Team l business model_canvas_day5_v4_rajesh

CONFIDENTIAL

Rajesh Koppula * Francesco Pagliarello * Vippy Wong * Paul Niemczyk * Alexis Kwong Alvarez

LEAN LAUNCHPAD

Unleash the Freedom * Save for the Future * Invest with Impact

A social cause peer-to-peer lending platform that matches indebted, underprivileged consumers with investors to help them pay off their credit card debt

Day 1 Day 2 Day 3 Day 4 Total

Customers Interviewed

16 15 12 (customer) 1 (partner)

3 (customer)2 (partners)1 (channel)

50

EMBA Global AE EMBA Global AE EMBA Global Asia EMBA NY EMBA Global Asia

Borrowers

• Loan Amount - <$500 to $10,000+

• Credit Type – Underserved, Poor, Fair, Good, Excellent

• Social Segment – Location, Profession, Education, Age, School, Groups & Associations.

• Develop/Manage Platform

• Promotion & Marketing

• Risk Management

• Reporting

• Borrower/Investor Analytic & Education Tools(Later Stage)

Borrowers

1. Social/Affinity groups to help them get out of Consumer Debt.

2. Debt Education and Money saving tools (Later on)

• Credit Bureaus , Banks, Trust Accounts

• Internet Search Engines

• Investment Funds

• Regulatory bodies – SEC, OCC, etc

• Fixed : Development and Launching Costs , Infrastructure , Accounting systems, Trust Accounts, Legal & Marketing

• Variable : Customer Data Costs , Investment, Reporting, Recovery, Marketing , Operations , Legal & Compliance.

• Percent of Loan Amount

• Margin on Returns

• Subscription Fee

• Pay-per-use

• Referrals/Affiliate revenue

1. Social Media & Groups

2. Blogs

3. Direct Marketing

4. Affiliate Marketing

• Physical :IT Infrastructure-Servers, Software, Datawarehouses , Office & equipment

• Intellectual : Brand, Proprietary Knowledge, Patents and Copyrights, Customer database

• Human resources – Risk, Technology, Marketing, Operations, Legal & Compliance

1

3

4 2

Relationship with Borrowers, Investors and Partners.

5

67

8

9

Investors

1. Social/Affinity groups to help their network come out of Debt

2. ROI or Impact Investment opportunities

BUSINESS CANVAS – DAY 1

Investors• Investor Type – Individual,

Institutional

• Return Type – Impact, Maximum Yield

• Social Segment –

Location, Profession, Education, Age, Alumni, Groups & Associations.

• Investment Amount - $500 $10,000+

CONFIDENTIAL

Hypothesis 1: Affinity GroupsHypothesis Experiment Result

People will want to help others in their social or affinity groups (e.g. university alums) come out of credit card debt

• Interviewed people around the Columbia University area

• Mixed result in borrowing / investing within a network

• Focus on underprivileged segment

Special affinity amongst ethnic communities

• Interviewed people in ethnic areas such as China Town and Little Italy

• Phone interviews with Indian and Russian communities

• Yes• Mixed on required returns

Hypothesis 2: Social InvestmentHypothesis Experiment Result

Investors will be willing to help underprivileged borrowers come out of debt as a type of social investment, for lower yields than market rates

Found socially minded people and asked if they would accept lower yields

Yes

Hypothesis 3: Yield ChasersHypothesis Experiment Result

Yield investors would be willing to accept a lower return for a social cause

Interviewed people on Wall Street No!

Hypothesis 4: Demand from BorrowersHypothesis Experiment Result

Underprivileged borrowers know they can refinance their credit cards at another rate

• Interviews in Harlem • 66% knew refinancing is an option

• 42% said they would go to a bank

• 50% would go to a website if they trusted it and a higher percentage would go if the rate was significantly lower

Hypothesis 5: Marketing ChannelsHypothesis Experiment Result

Is internet a viable option for reaching target borrowers?

Interviewed people in Harlem Internet is a viable option; 50% said they would use the internet. Some suggested direct mail.

Non profits are a possible channel Discussion with Robin Hood Foundation

Yes but need to speak with more non profits to verify

Customer Archetypes - Borrowers

Customer “Story”

a) Tom c) John

<$35,000 family income Upper middle class with life problem

2 kids Radiologist

Shop at Target and JC Penney Middle age

Drives a Chevy or used Honda Has a child with cerebral palsy

No college education Recently lost his job

b) Jane Slipping on payments

Single mom with 1-2 kids

No college education

JohnTom

Jane

Nathan ?

Social CauseLowHigh

Economics of the Business Model

– Average CAC for bank to acquire credit card customer: $30-$80

– Using AdWords of CPC = $1 and assuming conversion = 1%, CAC = $100

– Underprivileged customers loan size range $500-$3,000 Average loan size of $1,750

– Spread & revenue per average loan 5% = $87 revenue per loan

– Currently not considering cross-sell or up-sell opportunity to borrowers

• LTV = one-time sale to borrower

Revenue $87 $1,750 avg loan size, 5% spread

CAC $100 To achieve gross profit of 30%

Customer Acquisition Cost (CAC) for AdWords

– CAC for Borrowers• Assumption: $100 CAC for AdWords; $198

CAC for Direct Mail• Avg CAC: (100+198)/2 = $149

– CAC for Investors• Assumption: $100 for AdWords

– Total CAC: $249

– If want to cover CAC in 12 months, we need to generate revenue $249 per year!

– Assume loan duration is 3 years: $249*3 = $747– Total Loan Size, assuming a 5% spread

• $747 / 5% = $14,940• Problem: Above non-prime

Total CACs (AdWords and Direct Mail)

Borrowers• U.S. underprivileged

borrowers with low income, challenging stories and high debt-to-income ratios

• Loan Amount - <$500 to $10,000+


• Social Segment – Location, Profession, Education, Age, School, Groups & Associations



• Risk Management

• Reporting


Borrowers

1. Social/Affinity groups to Underprivileged borrowers receive help from investors who perceive a social cause to get them out of Consumer Credit Card Debt


• Non-profits• Universities (focus on

Columbia)• Philanthropy

organizations• Credit Bureaus, Banks,

Trust Accounts• Internet Search Engines• Investment Funds• Regulatory bodies –

SEC, OCC, Consumer Protection Agency






• Pay-per-use


1. Direct Marketing2. Non-profit organizations3. Dedicated e-commerce4. Point of sale5. Social Media & Groups6. Blogs7. Affiliate Marketing




1

3

2

5

67

8

9

Investors

1. Social/Affinity groups Give investors an opportunity to pursue a social cause by helping underprivileged borrowers to help their network come out of Debt

2. Reasonable ROI or Impact Investment opportunities


Investors• Male and female college-

educated investors seeking a social investment cause

• Columbia alums, universities

• Investor Type – Individuals, Institutional Corporations focused on Corporate Social Responsibility

• Support from Columbia University


• Social Segment – Location, Profession, Education, Age, Alumni, Groups & Associations.

• Investment Amount Individuals - <$500 (until trust proven)

CONFIDENTIAL


Borrowers• Public transportation ads• Direct mail• Workshops through

community centers, churches, non’-profits, booths

4

Investors• Internet marketing• Direct mail• Philanthropy partner

events


borrowers with low income, challenging stories and high debt-to-income ratios

• Loan Amount - <$500 to $10,000+


• Social Segment – Location, Profession, Education, Age, School, Groups & Associations



• Risk Management

• Reporting


Borrowers

1. Social/Affinity groups to Underprivileged borrowers receive help from investors who perceive a social cause to get them out of Consumer Credit Card Debt


• Non-profits• Universities (focus on



Trust Accounts• Internet Search Engines• Investment Funds• Regulatory bodies –







• Pay-per-use


1. Direct Marketing2. Non-profit organizations3. Dedicated e-commerce4. Point of sale5. Social Media & Groups6. Blogs7. Affiliate Marketing




1

3

2

5

67

8

9

Investors

1. Social/Affinity groups Give investors an opportunity to pursue a social cause by helping underprivileged borrowers to help their network come out of Debt

2. Reasonable ROI or Impact Investment opportunities


Investors• Male and female college-

educated investors seeking a social investment cause

• Columbia alums, universities

• Investor Type – Individuals, Institutional Corporations focused on Corporate Social Responsibility

• Support from Columbia University


• Social Segment – Location, Profession, Education, Age, Alumni, Groups & Associations.

• Investment Amount Individuals - <$500 (until trust proven)

CONFIDENTIAL




4


events

Borrowers• U.S. urban underprivileged

borrowers- with low income (or)- challenging stories and or- high debt-to-income ratios• Credit Type - Underserved- Poor- Fair - Lower Middle Class (Avoid Highest Credit Risk)- Upper Middle Class

• Develop/Manage Platform• Promotion & Marketing• Risk Management• Reporting• Borrower/Investor Analytic

& Education Tools(Later Stage)

Borrowers

1. Underprivileged and “Problem Story” borrowers receive help from investors who perceive a social cause to get them out of Credit Card Debt with lower interest rate loans

• Non-profits - Robin Hood(if interests align • Community

Organizations -Neighborhood Trust • Department of

Consumer Affairs• Universities (focus on



Trust Accounts, Internet Search Engines

• Investment Funds• Regulatory bodies –



• Variable : Acquisition, Customer Data Costs , Investment, Reporting, Recovery, Marketing , Operations , Legal & Compliance.

• Percent of Loan Spread (3-5%)• Margin on Returns• Subscription Fee • Pay-per-use• Referrals/Affiliate revenue

1. Direct Marketing2. Non-profit organizations3. Dedicated e-commerce4. Point of sale5. Press (WSJ)6. Key influencers, word of

mouth




1

3

2

5

6 7

8

9

Investors

1. Give investors an opportunity to pursue a social cause by helping underprivileged and “Problem Story” borrowers come out of Debt

2. Higher ROI than traditional investment products


Investors• Male and predominantly

female • college-educated investors seeking a social investment cause • Columbia alums, • Other universities alums• Investor Type –

Individuals, Corporations focused on CSR

• Casual investors• Bank products users

(deposits, CDs)• Ethnic investors with

ethnic affiliation (on hold)• Investment Amount

Individuals - <$500 (until trust proven)

CONFIDENTIAL



4


events

1.Non Profit2.Community Organizations3.Ads and Publicity:free4.Public Transportation5.Community Papers6.Loan Counselling Centers7.Grocery -Family Dollar, Walmart,etc8.Online Marketing:Email Marketing, 9. Web Searches,Adwords,blogs & forums10.Partnerships with finance advisors


borrowers- with low income (or)- challenging stories or- high debt-to-income ratios• Credit Type - Poor- Fair - Lower Middle Class (Avoid Highest Credit Risk)- Upper Middle Class

• Develop/Manage Platform• Promotion & Marketing• Risk Management• Reporting• Borrower/Investor Analytic

& Education Tools(Later Stage)

Borrowers

1. Underprivileged and “Problem Story” borrowers receive help from investors who perceive a social cause to get them out of Credit Card Debt with lower interest rate loans

• Non-profits - Robin Hood(if interests align • Community

Organizations -Neighborhood Trust • Department of

Consumer Affairs• Universities (focus on



Trust Accounts, Internet Search Engines

• Investment Funds• Regulatory bodies –



• Variable : Acquisition, Customer Data Costs , Investment, Reporting, Recovery, Marketing , Operations , Legal & Compliance.

• Loan Spread (3-5%)• Subscription Fee • Referrals/Affiliate revenue

1. Direct Marketing2. Non-profit organizations3. Dedicated e-commerce4. Point of sale5. Press6. Key influencers, word of

mouth




1

3

2

5

6 7

8

9

Investors

1. Give investors an opportunity to pursue a social cause by helping underprivileged and “Problem Story” borrowers come out of Debt

2. Higher ROI than traditional investment products


Investors• Male and predominantly

female • college-educated investors seeking a social investment cause • Columbia alums, • Other universities alums• Investor Type –

Individuals, Corporations focused on CSR

• Casual investors• Bank products users

(deposits, CDs)• Ethnic investors with

ethnic affiliation (on hold)• Investment Amount

Individuals - <$500 (until trust proven)

CONFIDENTIAL



4


events

1.Non Profit2.Community Organizations3.Ads and Publicity: free4.Public Transportation5.Community Papers6.Loan Counseling Centers7.Grocery -Family Dollar, Walmart,etc8.Online Marketing: Email Marketing, 9. Web Searches, Adwords, blogs & forums10.Partnerships with finance advisors

Iterate: Next Steps

• Research regulations surrounding online peer to peer lending platforms

• Build an MVP

• In real life research of customer acquisition costs using different marketing channels for both borrowers and investors

• Continue to test customer segments, for example, social and ethnic affiliations

Appendix

Competitor LandscapeCompetitors Type of borrower Profit

making?ROI for lnvestors Interest paid?

Kiva Small businesses and ppl without access to banks

Non profit No ROI No interest paid to lenders, only interest paid to field partners to cover OpEx

Lending Club (LC) Prime borrowers with FICO score >660. Most stringent requirements.

Profit making

High returns from 6% to 18%

Lower rates than banks and credit cards

Prosper FICO score >640. Better option for borrowers than Lending Club.

Profit making

High returns from 6% to 18% but may have higher returns due to higher risk.

Lower rates than banks and credit cards

Lending Tree Loan broker that matches borrowers to lending institutions. Lenders pay to compete for business; borrowers don’t pay.

LoanSprite Low Income, High Debt-to-Income, Non-Prime, segment.

Profit making

-Low/reasonable returns due to social cause.-Similar/higher repayment rates

Lower rates than banks and credit cards, potentially lower than LC and Prosper

TARGET MARKET - US

Target Addressable Market

• Total US Revolving Debt (98% CC) – $864.2 Billion.

• % of households – 46.7%

• Average CC Debt- $7,768

• 42% population < 700 FICO

Served Available Market

• Non-Prime– 40%, $362.9Bn

LoanSprite

• Assuming 0.25% Market Share in 3 years ~ $453MM

• Assuming 3% -6% Gross Margin => $54.4MM – 108.8MM

http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/Source: FRBNY Consumer Credit Panel

Served Available Market

• Assuming 50% “Problem Story” Archetypes -> “181.45Bn”

http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

Help others while you invest

Free yourself from Credit Card Debt

Invest smartly in a good cause. Help low income individuals to a debt free life,

with reasonable return on investment.

Are you struggling to keep up with your credit card payments? We offer help to

low income individuals with a low interest loan to pay off your debts.

Start helping today! Get help now!

How it Works About Us

PROTOTYPE – WEBSITE

Anonymousfrom Queens, NY

Hi there, I am originally from Latvia, and I have been in the US for 5 years. I built up my debt with my credit card when my baby Jasmine was born and now I am struggling to keep up with the payments. I need help now since Jasmine is starting school next month. I want to be and stay debt free.

$3,000Loan Amount

4 Years 10%Lender yield Sprite rating

Help her now! $$2,300 funded, $700 left

PROTOTYPE – WEBSITE How it Works About Us

LoanSpriteSocial cause

Low ratesSub prime

Kiva MicrolendingNon-profit Sub prime

No credit historyMulti-national

ProsperPro borrowers Lending Club

Pro Investors

Competitor Landscape Diagram

Near prime

No social causePrime borrowers

ChannelsBorrowers “Social” Investors

Non-profit organizations Online: email marketing, web searches, blogs and Adwords

Community organizations Social marketing

Advertising and Publicity: free newspapers, public transportation, community papers

Advertising and Publicity: Financial press

Loan counseling centers and websites: both for profit and non-profit

[in process of testing]

Grocery stores (POS), e.g. Family Dollar, Walmart, Target

Online marketing: email marketing, web searches, Adwords, blogs and forums

Partnerships with finance advisors

Tom

Jane