual capitalfocus

2011Arcadia/Eaglewoodthe first dedicated

platform funds

2012-2016Institutional capital floodgatesopen: structured credit funds,

securitization market

st


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MPL Funding Is Now Largely Institutional Hedge Fund Based

$0

$3,000,000,000

$6,000,000,000

$9,000,000,000

$12,000,000,000

2008 2009 2010 2011 2012 2013 2014 2015

$12

$10

$8

$6

$4

$2

$0

$ $ $ $

Retail-driven Growth

Institutional-driven Growth

U.S. Annual Origination Volume by Loan Type ($ Billions)

Source: Orchard


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Institutional Bias Is Actually Much Stronger

500+ originators


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When the Cycle Turns,What Was Once Strength Becomes Weakness

$0

$8

$15

$23

$30

J F M A M J J A S O N D JSource: Asset Backed Alert

US ABS IssuanceVolume in Past 15 Months ($ Billions)


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As Clearly Evidenced in Recent MPL Securitizations

100

200

300

400

500

600

CHAI 2015-PM1; 8/5/2015 CHAI 2015-PM3; 12/18/2015

Source: Bloomberg, PeerIQ Research

Weighted Average Spread (bps)


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A Lesson Legacy Players Have Learned

$0

$50

$100

$150

$200

2007 2008 2009 2010 2011 2012 2013 2014 2015

Debt Deposits

$ Billions

$0

$25

$50

$75

$100

2007 2008 2009 2010 2011 2012

Debt

Source: SEC filings


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Including Even the Most “Institutional” of Players


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Reliance on One Capital Source Is Foolhardy,Especially When It Is an Intermediate Source

$34TRetail $37TInstitutional

$$ $

$ $$$$

$$

$ $$ $

HEDGEFUNDS

Wire HousesRIAs

Broker/DealersSelf-directed Investors

Bank Deposits

2015 Marketplace Lending

RETAIL

BankPension Fu

Insurance ComFoundations/EndSovereign Fund

INSTITUT

$ $$ $

$$ $

Source: Cerulli Associates & US Treasury


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Wire HousesRIAs

Broker/DealersSelf-directed Investors

Bank Deposits

BankPension Fu

Insurance ComFoundations/EndSovereign Fund$

$ $$

$$$

$$

$$ $

$ $

$$

DIRECTINVESTMENT$$

$$$$

$

$

$

$

$$$

$$ $

Which DIRECT Capital Sources Fuel Future Growth?

$34TRetail $37TInstitutional

RETAIL INSTITUT

2015 Marketplace LendingSource: Cerulli Associates & US Treasury


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Institutional Capital is Efficient

2009 2010 2011 2012 2013 2014 2015Retail Institutional

Time to Scale Retail >

Time to Scale Institutional

Year 1 YeaYear 2 Year 3 Year 4 Year 5 Year 6

Source: Canaan Partners analysis


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Great Recession Bull Market

-30%

-23%

-15%

-8%

0%

8%

15%23%

30%

1/1/11 1/1/12 1/1/13 1/1/14 1/1/15 1/1/16

FDIC Deposit Growth HF Net Flows % of AUM

However Institutional Capital Is Fickle

Source: FDIC & SS&C GlobeOp Capital


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Retail Capital is Sticky and Enormous

Source: Phoenix Global Wealth Monitor (2015)

120M US Households

1M5M

23M

85M

7M

$100K - $500K

$1M - $5M

$5M+


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Retail Direct

1 year payback

Institutional

4 month payback

However Retail Has Higher Costs

Source: Canaan Partners analysis

Capital Diversification Is the Answer in Different “Flavors” of Volatilit


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Capital Diversification Is the Answer – in Different “Flavors” of Volatilitand Cost

C o s t “Retail

Investors”

Self-DirectedInvestors

“Opportunistic

Investors”

FinancialAdvisoryChannels

Lower

Higher

“Asset allocationinvestors”

HedgeFunds

Institutions

Volatility HigherLower


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New Diversified Capital World Winners

BrandRegulatoryEmbracers

CreditHistory

Technology andProduct

Secondary

Market

$


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Liquid Secondary Market

Secondary Market Key to Every Mature Market

Equities

FX

Derivatives

Bonds

ABS

Commodities

Secondary

Market

$


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CreditHistory


Secondary

Market

$


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Technology and Product

RETAIL INSTITUTIONA

UI / UX

RIA & Custodian IntegrationPrincipal Protection

Regulatory RequiremenData Analytics

Order Execution InfrastruReporting / PortfolioManagement Tools


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Integration With RIA Workflow

Marketplace Lenders Must Build it on Their Own Or Integrate with RIA TechnolSource: Lend Academy

Independent RIA Daily Wor

CUSTODIANPORTFOLIO

MANAGEMENTSYSTEM

TURNKEY ASSMANAGEMEN

PLATFORMOR

RIA

Marketplace

Lender

f


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CreditHistory


Secondary

Market

$

N Di ifi d C i l W ld Wi


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CreditHistory


Secondary

Market

$


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Embrace The Regulator

N Di ifi d C it l W ld Wi


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CreditHistory


Secondary

Market

$

B d R t T t


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Brands Represent Trust

Co opetition Competition and Acquisition?


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GAFA MP

FINTEBANKING

Co-opetition, Competition – and Acquisition?

The Evolution of the Capital Base Is Clear


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The Evolution of the Capital Base Is Clear

Total MPL Capital Base

Introduction Emergence Maturity ScaleIndividuals

Small institutionsIndividuals

Small institutionsHedge funds

IndividualsSmall institutions

Hedge fundsBanks

Closed end funds

InSmall

Hed

CloseMu

InsurancPens

Winners


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Will bridge between bothinstitutional and retail

capital

Will leverage branhistory, technolog

regulatory comfort secondary liquidi

Winners

Marketplace Lending: A New Asset Class For All Capital Needs


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Marketplace Lending: A New Asset Class For All Capital Needs

Will create a new asset class across

all capital sectors

$


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Thank You

lendit master deck final wn canaan partners

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