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[Urbi_et_Orbi]

http://www.americanbankingnews.com/2010/03/20/prosper-marketplace-has-11-days-to-announce-new-funding-or-may-face-bankruptcy/

Peer-to-Peer Lending: Prosper Marketplace Has 11 Days to Announce New Funding or May Face Bankruptcy
March 20th, 2010
Filed Under: Peer-to-Peer Lending
Last month Prosper Marketplace, a company that offers peer-to-peer loans, received a $2 million bridge loan due on April 1st to cover operating costs while it seeks its next round of venture capital funding. The loan is due in 11 days and Prosper Marketplace may find itself out of cash if it doesn’t announce a new round of venture capital by the time the bridge loan it took out comes due.

The interim round of capital was announced on February 3rd and at the time, Prosper Marketplace said that the process to seek its next major round of funding is “going well and we have strong interest from a number of world class investors.” The company said that hat they are looking “forward to announcing our Series D round soon.”

Others have been more skeptical of Prosper Marketplace’s chances in raising a next major round of capital. The company has been plagued by far higher than expected default rates from its borrowers and has not been able to get its loan demand up to anywhere near sustainable levels since the company was allowed to re-launch after registering with the SEC in 2009. We recently reported that the amount of new loans that Prosper is originating each month is declining.

No one is certain how much operating capital Prosper Marketplace has in its coffers, but many believe that it’s not much. On September 30th of 2009, Prosper Marketplace reported to the SEC that it had $2.07 million in operating capital. Since then, it’s received $3 million worth of warrants in terms of funding. Prosper has a relatively high burn-rate though, and some predict that it would be out of money in early April based on burn-rate calculations using the company’s previously released SEC filings.

Prosper Marketplace has not released a Form 10K to the Securities and Exchange Commission, but will be legally required to do so by April 1st. That report will tell the public the company’s financial status at the end of December.

The company will be required under the terms of its February loan to repay the $2 million with interest on April 1st if it does not receive a new round of funding. If the company does not announce a new round of funding and does not have capital to repay the loan, Prosper Marketplace will likely end up in a situation where it is out of cash. At that point, the company would either be forced to file for bankruptcy or wind-down its operations.

[GLeaderAccountantsChoice]

Oops.  Didn't see that one coming... good thing there isn't much left in terms of my notes.   

[112233]

We can all speculate but I don't think I would have a headline like that just yet.

[Fred93]

The most likely thing to happen when the bridge loans hit their due date is "nothing".  The lenders (VCs who earlier funded Prosper + some others) want Prosper to succeed, so they won't take drastic action, at least not soon.

[bamalucky]

Vast untapped reserve of 3.0 loans notes to operate with

[cowdog]

This is critical information for all current and potential investors in Prosper...

I vote lobby so it can be accessed without a login.

[pioneer11]

This is critical information for all current and potential investors in Prosper...

I vote lobby so it can be accessed without a login.

Second for lobby

[czach]

Question: As a dot.com veteran I know the issues and such behind burn rates; what about Prosper makes the rate unusually high? Data security? Collection fees? Need to hire shovelers of bullshit?

C

[Urbi_et_Orbi]

Too many people with big titles supervising the shovelers...

[justlendnlearn]

Question: As a dot.com veteran I know the issues and such behind burn rates; what about Prosper makes the rate unusually high? Data security? Collection fees? Need to hire shovelers of bullshit?

C

I wonder the same thing...... The majority of ground work for site structure has been done (web interface/setup, clearing states with SEC, automated systems to handle funding, payment processing, etc.)

Why not scale back marketing, employee payroll and down size office space by 50-75%?? There will surely always be some level of demand and traffic; at a minimum from returning borrowers already on board and familiar with the site. I just don’t see how a web based company couldn’t operate for considerably less than 2 million per month!!!

[Fred93]

Why not scale back marketing, employee payroll and down size office space by 50-75%??

You are more wise than Chris Larsen.  

Scaling back marketing is questionable, because it is the engine of growth, but in general you are right on the mark.  He should have been implementing frugal behavior.

The first thing I would have cut is the stupid stupid expenditure for lobbyists.  $60,000 to Podesta group.  http://prosperlending.blogspot.com/2009/05/prospercom-only-p2p-player-on-beltway.html

Next thing I would have cut is rent.  They're on the top floor of one of the fanciest old buildings in San Francisco.
http://fred93blog.blogspot.com/2009/01/prospercom-best-architecture.html
http://fred93blog.blogspot.com/2009/01/prospercom-best-architecture-part-two.html
The 2nd part contains lots of interior photos and historical poop.

I just don’t see how a web based company couldn’t operate for considerably less than 2 million per month!!!

Cash burn is approx $827,730/month.  (for the June 30 to Sept 30 period, the most recent for which we have info.)  Details here... http://fred93blog.blogspot.com/2010/01/prospercom-is-near-bankruptcy.html

[ira01]

Next thing I would have cut is rent.  They're on the top floor of one of the fanciest old buildings in San Francisco.
http://fred93blog.blogspot.com/2009/01/prospercom-best-architecture.html

Supposedly Prosper got a really good deal on the office lease by taking over the space from some failed dot com or something.  Who knows if that is true, and/or if they could legally sublet the space to take something cheaper.  And I believe that the commercial real estate market isn't so hot anyway, with a lot of vacancies, so I don't know how much they would get anyway.

[Fred93]

Supposedly Prosper got a really good deal on the office lease by taking over the space from some failed dot com or something. 

 

Who knows .. if they could legally sublet the space to take something cheaper.  And I believe that the commercial real estate market isn't so hot anyway

Good point about the practical difficulties of reducing costs at this point. 

The 10Q says

Prosper leases its corporate office and co-location facility under noncancelable operating leases that expire in July 2011 and August 2011, respectively.  Prosper’s corporate office lease has the option to renew for an additional three years. Future minimum rental payments under these leases as of September 30, 2009 are as follows:
 
Remaining three months ending December 31, 2009  $107,012
Years ending December 31:               
  2010 431,864
  2011 265,513
Total future operating lease obligations  $804,389

Rental expense under premises-operating lease arrangements was approximately $106,248 and $315,690 for the three and nine months ended September 30, 2009, and $94,748 and $272,309 for the corresponding periods during 2008.

The 2011 number above is for a partial year.  The 2010 number is a full year, so we can use it to compute.  $431,864/12 = $36,000/month.  The colo cost has got to be a small fraction of this, so I believe it is mostly office space.  According to http://111sutter.com/index.cfm?NOaction=propProfile its a 286,182 sq ft building.  Its 22 floors, so if we divide 286182/22 = 13,000 sq ft per floor.  $36,000 / 13,000 sq ft = $2.76 / sq ft.   Doesn't sound like a deal.  Doesn't seem like frugal startup office space to me.

The building has vacancies, listed on http://111sutter.com/index.cfm?NOaction=leaseInfo
Entire 4th & 19th floor empty now.  Entire 12th, 13th, 14th, 16th goes vacant April 2010. 

[cowdog]

It is amazing to me that anyone still thinks Prosper ever aimed to be profitable.

[God-Father]

It is amazing to me that anyone still thinks Prosper ever aimed to be profitable.

I don't see how they can ever make a profit now, but why do you think they didn't "aim to"?