In a move that was not unexpected Prosper announced today that it will no longer update its loan data on a daily basis. Data will now be available 45 days after the close of each quarter.
Now, when you go to their data download page there are no files to choose – you just receive this message:
As I said, this move is not very surprising. Lending Club made a similar move in April last year. What is a little different is the explanation that Prosper has given for this change. On their blog post and in an email to investors today Prosper clearly stated the reason for this change:
We are making these changes in order to protect our intellectual property and proprietary data, not to inhibit our clients who are using the data for their credit models and to make investment decisions. We understand that our investors need our data to analyze investment performance, but we also need to ensure that people can’t reverse engineer our underwriting model. One of Prosper’s main competitive advantages is our data asset, and we have spent a considerable amount of time and effort building it. These changes strike a balance between maintaining appropriate levels of transparency and protecting our intellectual property.
So, this is about protecting their data. And I certainly believe there is truth to that concern. I have heard from several entrepreneurs over the last few months who have boasted about having run their credit risk algorithm through Prosper’s underwriting and supposedly improved upon it.
The good news from an investor perspective there is very little that will impact us. What they are really doing is removing the connection between loan listings and approved loans. There is no reduction in credit data and the API will work as before. We will just have to get used to slightly less transparency from Prosper. It means no more loan volume charts at the end of each month and we won’t really know how Prosper is doing now until well after the end of each quarter.
When I spoke with Ron Suber, Prosper’s president about this today, he made it clear that this was a decision they thought about very carefully. They talked to many of their large investors as well as the folks at Orchard before making this change. There were very few concerns and everyone gave them the green light.
While I can’t say I like the reduced transparency I understand this move. As the industry matures and the companies involved become much bigger and more valuable, intellectual property gets more and more important. While we can speculate as to whether or not this is related to an IPO in Prosper’s future Suber would not comment about that other than to say, “they have made no decisions around a possible IPO”.
Regardless, Prosper is clearly setting themselves up for a quarterly update cycle of all of their data, financial and otherwise. This will make the transition to a public company that much easier if and when that happens.
