Middle Market Deals and how to buy, sell and raise capital from $5 to $500 million

You have a day job? I thought all bloggers were hermits that read other blogs and then reworded them. (Just Kidding)

I would like to hear the realities of investing in companies that are a bit off the beaten path.

I would like to hear about unique deals that create a new kind of investment opportunity - ideas, patents, dutch-auction type stuff.

I would like to hear if you see any new exit strategies appearing for entrepreneurs or investors.

That's a start. Maybe tomorrow I add to the list...It's late.

I would like to hear your take about prosper.com. With the peer-to-peer lending industry starting to grow, many opportunities exist for arbitrage in interest rates. What is your take on the risks for this arbitrage? From my understanding, arbitrage usually has little risk because the life of the transaction is very short, but these terms are closer to 3 years.

lendingstats.com is a site that has put together the numbers from prosper.com but i'd like to hear a professional opinion.

First, I get the most mileage out of your 101 posts... I'm an entrepreneur with a firm head on my shoulders — but I've always eschewed the money side of the business. Maybe it's time I get a little more involved with filthy lucre.

Second, I love your events posts... I seldom attend, but I like being in the know.

Third, I think you should treat to lunch.

Just saying.

Roger,

I'll take up these topics in future posts! Great ideas!

Steve,

I'm not an expert in the peer to peer lending, but I believe that it is a step backwards. In ancient times, all lending was peer to peer, but then banks emerged. Banks can assume greater risk because the risk is pooled and all of the customers get the benefit of that. This is more true today because of effective credit scoring--tools that are weak or lacking at Prosper.com. This leaves a real adverse selection problem at Prosper--the only borrowers are those not able to get traditional credit at acceptable rates. Do you want to be the lender of last resort? I don't.

Silus,

I'm pleased to hear you like the 101 posts, because that is what I do best!

ddt

Devin,

I've been looking more and more into prosper's business model. Some of the concerns you have listed, they appear to have addressed. Prosper uses the borrower's credits core and provides them a grade of A-E, NR, or HR. Prosper also lists a lot more information such as:

Now delinquent: 2
Amount delinquent: $26
Delinquencies in last 7y: 0
Public records last 12m / 10y: 0 / 0
Inquiries last 6m: 0
First credit line: Oct-1992
Current / open credit lines: 13 / 12
Total credit lines: 25
Revolving credit balance: $16,504
Bankcard utilization: 52%

As far as the risk is concerned, the P2P lending, in most cases, the loan is not funded by an individual. Usually it's $50-$100. So, say I have $1000, I can chose to lend $50 to 20 different people. If someone I loaned money to defaulted, it would only be $50 of my $1000.

The part about arbitrage that interests me is that there are many listings of people with "good" credit scores that are borrowing so they can re-lend to people with lower credit scores. Supposedly the site has provided $65M in loans. Maybe one day this could become a way for entrepreneurs to find funding.

Also, the interest rates are bid down, instead of up. Think of it like eBay, but backwards. I've opened up an account and deposited $500 to see if can further understand how and why this might succeed.

Oh man... PROSPER has to improve their marketing... I had no idea they were a P2P lending network.

I'm a big fan of these, as the likelihood of usury is lower (among other issues).

ZOPA, a UK start-up is intriguing — and she's coming to the US.

http://zopa.co.uk/ZopaWeb/