Last year at LendIt 2013 we featured a number of P2P lending start-ups in our exhibit area in order to learn about the next new thing. There was one company in particular that had a great mission and a great story that we were excited to feature. This company was called Funding Community (we wrote about their launch here).
Their mission was to develop a small business P2P lending platform so that the local community could fund their local businesses. In exchange, the small businesses provided deals and discounts to their lenders, who often became their most loyal customers. We loved their local social ecosystem approach, which gets to the essence of what makes peer-to-peer lending so amazing. They made it personal and supportive.
So it came with great disappointment when we heard that Funding Community was shutting down. But the story is not over. Not only has Funding Community bought-out all outstanding loans to make their lenders whole, but also one of their co-founders, Alex Binkley, has decided to write a post-mortem to share his lessons on the successes and failures of his venture. Funding Community is showing us how to fail with class, dignity, and honor. It takes courage to publicly speak about a failure and we applaud him for that. We can all learn from his lesson.
Here are my lesson’s learned after reading this story:
1) Entrepreneurship requires creativity, flexibility, purpose, and passion, which were all demonstrated in this story.
2) Every leading company in our space including Lending Club, Prosper, Funding Circle, OnDeck, and Kabbage (to name a few) dealt with their own unique issues and have their own startup story like Funding Community. That unified struggle for success creates a common bond among the entrepreneurs and it is part of what made the industry gathering at the LendIt conference so special last year.
3) P2P small business lending is a different category than consumer lending. Finding the sweet spot requires much experience and credit modeling expertise.
4) The original idea (in this case, funding.harvard.edu) is often not the ultimate idea for the company.
5) The web helps a company scale but the company better have its systems in place to handle the load. Process improvements often dominate an early stage company’s time and attention.
6) Start-ups can get pushed into the big leagues fast. For investors and outsiders, things aren’t always what they seem (just ask the Treasury in this case). For companies, try to represent yourself honestly.
7) Lending Club and Prosper have structured amazing business models that are very difficult to replicate.
8) Picking the right co-founders is probably the most important decision in launching a new business.