ira01's blog

Most Prosper lenders know that both Lendingstats and Eric's provide graphs showing Prosper's loan originations each month.  Lendingstats graph, which is available here, categorizes loans by their origination date, while Eric's, available here, categorizes loans by their listing start date.  Both provide useful information for analyzing Prosper's loan originations over time.  As can be seen, there are monthly ups and downs, and there are some variations that appear to be seasonal as well, such as an uptick around Prosper Days.  What neither graph provides, however, is a clear picture showing the overall trend of Prosper's originations. 

It occurred to me that the best way to show that, would be a graph showing the 12-month moving average of Prosper's monthly originations.  That way, each 12-month period includes a full year of originations, thereby eliminating the effect of seasonal variations.  Using Lendingstats data (which is therefore categorized by origination date), I prepared a table of monhly loan originations over Prosper's entire history, and calculated each 12-month average (the spreadsheet with the data is linked below).  I then graphed these 12-month averages against time.  Here is the graph:

(Click Here for a larger image) 

It It appears to me that there was a noticeable flattening of Prosper's origination growth after April 2007, which accelerated for several months.  Then the growth rate picked up for two months starting in October 2007 (probably due to Prosper's aggressive marketing of second loans), before essentially disappearing after November 2007.  For example, the average originations for the 12 months ending December 2007 was $6.75M, and only $6.77M for the 12 months ending April 2008 -- almost completely flat.  In May 2008, the 12-month origination average began to increase again somewhat (probably from the elimination of rate caps due to the WebBank venture on April 15), although at a fairly sedate rate that has continued for the last few months (although the July 2008 average would have been considerably lower without the huge number of loans originated in the last two days of July (149 loans for $879,000)). 

Put another way, it took about two months for the 12-month average to increase from (about) $2M to $3M, another 2 months to increase to $4M, and another 2 months to increase to $5M (May 2007).  This was the period that Prosper was growing originations strongly.  But then it took three months for the moving average to reach $6M, and nine months for it to hit $7M (May 2008).  Absent some major change in Prosper, it appears that average originations have pretty well reached a plateau in the $7M a month range.

I believe this graph has to be deeply troubling to the venture capital firms that have invested in Prosper (particularly in light of Prosper CEO Chris Larsen's public statement last Fall that loan originations needed to increase 400-500% in order for Prosper to just break even).

Here is the spreadsheet containing the data I used (monthly originations, 12-month totals, and 12-month averages):  Prosper Monthly Loan Originations