Prosper.com The Online Marketplace for People-to-People Lending

Evaluating the Student Loan Market Opportunity

Market Research: Final Presentation

Brannan Schell, Kurt Kresge, Ryan Kaiser, and Scott Orn

Agenda

Introduction Client / Business Problem Define Research Objective

Target AudienceSampling MethodSample Size

Key Findings Recommendations

Introduction Client / Business Problem Prosper is developing an innovative

Borrowing & Lending Network that facilitates people to people lending.

The site launched 4 months ago and is looking to ramp business as fast as possible.

Like all startups, Prosper is resource constrained so it is looking for “low hanging fruit.”

Prosper thinks the MBA lending market is interesting and wants us to validate the opportunity.

Research Objectives

To recognize the business opportunity of MBA students at the top 25 schools, Prosper must understand:

What is the size of the graduate business school market for online lending?

Do graduate business school students represent a market opportunity as defined by:

Borrowing and spending habits/attitudes Attitudes towards current student loan process and lenders Reaction to www.Prosper.com concept

We have the explicit goal of: (a) finding groups of students that pose a business opportunity and (b) understanding how best to address potential obstacles.

Sampling Method, & Sample Size

• Population of interest: top 25 MBA programs

• Kellogg ‘07

• Homogeneous sample

• Each section mutually exclusive and collectively exhaustive

• Web survey distributed to two of eight sections

Sampling Method Sample Size

• Based on key survey question

• 7 point scale

• N = 92

Key Findings – Student Spending 79% of Kellogg students spend over Kellogg’s

suggested $63,000 budget

How Much $ Have Kellogg Students Spent in 1st Year

10%

12%

38%

24%

17%

0%

5%

10%

15%

20%

25%

30%

35%

40%

<$55,000 $55,001-$63,000 $63,001-$70,000 $70,001-$80,000 $80,000+

$ Spent in 1st Year

Key Findings – Want Money 52% of Kellogg students would have liked to borrow

more money than they did this year Kellogg students want to borrow an additional $3,700 per

student

How Much More $ Kellogg Students Want

48%

1%

21% 20%

6%4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$0 <$1,000 $1,001 -$5,000

$5,001 -$10,000

$10,001 -$20,000

$20,001+

% o

f K

ello

gg

Stu

den

ts (

n=1

03)

Lending Opportunity at Kellogg is $3.9M

Lending Opportunity at Kellogg is $3.9M

Lending Opportunity at Top 25 US B-Schools is $36M - $64M

Lending Opportunity at Top 25 US B-Schools is $36M - $64M

Key Findings – Needers Analysis Objective #1: Find students that Need Money Analysis: Using cluster analysis, we found that 68% of Kellogg

students need money along behavioral and attitudinal metrics

Funding 1st Year at Kellogg

0%

10%

20%

30%

40%

50%

60%

70%

80%

% Parents % Loans % Savings

% of Funding by Category

Per

cent

Savers

Parental Supporters

Needers

•71% of budget funded by loans

•23% have credit card debt

•71% of budget funded by loans

•23% have credit card debt

Key Findings – Needer Sub-Segments Analysis Objective #2:

Within “Needers” Attitudinal differences

Sub-Divided “Needers”1 into 3 sub-segments based on “Attitudes Towards Lenders” and “Attitudes Towards Prosper”:2

Tech-Savvy Borrowers Cautiously Interested Borrowers Anti-Online Borrowers

Attitudes Towards Lenders

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

Q22 Q23 Q24 Q25 Q26 Q27 Q28

Questions

Rat

ing

(1-

7 S

cale

)

Tech-SavvyBorrowers

Anti-OnlineBorrowers

CautiouslyInterestedBorrowers

Attitudes Towards Prosper

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

Q30 Q34 Q35 Q36 Q37 Q38 Q39

Questions

Rat

ing

(1-

7 S

cale

)

Tech-SavvyBorrowers

Anti-OnlineBorrowers

CautiouslyInterestedBorrowers

Interest and Likelihood to Use Prosper

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Q33 Q40

Question

Rat

ing

(1-

5)

Tech-Savvy Borrowers

Anti-Online Borrowers

Cautiously InterestedBorrowers

1) 68% of Kellogg students fell into the “Needers” segment; 2) Sub-segments based on Q22-28 & Q30, Q34-39

Recommendations

Identifiable “Opportunity Segment” Exists

Identifiable “Opportunity Segment” Exists

Key Takeaways Strategies

Minimum Requirements to Compete

Minimum Requirements to Compete

Middle-of-the-Road Likelihood to Use

Prosper

Middle-of-the-Road Likelihood to Use

Prosper

Large Opportunity for Lenders

Large Opportunity for Lenders

1

2

3

4

National Opportunity at top 25 US business Schools is $36M – $64M

Develop and communicate messages tailored towards attitudes and beliefs that motivate the targeted segment

Must consistently reinforce that Prosper surpasses the “minimum requirements to compete” Secure & Trustworthy; Provide Good Value; Convenient to Use

Increase understanding and awareness of site to increase likelihood to learn about product and use product