Wall Street is downright giddy about online lending.
On the heels of LendingClub's blockbuster initial public offering late last year, smaller rival Prosper Marketplace has just raised $165 million from investors including the asset management units of Credit Suisse and JPMorgan, valuing the company at $1.87 billion.
Once tucked away in a small corner of San Francisco's start-up scene, LendingClub and Prosper have exploded onto the public stage in recent years, as big-money investors recognized the opportunity to generate fixed-income returns that far exceeded what they could get elsewhere.
Prosper's financing announcement on Thursday followed 300 percent loan growth in the first quarter to $600 million. In 2014, Prosper originated $1.6 billion in loans, compared with $4.4 billion for LendingClub.
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Both companies have grown rapidly by issuing consumer loans of up to $35,000 to low-risk borrowers at rates below credit cards, and turning to institutional and individual investors to finance the debt.
Prosper needed eight years to issue its first $1 billion in loans, reaching that mark in April 2014. It took just another 11 months to triple that number to $3 billion.
But even with such expansion, profitability is a challenge. Familiarizing consumers with the brand and efficiently spending marketing dollars requires a steep investment in technology and people.
Prosper spent $42 million on sales and marketing in 2014, accounting for over half of its total revenue. The company recorded a net loss of $2.67 million.