PROSPER

Chris Larsen (who later co-founded Ripple) started Prosper in 2005 after running E-LOAN, an early online mortgage company. The idea was simple: what if people could lend money directly to other people, cutting out banks entirely?

Prosper launched as America's first peer-to-peer lending marketplace. Borrowers posted loan requests.

Lenders bid on them. The platform matched them and handled the paperwork.

In the early days, it was like eBay for loans — lenders could even see borrowers' stories and choose who to fund. The SEC stepped in, issued a cease-and-desist in 2008, and Prosper went quiet for nine months while they registered as a securities offering.

They relaunched in 2009 with a compliant model.

Prosper is an online lending marketplace. Borrowers apply for personal loans ($2,000-$50,000).

The platform evaluates their credit, assigns a risk grade, and funds the loan through institutional and retail investors. Prosper makes money through origination fees (charged to borrowers) and servicing fees (charged to investors).

It's not a bank — it's a marketplace that connects people who need money with people who have money.

Personal Loans — the core product. Fixed-rate loans from $2,000 to $50,000 for debt consolidation, home improvement, and other purposes.

Prosper also offers a home equity line of credit (HELOC) product and credit score monitoring tools.

First-mover advantage. Prosper was the first P2P lending platform in the US, which gave it brand recognition and media attention.

They also shifted from pure P2P (individuals lending to individuals) to institutional funding (hedge funds and asset managers providing capital), which allowed them to scale loan volume dramatically. The institutional pivot was the key growth unlock.

Regulatory risk. The SEC's 2008 shutdown nearly killed them.

Online lending also faces credit risk — if borrowers default at higher rates than expected, investors lose money and leave the platform. Competition from Lending Club, SoFi, and traditional banks has been fierce.

The 2022-2023 rising interest rate environment compressed margins across the entire online lending industry.

Sequoia Capital was an early backer. Other investors include Francisco Partners, Institutional Venture Partners, and various credit funds.

Chris Larsen (co-founder) later became famous for co-founding Ripple. The transition from pure P2P to institutional funding brought in major credit investors.