Prosper Marketplace Announces $2 Million in Bridge Financing as Bankruptcy Fears Loom
Prosper Marketplace has received $2 million worth of bridge funding from its existing investors as many are questioning the company’s overall financial health.
The new interim round of funding comes from Prosper Marketplace’s existing investors, including Accel Partners, Benchmark Capital, DAG Ventures, Meritech Capital, Omidyar Network, and Volition (formerly Fidelity Ventures). Prosper Marketplace says that it is in the process of raising another round of capital and according to their blog, the process is “going well and we have strong interest from a number of world class investors.” Prosper Marketplace said that they are looking “forward to announcing our Series D round soon.”
In the company’s blog post, the company painted a rosy picture about the peer-to-peer lending industry’s future prospects, saying “we’re pleased that estimated lender returns are tracking very well. In addition, continuing to attract high quality borrowers – the cornerstone of great lender returns – is our top priority as evidenced by the recent additions to our leadership team. With the persistent disruption of the traditional banking system, there is a world of opportunity to drive great loan assets to our lenders.”
However, not everyone is as optimistic about the peer-to-peer lending industry’s and Prosper Marketplace’s future success. A recent slate article entitled, “You Are Unlikely to Prosper” questioned the riskiness of peer-to-peer loans as an investment. The article pointed out that 39% of loans on Prosper Marketplace that have reached the end of their three year term have gone into default. Prosper was unsurprisingly unhappy about the article and demanded that the article be retracted.
Others that cover the peer-to-peer lending industry question whether or not Prosper Marketplace is nearing bankruptcy. These detractors note Prosper Marketplace’s relatively poor cash position during its last SEC filing and the company’s high burn rate. On September 30th of 2009, the company reported having $2.07 million in operating capital. Prosper Marketplace has received $3 million across two rounds of capital since then, but at the company’s high-burn rate, that money will not last the company more than a few months.
Using data from Prosper Marketplace’s June 30th and September 30th SEC filings, their cash position dropped from $4,617,594 down to $2,079,624 during a 3 month period, leading to a burn-rate of $27,591 per day. Based on that burn rate, Prosper Marketplace’s 9/30/2009 cash position and its new funding, Prosper Marketplace would only have 184 days worth of capital to last through April 2nd, 2010 based on the calculated burn rate. The company likely has made some amount of money from the loans that it has originated and has likely slimmed down on its operating expenses, so the “out of capital” date will likely be a month or two after the calculated date. However, until the details of Prosper’s next SEC filing are released, it will be difficult to determine the company’s current financial state.