Comment by akg_67 | Hacker News Reader

Comment by akg_67 | Hacker News Reader

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Have you looked into Lending Club and Prosper Marketplace peer to peer lending platforms? The retail investors on these platforms are having good success in assessing and managing risk with consumer lending. There is no reason that the same will not happen with equity crowdfunding.

Equity crowdfunding platforms will be responsible for due diligence and standardizing the equity offerings instead of the individually negotiated deals and preferential deals to different investor groups that is the norm right now.

I run crowd-lending analytics and automation platform, PeerCube https://www.peercube.com, for retail lenders on Lending Club and Prosper. I also consult and advise hedge funds and institutional investors on the same platforms. In my experience, retail investors appear to be much more vigilant, perform much more due diligence and selective than the institutional investors. This is primarily due to "own money" versus "other people's money (OPM)" and the amount of money deployed. When you have your own skin in the game, you are more vigilant.

Your arguments are more about maintaining segregation of certain areas for "privileged" classes. Exact same arguments were made when SEC approved retail investor participation in p2p lending in 2008/2009.

Edit: More details on SEC approved rules in SEC press release http://www.sec.gov/news/pressrelease/2015-249.html. It appears there are enough safeguards in place to alleviate investor screw ups.

> Have you looked into Lending Club and Prosper Marketplace peer to peer lending platforms?

1. Lending Club and Prosper Marketplace have grown up in a period of historically low defaults. We will see how successful investors, retail and institutional, really are at assessing and managing risk when the current cycle ends and defaults rise. As Warren Buffett said, "Only when the tide goes out do you discover who's been swimming naked."

2. Marketplace lending activity is increasingly institutional[1]. Without institutional money seeking yield, you would not see nearly as much dollar volume in this market.

3. While I would not be surprised to find that some institutional investors aren't very diligent, you should also recognize that the notes they are purchasing typically make up just a portion of their investments. Unless you have a 360-view of a fund, it's not entirely fair to pass judgment on how well the fund manager is managing risk.

4. Assessing the risk of Lending Club and Prosper notes, which are debt obligations associated with consumer loans, is a very different exercise than assessing the risk of an equity investment in a company, especially when that company has little or no operating history.

5. The last time I checked, the notes on Lending Club and Prosper were actually obligations of Lending Club and Prosper and are not secured by the actual loans. In other words, if Lending Club or Prosper run into financial difficulty and can't meet their obligations, investors can lose even if a borrower is still making payments on his or her loan. I would venture a guess that many of the supposedly diligent retail investors you refer to don't actually know this.

[1] http://qz.com/536573/one-thing-putin-and-kim-jong-un-both-ge...

Off topic, but I've been really wanting to get into lending club. I spent about three weeks researching, then when I was ready to pull the trigger... I discovered it's not available in my state. -_-

Any advice, other than complaining to my state representative?

You might want to reach out to your state security regulator. IANAL, you might be able to pool funds with friends and form a partnership in an acceptable state.

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