Imagine you could build a credit score based on your social media presence. Now imagine you could take a personal loan, leveraging your online behavior, and apply it toward improving your life and fulfilling your dreams. Certainly, it’s a cutting edge concept. But let’s take this idea a step further. Now envision you are a citizen living in emerging countries where there is no credit score. And if this capability did exist, why would it be appealing?
There is an emerging middle class abroad and it is poised for vast growth. These are people who have enormous demand to improve their minds and who require relatively small amounts of capital to achieve it. However, lack of credit score and insufficient trust in the local economy and small banks make this all but impossible. Historically, bureaucracy stifles the endless possibilities associated with a small, albeit life-altering, personal loan. But whereas a pessimist sees the difficulty in every opportunity, an optimist sees the opportunity in every difficulty. That is, the current state of affairs in emerging middle class economies presents an opportunity to build relationships with these upwardly mobile trustworthy individuals. It opens the door for convergent thinkers wishing to solve an ongoing international issue. These problem solvers hope to provide loan recipients with a tool that enables them to work hard, be educated, build their own assets, and make their own families better, which ultimately allows such individuals to be more financially stable themselves.
These ideas were forming the basis for a venture with a friend, angel investor, and entrepreneur, Jeff Stewart. We shared office space for many years and evaluated start-up deals together, occasionally coinvesting and assisting entrepreneurs. Last summer, Jeff and I worked together with an intern, Jessica Nussbaum. Jessica spearheaded a summer research program with Jeff that focused on microlending, emerging markets, and the emerging middle class which gave rise to our portfolio company, Lenddo.
Lenddo is the world’s first online community that empowers the emerging middle class to use their online social connections to build their creditworthiness and access local financial services. “Lenddo seeks to improve the lives of millions of people in emerging markets,” says Jeff. “We witness the impact of our loans every day in the Philippines and Colombia. Members pursue education, help sick relatives and repair their homes after natural disasters—all made possible because of their positive online reputations.” In contrast to the detached and objective risk-assessment tools that currently preclude and alienate most of the world’s population, Lenddo’s personal touch has the power to revolutionize microlending as we know it.
Unfortunately, people in these areas generally do not qualify for the loan criteria established by commercial banks, a reality that has been a major pain point for emerging market countries with citizens aspiring to better their lives. The Internet remains a key way to gain massive access to both banked and unbanked populations, especially younger individuals with a greater preference for technology. Catering toward people who feel more comfortable with internet transactions, virtual offices stand to thrive the most moving forward.
Lenddo has solved this pain point and addressed latent demand by introducing a proprietary algorithm that analyzes risk, with remarkable accuracy, through a combination of social media data (Facebook, Linkedin, Twitter and Yahoo!) and community-based microfinance techniques. A recent report (EuroMonitor Feb. ’12) about consumer lending in Colombia speaks to Lenddo’s strategy, that “the most benefitted categories are likely to be those that represent an actual and lasting improvement to the quality of life, such as mortgages, home, education and durable lending.” In contrast to conventional processes, Lenddo works by responding with speed and less red tape. The more honesty, engagement, and candor applicants demonstrate, the faster Lenddo facilitates new opportunities for users. Likewise, the willingness of an applicant’s community to vouch for him or her, with an eye toward online behavior, serves as an invaluable barometer of personal character and loan recoverability risk. In doing so, Lenddo is fostering relationships that extend beyond financial transactions and promote goodwill and trust on a global scale.
As reported by TechCrunch, online reputation and financial services startup Lenddo has raised an $8 million Series A Round from institutional investors including Metamorphic Ventures, Accel Partners, Blumberg Capital, Omidyar Network, iNovia Capital, as well as angel investors such as Geoff Judge, David Kidder, Scott Heiferman, and Barry Silbert.
Post created with Lewis Gersh by Gavin Pelling, interning with Metamorphic Ventures.
