Derek Sivers is an interesting blogger and author.  His success was due to a music company that was obliterated by Apple.  One press conference.  One Steve Jobs.  Done.

For Derek he watched a lot of work disappear in an instant (still made a few bucks though!)

That stands out to investors.  Could you be wiped out in one press release?  Microsoft used to do this constantly with their vapor ware.  Maybe that's the measure we need to keep in mind: how quickly could one press release kill a business.

As we look at VC that's the power of disruption.  A new idea, developed in a garage, that no one expected (click here for some of them).

Looking back at the FinTech landscape, one has to ask, what is truly unique?  What is there that hasn't been in the back of the mind of every banker?  Maybe finance companies need a Google-like model wherein a certain portion of their time is dedicated to innovation.  Because if we really got down to it, its the industry's fear of change thats hindering it.

But the disruption today is not disruption.  Its a simple matter of letting some other folks whose opportunity cost (or incentives) are aligned to pursue an obvious theme.  

Take peer-to-peer (P2P) debt.  The banks should have done this long ago.  So what happened?  Some smart guys do it on-line.

Now, fast forward.  We have one IPO: Lending Club.  And a traffic jam of wannabes right behind them.

What do we also have?  Markets being markets, a slew of P2P fund managers who had first mover  advantage.  Since no institution would initially touch the debt, these P2P managers did...and benefited from it.

Now the fund marketplace has a retinue of P2P debt managers charging a range of fees.  1% flat fee, or 2/20, etc.  But, are they really adding alpha?  Or, did they just happen to be first in line, on a non-exclusive basis?

What was interesting was this press release from Bloomberg (click here to read it).


Citi is stepping right in front of the line of the smaller P2P debt managers with one swoop.

Like that, a market "advantage" is gone.

There is a scramble now by the P2P debt managers to line up behind Citi in the queue.

In addition, they have a 25bps rate increase coming in their portfolio.

With the inability to replace their existing debt with new quality debt, and limited data on defaults in a rising rate environment...what would you prefer?  A note backed by Citi...or a small P2P manager with less than $100 million AUM?

As far as the originators are concerned they are fine.  Their mission is to clear inventory as quickly as possible and not hold the debt themselves.

In the end, the P2P space is not that unique, but it is incredibly efficient.  To Citi's credit, they can be a client/partner without having to "buy the cow".

Conversely, I have always felt that the asset class is not new.  It seems investors will conclude that as well and pay accordingly.

The entrepreneur?  As long as he keeps his valuation near what the corporate opportunity cost is/was, they stand a good chance of an exit.  

Those stretching for an IPO need to be worried...they are only one press release away from oblivion.