East 49th Ventures

Prosper and Other Changes

noreply@blogger.com (Anonymous) — Sun, 17 Feb 2008 03:23:00 +0000

In the past I've been a proponent of Prosper. While I continue to think this is a unique business idea and a great way to increase returns by bypassing banks, my recent thinking has shifted. The three year lock in of funds is not adequately compensated. As such, I'm now inclined to search for other places to generate returns.

This brings me to the other changes for East 49th Street. Since inception, the goal has been to generate returns through direct investments in startups. While this will continue to be a goal, I will also be leaning towards advising startups in bootstrapping ventures.

Deutsch to English

noreply@blogger.com (Anonymous) — Wed, 23 Jan 2008 00:53:00 +0000

Deutsch to English launched last week as my first investment. While I am fascinated by many of the Web 2.0 sites, I am generally skeptical as their product is free to the user and advertising is expected to generate enough revenue to cover costs. At some point, there will not be enough ad dollars to support every new site. As such, I'm keen to find more concepts similar to Deutsch to English, which takes some Web 2.0 ideas (in this case the infrastructure) and applies them to a service which should generate revenues from customers instead of advertisers.

The idea behind Deutsch to English is simple - every day thousands of tourists come to the United States. Many of them speak limited to no English, and are therefore at the mercy of those around them. Through Deutsch to English, these tourists are provided with a phone number they can call and instantly speak with an interpretor. This then enables the traveler to pass the phone back and forth with whomever they are trying to communicate, and the interpretor translating making conversation possible. If you want to give it a try, you can reach an interpretor at 1-888-693-8437 ext. 02537286. Currently, only German / English translation is supported, other languages may be added in the future.

Investment Possibilities

noreply@blogger.com (Anonymous) — Sun, 23 Sep 2007 17:41:00 +0000

In the last week I've set about funding my prosper account, which has been a fairly straight forward - albeit lengthy - process. As such, as I've waited for my funds to become available, I've had a chance to evaluate some of the statistics on the site.

Prosper has a few statistics available in various place on the site, the most interesting I've come across is the following:

Source: prosper.com

This data represents YTD statistics. The interesting observation seems to be that after fees/expenses and defaults B loans actually yield more than C loans. This is of interest, because the risk of a B loan is supposed to be lower than that of C loans, and therefore C loans should yield higher to compensate lenders for the additional risk. As such, with B loans seemingly having a higher yield and a lower risk, these are a prime candidate for investment.

The rest of the implied risk curve from the data is as would be expected through E rated loans, with compensation rising as risk rises. Tenor is equal for all the loans, and as such does not have an impact of this curve. However the HR loans do not appear to follow suit with average annual return falling to only 3.35%. The data indicates that this is due largely to defaults. As such, it's possible to extrapolate that lenders are not being adequately compensated for the risk of these loans.

In conclusion, when considering investment options, this data would suggest a few things: 1) B loans seemingly offer the lender a greater return for their risk than should be expected. 2) HR loans offer far inferior returns to lenders. As such, when constructing a diversified portfolio of loans, an overweighting on B rated loans would be beneficial, while a significant under weighting of HR rated loans would also seem prudent.

[the above information should not be considered investment advice. Should you decide to invest money through prosper (or any other platform) you should conduct your own analysis of the data, and reach your own conclusion]

Startup

noreply@blogger.com (Anonymous) — Tue, 18 Sep 2007 02:25:00 +0000

In an attempt to bring my experiences and knowledge into an area I find interesting/stimulating, I'm starting this blog to document my foray into the entrepreneurial arena. I have (some) experience analyzing businesses, and am going to start my adventure into quasi-VC through prosper.

Now, I know what you are going to say - It's not true venture capital because it's not a true equity investment. The investments is small and for a fixed period of time. The upside is limited. Well, to that I have two responses 1) you have to start somewhere, and while the investments are small, so is my current budget 2) the debt portion of the capital structure is just as important as the equity portion. After all, through debt leverage is achieved, and leverage is a means to enhance returns for equity investors, or small business owners. So, that's how I'm justifying my means at the moment - hopefully I'll be able to evolve this over time.

Now for the method: prosper offers a variety of lending opportunities which I would ultimately group into one of two categories. First, there are individuals seeking to consolidate debt or seeking a personal loan. Second, there are individuals seeking loans to start or grow a personal enterprise. While the first is a much needed service, especially when considering the mountain of debt most Americans have. However, it is not in the entrepreneurial spirit of my goal here. As such, I will be focusing on the later category. As for which businesses - I suppose only time will tell.

Lastly, a few more random thoughts as I embark. I will use links that generate referral fees throughout my posts - I'm sorry, but it's a way of increasing my return, and that's what I'm trying to do. Also, I'm doing this purely on the side and on my own. If posts are infrequent, I have other things I must prioritize, so I apologize in advanced. Also, this in no way represents views of my employer (past/present/future), and should in no way be construed as advice/recommendations/encouragement for you to invest in a similar fashion. In conclusion, please join me on this venture, and feel free to use the comment section to post responses to anything I say/do.