the state of online lending: q&a with dan ciporin, lending club & borro investor, fintech...

Strictly Confidential01/15/15 Copyright © Canaan Partners 2014, All rights reserved.

Canaan Partners Overview

01/15/15 Strictly ConfidentialCopyright © Canaan Partners 2013, All rights reserved. 2

Recent Fund Announcement


Total Assets Under Management

01/15/15 Strictly ConfidentialCopyright © Canaan Partners 2013, All rights reserved.

Early Stage, Multi-Sector


12 Exits in 12 Months


Crowdfunding

Lending alternatives

Payments and digital currency

Unique SKUs

High margin products

Ability to leverage social

eCommerce

Reinventing old industries

Crowdsourcing

Reputation economy

Marketplaces

Technology Investing Themes

FinTech

Data center efficiency

Software defined everything

Internet of everything

Business analytics

Mobile/Enterprise apps

eCommerce enablement

Big Data Cloud


Crowdfunding

Lending alternatives

Payments and digital currency

Technology Investing Themes

FinTech


Dan Ciporin, General Partner

Experience Education


The FinTech Opportunity: Watch Out Money,

Your World is Changing!

January 15, 2015


AdTech

$165B

Financial Services

$25,450B

Financial Services Spend Eclipses AdTech by 150x


Traditional Bank Lending Turned On Its Head

11

4th Largest US Internet IPO in History


Financial Services is a $25T+ Business

12

1.7

3.1

9.4

11.2

0

2

4

6

8

10

12

Commercial Consumer Credit Home Mortgage Deposits

Total ($ Trillions)

Source: Deposits, Consumer Credit and Home Mortgage from Federal Reserve Bank; and Commercial from MarketWatch


Financial Sector Has Yet to Optimize Technology

13


Lack of Innovation Hamstringing Margins

14


Reliance on Trading Volumes to Drive Revenue

15

% Equity Trading Volume Over GDP


Basel I Basel II Basel III

1988

2005 -

2009 (slow

adoption)

2010

Common Equity 2.00% 4.50%

Tier 1 Capital of

Risk Weight

Assets

4.00% 6.00%

Leverage Ratio

3% - (US FED announced it would be

6% for 8 Systemically important

financial institutions, 5% for insured

bank holding companies)

Liquidity Coverage

Ratio

Firms of size need to hold 21-30 days

of net cash outflow on hand

Other Notes

Defined Risk Weighted

Assets (RWA), Tier 1 Capital

Ratio, Leverage Ratio

an additional "mandatory capital

conservation butter" of 2.5%

Focused on mainly on

reporting requirements

a "discretionary counter-cyclical buffer",

which would allow national regulators to

require up to another 2.5% of capital

during periods of high credit growth.

Regulation Increases Pressure on Banks


Reserve Requirements Also Cutting into ROE

17


Cost Advantages Powered by Tech

18


Origination All online

Pays commissions to

agents accepting

physical cash

Gross sending

volume

90% ACH, 10%

cards Mostly Cash

Gross margins 66.5% 45%/55%

Other costs No physical locations

Cost for maintaining

and growing physical

locations

Not Just P2P: Remittance Another Example

19


Personal Asset-Backed Securities: Yet Another

Example

Technology expansion of the market via the Internet: allows for loans against physical goods to be originated online

Principal/interest rate losses over 4 years: ZERO. Defaults of 10%, but with 130% recovery of those defaults

2014 Revenues of ~$20 MM on ~$73 MM of originations, growth rate of over 70%

Automated appraisal system built upon 45K historic appraisals

Extremely attractive lifetime values, based upon strong repeat usage


The Market is Evolving

21


P2P Forecasted to be $500B in 10 Years from Just

5 Players Alone

22


Opportunities Abound

MASSIVE market (Trillions, not Billions)

Lack of innovation from incumbents

Regulatory environment lifting startups

FinTech exploding now

23

the state of online lending: q&a with dan ciporin, lending club & borro investor, fintech...

Economy & Finance