David Kimball is on a mission.
Since being appointed CEO of Prosper Marketplace late last year, Kimball has stepped outside his former financial role as Prosper’s CFO to take on a more operational-driven strategy.
Along with FinTech industry guru Ron Suber, Prosper’s president, Kimball is intent on growing loan volumes, offering lower average rates compared to traditional lenders, delivering higher returns to investors and returning Prosper to profitability.
Prosper, which is the original online peer-to-peer marketplace, has originated over $9 billion in consumer loans over the past decade. The San Francisco-based marketplace offers both personal loans to consumers and allows investors to invest in those loans to earn a financial return.
In February, Prosper signed a deal with a consortium of investors – including affiliates of George Soros’s Soros Fund Management and Dan Loeb’s Third Point – who plan to buy up to $5 billion of Prosper’s loans over the next two years.
A personal loan is an unsecured loan typically from $1,000 – $100,000 with fixed or variable interest rates that can be used to make a large purchase (medical procedure, home improvement, engagement ring, wedding, baby or other major life events) or to consolidate debt such as credit card, for example.
I spoke with Kimball about Prosper, the future of financial technology (or “FinTech”), what FinTech companies are getting right and how Fintech companies can do better, the transition from CFO to CEO, his words of wisdom for aspiring entrepreneurs, and his best personal finance advice:
Zack Friedman: What is the state of play in the FinTech industry today?
David Kimball: In a short amount of time, the FinTech industry has proven that technology offers customers a better, faster and more accessible experience. As with any industry, as this one matures, it continues to find what works and what doesn’t work. FinTech is not just about the tech – just like financial services cannot just be about finance. We’re now deeply embedded in the financial ecosystem and traditional financial services and consumers alike recognize our value. As a result, the focus has shifted to new ways to partner and ensuring sustainable companies.
Zack Friedman: What can we expect from FinTech over the next 1-2 years? What coming disruptions or technological advancements in the space excite you?
David Kimball: It is exciting to see more partnerships between FinTech and traditional finance companies.
Ultimately, the long-term success of platforms will be dependent on their ability to deliver a great product and a consistent experience. The success of the partnerships will depend on the ability for the two companies to communicate and understand each other (language, transparency, and culture), and it will depend on how well objectives remain compatible.
In the marketplace lending space, we are discussing several different approaches to partnerships between platforms and traditional financial institutions, including banks buying loans as investments, utilizing referral models, or providing lending as a service.
It may be even more exciting to see more FinTech-related partnerships. We see a lot of niche tech companies that exploit a very narrow focus of the industry. These companies are still designing their value equations or pivoting into adjacent spaces, but I already see great opportunities to bring more of these technologies together to use new data to automate steps of the lending process, and provide more comprehensive solutions.
Zack Friedman: What’s your plan to rebound from 2016’s financial results?
David Kimball: Last year, the industry did a lot to lay the foundation for a successful 2017, and we’re seeing that work pay off. The [recently announced loan purchase deal] gives us the funding stability we need to continue to grow, while at the same time giving us some great long-term partners that are invested in our business and its success.
We’ve been building loan volume every month since July 2016, and our loan portfolio performance is strong with great returns.
Zack Friedman: There is a lot of talk about how wonderful FinTech companies are and how they are revolutionizing traditional finance. What can FinTech companies do better?
David Kimball: One of the biggest challenges for FinTech companies is to fully comprehend the complexities of the industry we’re working to disrupt (or improve). Financial structures are complicated and have often evolved over decades. Technology makes the experience infinitely easier, but you need to understand why products and services are structured the way they are. It is naive to think that it comes down to poor design, lack of intelligence, or lack of effort. Without that empathy and understanding, FinTech companies risk making the same (or new) costly mistakes. At Prosper, we are always evolving and continuously improving to make the experience better for our customers. This requires us to carefully consider old rationale and regulations and new, creative solutions that challenge the status quo. It’s a difficult and ongoing balancing act.
Zack Friedman: Given your finance background as Prosper’s CFO (and previous finance roles at USAA and Ford), how did your finance background prepare you to be a CEO? How is the job different than CFO?
David Kimball: I always wanted to be a CFO that was more than just a numbers person. A successful CFO is one who partners with the business instead of playing the finance sheriff. That requires a willingness to understand the business, to think holistically, to work with peers who jointly own the results. The CFO is the finance subject matter expert, but should be able to consider other disciplines, just as a CTO should be able to understand the financial implications of engineering decisions. If you work with a team ignores the financials, then the CFO is relegated to carrying around a measuring stick highlighting boundaries. I have worked in both situations, and it is far more satisfying to play the partner rather than the cost monitor.
As CEO, I continue to think holistically and I now have an opportunity to flex into other areas of the business. I work with a terrific CFO and great partners across the organization. It is a tired analogy, but the best CEOs I have worked with have been like orchestra conductors. The good ones know the music and know how to give each player the right resources to reach their best. If the groups work in harmony, it is an amazing experience.
Zack Friedman: As a CEO, you’re an executive, leader and entrepreneur. What three pieces of advice can you offer to an aspiring entrepreneur who wants to start the next big thing?
David Kimball: Surround yourself with people who challenge you. Whether you’re an entrepreneur or a CEO, you need smart people who are willing to speak up and challenge you in order to be successful. If you believe you’re the only one who can accomplish something, you’re toast!
Being resilient is also critical. That is part of the magic of Silicon Valley – there is a tremendous appetite for pushing boundaries. Sometimes that works, but many times that doesn’t. It’s great to see the willingness to screw up and to adjust quickly. That agility and resiliency ensure we can continue to transform.
It’s important to maintain a founder’s culture and remember why you started this in the first place. Once you lose track of the mission, you begin to attract a talent base that is not mission-driven. That group will be less willing to ride out the challenges that eventually face every growing company.
As CEO of a marketplace lender, and a seasoned finance executive, you have exceptional insights into consumer loans and the U.S. consumer. What’s the best personal finance advice you have ever received?
Pay off your home as soon as you can. It defies all the traditional finance tips, but the peace of mind and flexibility that comes from paying off your home is priceless. (Though darn hard in the Bay Area!)