The Individual vs The Institution

I ponder the significance of Bernie Sanders' millionth donation and the parallels between a large number of individual donors in a political campaign and a large number of individuals (peers) on a marketplace lending platform. When does the collection of individuals make the difference for a politician or a platform?

Presidential hopeful Bernie Sanders became the first candidate of the 2016 election to earn his millionth individual donation on Wednesday. While significant in its own right, one must consider that the average contribution to his campaign is less than $25, while Hillary Clinton's campaign boasted an average donation of  $145. From a total donation standpoint, he has raised far less than his primary opponent. This juxtaposition highlighted the appeal of seeking institutional investors in the P2P lending space. While the power of the individual (Peers) is admirable ideologically, the ability of the institutional investment to scale rapidly is more valued in a market where ideas and investment themes are highly perishable-- much like a candidate's run for office. 

The significance of reaching 1 million individual donors in a short amount of time is astounding, but without the "OOMPH," of a large average donation, this milestone loses some relevance. As we have seen in elections of all sorts, money (and the ability to raise it in large sums) has ultimately been the deciding factor. The same can be said about scaling a marketplace lending start-up and the allure of courting institutional investors.  

P2P lending facilitates transactions directly between individuals, disintermediating financial institutions and empowering the individual. Crowdfunding takes the concept a step further by creating collective pools of money to support a project, an idea, an individual, or a campaign. The efficiency and efficacy of institutional investment (imagine a crowdfund of one large investor) in the P2P space has forced many platforms to shift their strategy of maintaining a pure peer-driven funding source to one that acknowledges and caters to the institutional investor. When armed with the ability to fund loan volumes (and generate profits) at an order of magnitude greater than one can achieve with peer-funding, these businesses caught the eye of the kingmakers of the start-up world. But let's not forget what drew institutional investors to the most promising platforms in the first place: a large collection of individual investors and borrowers.

It is not my intent to speculate on whether or not Sanders wins the favor of the kingmakers of his party. It is fascinating to consider the parallel, however, between the power of the individual donor in a political campaign and the power of an individual lender on a marketplace platform. The popularity of a platform (or a politician) can not be denied as a barometer of success of some sort, whether it is a large portfolio of probable investments, ease of execution, or any number of other factors. As it pertains to marketplace lending, the collective strength of 1 million of those individual lenders certainly attracted the notice of institutional investors. Only time will tell if Mr. Sanders' milestone will have the same effect on the political equivalent.

Jeff Gapusan
Head of Capital Markets