SoLo is one of several fintech startups in the peer-to-peer loan space. Other platforms include Santa Monica-based Tala; Irvine-based microinvestor Acorns Grow Inc.; billionaire Mark Cuban-backed Dave Inc., located in the Miracle Mile; San Francisco-based nonprofit lender Kiva Microfunds; and Hollywood-based ZestFinance Inc. These companies operate in a gray zone in the banking world without having to provide much in terms of registration with or licensing by state and federal regulators because they do not technically charge interest or fees for their services.
“It’s not clear whether their particular business model requires one. We do take unlicensed lending very seriously,” said Mark Leyes, a spokesman with the California Department of Business Oversight. “Some of these novel lending products do require further investigation.”
Despite some regulator misgivings, peer-to-peer lending platforms have garnered support from some in the finance world.
“They are very popular,” said Bhagwan Chowdhry, a Bhagwan Chowdhry Anderson School of Management finance professor who teaches on microfinance. “Socially conscious people think this is a good idea to help people in need. Here, these guys are saying that they collect a donation, which they can. I don’t see any particular problem with that.”
Rodney Ramcharan, an associate professor of finance and business economics at USC’s Marshall School of Business, notes that P2P lenders like SoLo are targeting the payday lenders who charge “very, very high interest rates at up to 20 percent.”
With the credit scoring technology built into these platforms, P2P lenders like SoLo could potentially undercut the multibillion-dollar payday loans industry, Ramcharan said.
“It’s operating under the donation principle, so they don’t need a bank charter,” he said. “These guys offer a much shorter term, and it takes away the liquidity risk.”
SoLo also announced the appointment of its new chief product officer, Jon Blackwell, who is a co-founder Tala. Tala, which has raised more than $105 million to date, makes similar microloans but focuses on underserved consumers in Africa, India and developing countries.
Blackwell remains on Tala’s board and continues to provide some consulting but joined SoLo as a challenge to “take a concept and ideas” to design the mobile phone “peer-to-peer” lender from scratch – like he did at Tala.
“I love the social aspect of it,” the 30-year-old Blackwell said.
As SoLo looks to raise more money, it already has the backing of Dennis; Culver City-based Cross Culture Ventures; Boulder, Colo.-based Techstars Central, a seed investor in startups; Cleveland-based business mentoring firm JumpStart Inc.; and Joanna Rees, who founded Venture Strategy Partners and VSP Capital in the Bay Area and made an unsuccessful run for mayor of San Francisco in 2011; and Monique Idlett-Mosley, managing partner of Miami-based Reign Ventures, an early stage venture capital fund. Idlett-Mosley was formerly married to music producer and rapper Timbaland, whose real name is Tim Mosley.
Holoway formerly worked for Milwaukee-based financial services giant Northwestern Mutual in New York, while Williams worked as a brand manager with Procter & Gamble Co. in Cincinnati, which is where the two businessmen initially met.
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