Canadian Peer-to-Peer Lending

I love it when a good idea comes to fruition. I thought about starting up Craigslist in Canada before they came here (I’d used it in San Francisco and loved it – I even registered a domain for it!). I was going to build a dating site based on collaborative filtering, and I wanted to start a Canadian P2P Lending site like Lending Club and Zopa, and someone has finally done it!

In case you haven’t read about P2P lending, its basically eBay for banking. Instead of borrowing (or saving) money through a bank, the borrowers and lenders communicate directly and cut out the middle man. In theory, the massive profits that the big banks make should go into giving both sides better rates and leading to a more efficient capital market.

We’re still in the infancy, so I wouldn’t say we’re quite at that point yet, but its still a very exciting new place to borrow and invest. Through an American friend I managed to set up a Prosper account and have been scraping by with around a 5.5% return on our investment there (we’ve had MASSIVE defaults).

One of the best things about these types of sites (from an operator perspective), is that lending laws are different in every country (and often from province-to-province or state-to-state). This gives the chance to set up a “local” version in your country, and not have to compete with the current site dominating the market (as would be the case if you tried to start a local auction site or a local classifieds site).

I have my fingers crossed that CommunityLend will improve on the business models of Lending Club, Prosper and Zopa. Even if they don’t, I’m happy that at least we’ll have a Canadian version available to us.

In case you’re reading this and wondering why I’m happy people made money on “my” ideas, my feeling is that ideas are cheap. With a company, creation and operation is the hard part (and deserve the bulk of the returns). Frank Herbert (the author of Dune) once had a guy come up to him and say “I have a great idea for a book, I’ll tell you, you write it, and we’ll split the profits 50/50”. Mr. Herbert said “no way, coming up with ideas is the fun and easy part, writing the book is hard work!”.

People have made similar observations about video games. If there’s any market for ideas, I certainly haven’t found it (please tell me where it is so I can cash in and retire!). The only way you can “sell” an idea is to find someone naive enough to give value to ideas on their own merit, convince them to do all the work and give you equity for your initial idea (“you build it and we’ll split the profits 50/50), hope that they are naive but very bright and productive (I haven’t met many people who would fit this bill), then sell the results and cash in.

An idea that I had (that no one has actually done yet) was to build a website, say “”. On it people could write up their ideas for businesses, post a business plan if they have it, and list what resources they bring to the table (what portion of the start-up capital they have, skills they possess, contacts, etc.) and what resources they don’t have but would need. People with those resources (or people just wanting to offer advice), could connect with the budding entrepreneurs. Money could be made off of advertising (I know, I know, this business model is *SO* 1999).

Anyone have $1000 / month to front me while I build it? 😉

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13 replies on “Canadian Peer-to-Peer Lending”

4P: I thought that’d be pretty cheap as my only post of the day ;-). I let the domain name expire, it promptly got purchased by a domain squatter.

I didn’t use craigslist as the name (that’d be lame), I came up with my own…

Colin: Great to hear! I’ll be looking forward to your launch. A lot of us PF bloggers are software developers if you’re looking to hire 😉

MDJ: I’m not a big believer in patents. They’re very expensive to set up, and need deep pockets to defend, therefore they’re only useful for rich corporations (if Microsoft infringed on one my patents, there isn’t very much I could do about it).

Your feelings about patents might be different (that’s cool), but I wouldn’t put time or money into them personally. I’ve never heard of a small guy patenting his invesntion, then EASILY making money off of it when a big corporation wanted to use it. The only people who make money with patents are those who are backed by ANOTHER big corp (who usually wants to undermine the infringing corp) or people who are willing to make fighting to defend their patent their lifes work for the next decade (no thanks).

I think the world would be a better place if the entire copyright/patent/Intellectual-property system was totally overhauled.

I always recommend tapping into your social network, especially family and friends, to get money and resources to start a business. is a site that helps entrepreneurs raise money for their small businesses through friends and family, rather than through traditional financial institutions. It is the first friends-and-family funding network for entrepreneurs. Using the Internet-based service, entrepreneurs connect with their social networks – friends, family, friends of family, colleagues, and others ? to raise capital by requesting loans and contributions, and entrepreneurs can share their fundraising pages on MySpace and Facebook too. scalable platform facilitates the funding requests and generates customized loan documents to make it easier for an entrepreneur to manage many investors (lenders and donors), who can provide $50 to $10,000 each.

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