I know I am a little late with this wrap-up but I took a few days off after LendIt and am just now getting caught up with everything. What an amazing experience it was at LendIt USA 2016.
For the uninitiated, last week the largest ever online lending conference was held in San Francisco – I am one of the co-founders of this event. We had 3,500 people from 49 different countries at the Marriott Marquis hotel, this was up from 2,500 people last year and less than 1,000 the year before when we were last in San Francisco. LendIt continues to mirror the growth of the online lending industry.
For the fourth year in a row the CEO and founder of Lending Club, Renaud Laplanche, opened proceedings with his morning keynote. He talked about marketplace lending’s next phase of growth – how we have moved from the era of rapid growth to one now of stabilization. He said that 24% of all personal loans issued in America last year were originated through an online marketplace. He talked about potential regulation and the fact that despite some negative press headlines regulators are in fact quite positive on this industry. He also shared that lending is showing the same trajectory as other industries such as music, travel and video that have been disrupted by new online players.
While we didn’t hear the typical big announcement from Lending Club this year Renaud shared that they would be making a major announcement of their entry into a new product category on June 13.
The first morning also saw the launch of the most comprehensive survey ever conducted in this industry that Ryan covered last week. Al Goldstein, the CEO of Avant, talked about the true innovation that marketplace lending has brought to financial services and how this innovation is different to anything that has come before it. Marketplace lending is resulting in not just a better deal for the consumer, but quicker access to funds and wider access to credit.
Ning Tang, the CEO of CreditEase, gave an optimistic perspective on the Chinese market. While he acknowledged some of the recent challenges by saying that bad guys can be very innovative and can do bad things at scale, he said that internet finance is critical to the future of China’s economy and that all finance will eventually be driven forward by technology.
One of the consistently negative stories in the last few months has focused around the declining valuations at Lending Club and OnDeck. LendIt addressed this head-on with a public markets panel that included some of the leading private companies in the industry: Kabbage, loanDepot, Avant and China Rapid Finance. Al Goldstein shared that what the industry really needs now is more companies to go public. While he didn’t commit his own company to go this route anytime soon he did not seem that concerned about valuation. The other panelists reflected similar views saying that equity investors over the long term will look at profitability, growth and increasing margins.
As always Ron Suber, president of Prosper, gave an eloquent presentation on the state of the industry today. He talked about what we have learned as an industry, some of the mistakes we have made and how we are addressing the headwinds the industry is facing today. He gave his perspective on where the industry is today and what we need to do to really go mainstream.
In the afternoon the conference split into 14 different tracks of content. There was so much going on covering so many topics that it was impossible to attend every session that you wanted. We also had some challenges with some overcrowded rooms with some sessions proving far more popular than we expected.
On the main stage in the first afternoon we had the second annual PitchIt @ LendIt, the startup competition featuring some of the best up-and-coming companies in the industry. Each company gave a five-minute pitch and answered questions from the judges who were all leading VCs and investors.
Day two began with the announcement of the winners of PitchIt @ LendIt: auto finance platform, AutoFi won the judges award while LogicFi won the audience choice award.
Peter Thiel was the opening keynote speaker on day two and it was standing room only for his presentation. He gave a fascinating look at the very early days of PayPal; he talked about the importance of starting with a small market to quickly reach a large market share and he discussed fintech more broadly. Interestingly he said that banks have been focused on globalization and not technology and that they are not politically geared towards innovation.
After his keynote Peter sat down with Bloomberg West anchor Emily Chang to talk about China, unicorns, female entrepreneurs, bubbles, politics, Yahoo, education, the importance of Silicon Valley and more. Emily Chang also say down with Jackie Reses of Square Capital to talk about their innovative approach to small business lending.
We had Dan Ciporin of Canaan Partners give his perspective on where capital for this industry will come from in the future. Noah Breslow, the CEO of OnDeck, talked about collaboration with banks and why he believed that the smartest move for banks is to partner with online lending platforms rather than try to compete directly. He also announced that the Chase-OnDeck partnership has now launched. Sam Hodges, the managing director of Funding Circle USA, shared his belief that the marketplace model will eventually become the institutional framework of the global financial system and that his company would be originating $100 billion in loans annually by 2025.
There was a wide ranging discussion between Mike Cagney, CEO of SoFi and Telis Demos of the Wall Street Journal where they covered misperceptions about banking, why FICO is not a good fit for SoFi’s customer base, how student lending is broken and why wealth management is a logical extension for this industry. John C. Williams, the CEO and President of the San Francisco Federal Reserve, gave the last keynote before lunch where he gave his perspective on the innovations happening in fintech. He said that fintech can lower costs, improve services and provide broader access to credit. But he also issued a warning in that, while fintech can help the economy, it can also hurt those people it is supposed to help – he gave the example of redlining.
My 10 Key Takeaways from LendIt USA 2016
Less exuberance is a good thing – the unbridled enthusiasm of previous LendIt conferences was replaced by a more realistic tone. While most people were still positive everyone acknowledged that the industry is facing headwinds today.
The importance of diverse funding sources – this was a theme mentioned in almost every session it seemed.
Regulators are cautious but generally supportive – regulators want to support innovation but are also focused on protecting consumers.
The fast growth days are over – many companies expect much slower growth this year than in 2015 and that is not necessarily a bad thing.
The easy money has gone – only solid companies with a defensible niche will attract funding today.
Banks are no longer competitors – partnerships is the way forward as so many platforms have signed deals with banks with more to come.
The public markets are notoriously fickle – the lower valuations of Lending Club and OnDeck were discussed in many sessions with no general consensus on the reason. Many did say that both companies are executing well but not being rewarded by the public markets.
Credit expertise is more important than ever – with some investors getting nervous every company needs to show they have strong underwriting.
Getting to positive cash flow is a high priority – no one talked about this last year but there was a sense from both startups and established companies that they need to show a clear path to being cash flow positive.
The opportunity is still huge – This is where the tone was most upbeat. Most conference attendees agreed that the industry is still in its early days and that it will be much bigger in the future.
Next year LendIt will be back in New York City. We expect the conference to continue to grow so we have booked the Javits Center on March 6-7, 2017. If you can’t wait that long for the next LendIt we will be hosting LendIt China in Shanghai in July (along with a China tour) and LendIt Europe will be back in London in October.
Finally, I just want to do a big shout out to the LendIt team who all put in a huge amount of work over the last few months to put together our most successful conference yet.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.