Notes from a panel discussion at the MaRS Social Finance Forum 2014 (Toronto, Canada).
As part of the MaRS Social Finance Forum November 6–7, I moderated a panel discussion about “Investment Platforms” with great speakers from the MaRS Social Venture Exchange (SVX) in Ontario, along with the founders of SVX’s new impact platforms in the USA and Mexico.
At CoPower, we’re bullish on how online platforms are continuing to transform the field of investing. The power of the internet allows investors to see deals they couldn’t otherwise access, and allows entrepreneurs and financial products to reach vast amounts of new capital through new channels.
We think the three main advantages offered by investment platforms are:
1) Access — the transparency of online platforms helps investors see and access deals they wouldn’t otherwise.
2) Vetting — platforms can help provide the expertise needed to curate dealflow. This can range from fraud prevention (like Ebay does), to full due diligence reports. Either way, investors acting via a platform reap the reward of a more easily understandable, trustworthy selection of opportunities.
3) Pooling money via a community — allowing investors to pool money with others to reach larger investments.
Lending Club and AngelList are two examples of this changing landscape.
Lending Club is an online platform for lending and borrowing.
People can borrow money at more efficient (read: cheaper) rates, especially compared to the rates charged by credit cards. And investors can back pools of these loans for solid returns.
Lending Club delivers value to both borrowers and lenders by helping them access each other more efficiently; by vetting borrowers through their risk screening to determine the appropriate interest rate; and by allowing investors to pool their money across money loans. Based on the strength of these offerings, Lending Club has become the premier destination for peer-to-peer lending, recently passing $6 billion of loans originated! This is the kind of volume that is making the titans of traditional banking sit up and take note: in 2012, former Morgan Stanley CEO John Mack joined Lending Club’s board.
AngelList is a relatively new startup that has been shaking up the world of venture capital investments. Entrepreneurs list their startup on the platform, and investors (usually accredited investors that meet certain requirements) can back deals. AngelList also helps recognized lead investors create syndicates: if I don’t know a lot about healthtech, I can back Julie, a fictional investor with a strong track record in healthtech, and follow on to deals she backs.
AngelList’s platform helps open up venture capital deals and makes it moreaccessible; the community of experts helps vet deals, and syndicates allow investors to pool money together. Similarly to Lending Club, this approach has quickly become a major competitor to traditional firms; the formerly opaque, white-shoe world of venture finance is being opened up by AngelList’s transparent, accessible platform.
It’s no surprise that in impact investing, platforms are also making a difference. At CoPower, we often hear from investors that they like our platform’s transparent, accessible approach to clean energy investing.
While many investors — from individuals to larger investment managers — are interested in investing in clean energy for a positive impact and a solid financial return, they often don’t have the connections in the industry to know which projects are looking for capital. Furthermore, they rarely have the special expertise needed to vet solar or energy efficiency projects. (What’s a good inverter company? And, What’s a bankable loan agreement?)Finally, many of these investors can’t always write the large cheques required to fund these infrastructure projects.
A platform approach helps impact investors overcome these barriers.
At the MaRS Social Finance Forum last week, we asked ourselves, “Why should disruption be left to the traditional economy?” With online platforms like CoPower and SVX, people from Canada to Mexico are finding, understanding and making financially compelling investments that also make a difference in the world.