In this lecture, Ron Suber, President of Prosper Marketplace, uses the metaphor of a three‑legged stool to explain how any business—especially two‑sided marketplaces—relies on three core components: the product/borrower side (right leg), the capital/investor side (left leg), and the operational engine (middle leg) that includes credit, engineering, accounting, and marketing. He recounts Prosper’s acquisition in 2013 when the platform had $9 M in loans and capital but a $800 cost to acquire each borrower and a $350 profit per loan, leading to unsustainable economics. By dissecting and rebuilding each leg—overhauling marketing channels, expanding investor sources, and revamping technology and credit models—Prosper grew to $380 M in monthly volume and achieved $1 B in loan originations in ten weeks. Suber emphasizes the importance of network effects and a flywheel, where satisfied borrowers and lenders refer others, and stresses that competition is not just other platforms but the broader lack of education, awareness, and understanding (EAU) in the market. He outlines three borrower personas (debt‑consolidation, large‑purchase, small‑business) and the need for evangelists to tell the story to both borrowers and institutional investors. The session includes audience questions about virality, student‑loan marketplaces, and unit economics, leading Suber to advise entrepreneurs to focus on execution, capital, addressable market, and relentless identification of the most broken leg each day. The talk concludes with a call to belief, clarity, and hard work to turn ideas into successful businesses.
Chapters
So, when I think of Prosper, I think of a 3-legged stool, and I want each of you to think of your business as a 3-legged stool. So, for Prosper, the right leg is the product. It's the people. It's the borrower. And for Prosper, the left leg is the money. It's the lender. It's the investor. It's the person or the institution. And the middle leg is like under the hood. It's what's happening at Prosper. It's the people who determine the credit, so how much money people can borrow. It's the people that do the engineering. It's the accountants. It's the marketing people. So how many people can think about your business as a 3-legged stool and understand what are the 3 legs? Anybody?
I can.
Who said yes? Tell us what your 3 legs are. What's your business, real quick?
Our business is streamlining mortgage applications and lending applications. So we have the underlying technology as a leg. We have the mortgage lenders and marketplace lenders that want to give money. And then we have our borrowers that need a better experience.
Exactly. Thank you.
Anybody else?
I'm telling you, every business has the same thing. I don't care if you're a doctor or a newspaper delivery. There's 3 legs to every stool. In Prosper's case, every day one leg is too short or too big or clogged or bent or stuck. And that's our job as entrepreneurs is to understand the legs of the stool, who's working on what, Who's accountable and which one is the most broken today? And in the beginning of a day, it could be one leg and at the other end of the day, it could be another leg. Yes?
The seat is the overall business.
Yes. The seat is the overall business. Okay. So we walk in every day and in January of '13 when we bought the company, there was $9 million of borrowers and $9 million of capital. The problem was it cost $800 to find every borrower, and we were making $350 off of each loan. And so the people at Prosper said, we can do more. I'm like, no, let's do less, because we're losing so much money on each one. So we had to figure out, how do we find more borrowers in different ways at a lower cost per acquisition? And how do we find more money, more investors who can fund these borrowers as we grow? So we had to tear apart the right leg and rebuild marketing— direct mail, digital marketing, partnerships, affiliates, radio, TV, podcasts. You get the idea. And then we had to rebuild all the ways we get money from investors. Then we had to rebuild the middle leg, all new technology, all new accounting, all new credit. Slowly, we went from $9 million a month to last month, $380 million. It took Prosper 8 years to do $1 billion. We did $1 billion in 10 weeks in the third quarter. This is what entrepreneurship is about. It's about having a clear intention, being able to take apart this 3-legged stool, and get the right people and capital to figure out how to get these businesses to go. I'm going to pause just for a moment on the 3-legged stool. Who has a question about Prosper, the 3-legged stool, your own business, or how some of these things fit together? Come on, this is your class.
Please use the microphones for the questions too.
Yes. Who has a question? Do we see a hand over here?
Yes, no?
Yes, right in the back.
Thanks. Thanks. So, I don't know a great deal about your business, but I'm just curious, is there any virality or network effect in it, or do you have to go out and get every new lender and borrower every time, thousands of times a day?
So, it's a great question. It's really about the network effect or the flywheel. And so, absolutely, I think in every business there is this network effect, there is this flywheel. And so, for us, it was Finding people who would tell a friend, who would refer a friend. It was people we could go to who'd say, yes, I've heard of Prosper. There is a better way to borrow. There is a better way to invest. That there is this new asset class. So, the left leg, we had to go find all these people and all these institutions. And once we found one, they would all start telling their friends. And that's what this flywheel and the network effect is really about. But it's on 2 legs. It's not just on one. And so I think that's part of the issue is how do you get the word out? And so for Prosper, everybody says, who is your competition? And as entrepreneurs, you better understand who your competition is. My guess is it's not who you think it is. People think we compete with the banks. People think we compete with Lending Club. Well, the reality is we compete with what we call EAU. or the lack of education, awareness, and understanding. So, there's such a big market for lending and borrowing and investing that there's tons for us and Lending Club and everybody else. If you think of every single industry, in mobile, it's AT&T and Verizon. In soft drinks, it's Coke and Pepsi. In your credit cards, it's Visa and MasterCard. It's Visa, MasterCard. There is no winner-take-all in financial services. In fact, in any industry except Amazon and eBay, there are many. There's usually 2 leaders, and then there's a bunch in the middle, and then a couple small ones that fight on price. So think about AT&T and Verizon. There's T-Mobile, cut your bill in half. There's Vonage and a couple other ones. It's probably the same in your business too. I'd really think about this concept of who is your competition, how do you get that network effect and that flywheel to go? It's really about telling your story and solving the pain for somebody. For Prosper, there's 3 kinds of borrowers. There's a person who has debt, usually at a credit card or a bank or elsewhere. We have to get to them and explain to them That there's a better way to borrow, there's a lower interest rate, it's easy, it's fast, it's online, and you can get out of debt. There's a term to it instead of this death spiral of credit card debt. A second kind of customer we had to get to was someone who wanted to do a large purchase or considered purchase— medical expense, home improvement, travel, vacation, taxes, solar. We had to get out to all these people and tell them— That's a good point. When you have a medical expense, when you want to do home improvement, when you want to travel, come to Prosper to borrow. And small business people need to borrow money, and so on your personal credit, an entrepreneur can come to Prosper and borrow money on their personal credit for the purpose of their business. And then the left leg was people and institutions. So we had to go out to all these people to tell them you could now lend money to other people. and get your money back and get a return. And then we had to go to all these institutions like Citigroup and BlackRock and hedge funds and insurance companies and explain to them that they could lend money and get their money back and make a return. And so that's part of being an entrepreneur is evangelizing and telling the story. So in your businesses, who's going to be the evangelist? Who's going to be the person who's out there telling the story and increasing education, awareness, and understanding. It's not for everybody, but someone's gotta do it. Are you gonna do it? Are you the evangelist for your company?
I do.
You're doing it? Good. How many people here are the CEO of your company? How many people are the tech people, the engineers, coders, programmers? How many people here are the marketing evangelists, PR? Interesting. So, what's not clear about what happened to Prosper? It had too much cost to find all these borrowers, didn't have enough borrowers. It had only retail people in the left leg. So it needed to find other institutions and other people. And the middle leg was pretty broken. Needed a new credit model, needed new engineering, new technology, new accounting, a winning culture. But it had the right bones, the right structure of the stool, and it'd be very hard to build a new stool, but you could restart it. How many people here are restarting a company? Versus building a new one. So show of hands, how many people are restarting something like we restarted Prosper? So there's something broken about one of the legs or a couple legs. And how many people are starting something from scratch? You guys are really crazy. Who can tell me about the idea that you're starting? Yes, what are you starting?
A new company. I'm actually your competitor. We are doing a peer-to-peer loan marketplace, but only for education. And do you mind if I ask what you think of the education credit sector?
So, the more the merrier. Come on in, the water is really warm. It's great. So, are you doing student loans? Student loans. So, there are 3 players in the student loan marketplace. SoFi, CommonBond, and Credible. And I'm an investor in SoFi and Credible. So I think these are huge markets, and you should go as quick as you can. I don't know what you're doing here, but you should be out there running this company. So I think SoFi's $3.5 billion. I think CommonBond's $500 million-ish, and Credible's $40 million. So there's tons of opportunity in this space. So, in these marketplaces, there are consumer loans, which is Lending Club and Prosper. There's business loans, so Lending Club also does business, but OnDeck and Funding Circle and some of these other marketplaces. There are student loans. There are mortgages. There's insurance. There's all kinds of marketplaces. So, I think the student loan market is huge. My only question is, how How are you gonna get to all these borrowers? And who's gonna put up all the money? And is there gonna be any unit economics between the cost it is to acquire CPA, cost per acquisition, and the end? You got this all under control? And you got the 3-legged stool?
We're still building, but we've got it planned out.
Right. So it's all about execution and I'm all for this. So that's one of my final, final things. What's it going to take? It's execution. All these ideas are great, but it's about the ability to do all these and recognize every day which one's the most crooked or bent. So people, execution, capital, addressable market. And really, really hard work with a little bit of luck splashed in. Those are really the keys to you taking this idea, this passion, and actually making it happen. So many people said, you can't do it, it'll never work, you're too old, Lending Club's too good, the banks will kill you. You gotta believe, and you gotta be clear. Thank you.
