Exchange talked with Crowdnetic CEO Luan Cox and Thomson Reuters chief product and content officer Debra Walton about the growing marketplace lending and crowdfunding industry and the partnership between our companies.
Exchange: Crowdfunding has become a hot topic. Can you tell us about Crowdnetic’s role in this new industry and the partnership with Thomson Reuters?
Luan Cox: Crowdfinancing offers huge potential to both early-stage companies and investors, but this potential can only be fully realized through the creation of an efficient, transparent and orderly marketplace. We are a global provider of technology, data and infrastructure to the rapidly-growing alternative finance industry, providing real-time data and research to the global marketplace-lending and equity crowdfunded start-up industries.
The goal is to improve transparency and create new opportunities for innovation in an industry that has matured in recent years, requiring a more substantial information infrastructure. We aim to help achieve this by providing education and transparency to the industry. With Permanent Identifiers (PermIDs) and other data-management and analysis tools in Thomson Reuters Eikon™ in the equation, Thomson Reuters will play a key role in helping us – and the industry – develop.
Exchange: How is Thomson Reuters working with Crowdnetic? And how does this benefit the industry and our professional customers?
Debra Walton: Currently our partnership revolves around two things: Crowdnetic’s use of the Thomson Reuters PermID and the availability of Crowdnetic’s data on Eikon.
Crowdnetic’s adoption of PermID as their primary symbology system for recording and tracking crowdfinanced transactions creates a standard symbology for this new and emerging industry that will enable participants to more easily link data to transact and gather market insight around crowdfinanced assets.
Delivering Crowdnetic’s company and investment data over Thomson Reuters Eikon offers users greater access to data about equity crowdfunded companies along with powerful analytics tools. Users will better understand this increasingly important market and improve their ability to make informed investment and advisory decisions.
Crowdfinancing is a new asset class, and as it grows we are beginning to see quite an interest from our institutional customer base. So, in the same way that we would offer private equity data to our customers, this is another important asset class and data set.
It’s very exciting to be on the foundational level of this emerging asset class.
Exchange: What exactly is PermID and what does it do?
Walton: PermID is a machine-readable identifier developed to create a unique reference for any data item. Unlike stock tickers and other such symbols, the PermID never changes. This makes it invaluable for managing data in rapidly growing sectors such as equity crowdfunding, where early-stage entities and unlisted securities are often poorly described, making them difficult to track over the long haul. We developed PermID to manage our own internal data sets and have now made it available as an open source capability to help solve the big data challenges faced by our customers.
Exchange: What has driven the growth of marketplace lending and equity crowdfunding? Can you give us a sense of the scope and scale today? How is alternative lending disrupting traditional lending?
Cox: The alternative lending world compared to the total outstanding consumer debt is still relatively small, but the growth is exponential in some parts of the world – for example, China growing 250 percent year over year.
The way it disrupts traditional financial services is, simply put, that people can go online, and in a matter of minutes, seconds, get approval for either a consumer or small business unsecured loan, which frankly banks don’t have. There’s no such thing as an unsecured personal loan anymore at a bank. And/or a small business loan. Banks turn down 90 percent of small business loans. So, the ability to go online to a platform like OnDeck or Funding Circle and be able to get a small business loan or go to a Lending Club and get a consumer loan – quickly – is unheard of in the banking industry.
And it’s not only start-ups. Goldman Sachs is entering the space which made all the banks say, “Wait a minute, we need to figure out from a technology perspective, from an underwriting perspective, from a process perspective, how we can streamline the lending process. And we’ve got to hurry.” JP Morgan just announced a partnership to provide small business loans via OnDeck to their customers. Nobody wants to be first and then really quickly, no one wants to be last.
Exchange: What external factors are influencing the crowdfinancing market? What are the opportunities and challenges?
Walton: Recent regulatory changes, including passage of the JOBS Act in the U.S., have been a catalyst for the development of equity crowdfunding as a serious way for companies to raise funding. The resulting surge in unlisted securities poses significant challenges to investors and regulators seeking to track deals and build an efficient primary market.
The opportunities for crowdfinancing really stem from the whole trend towards the socialization of business. You see it in platform companies like Uber and Airbnb. And crowdfinancing really is just extending the whole social platform trend to people seeking funds and those with funds without a financial intermediary for the transaction.
The challenges when you have financial transactions are how do you ensure integrity of the transaction? If someone invests in a security, do they exit the security or exit the loan at a certain point in time? How do you appropriately value the asset? And that’s the role that Thomson Reuters can play – helping to bring transparency to the market – and creating a mechanism to enable participants to price the asset.
Typically, transparent markets tend to be more liquid. The most liquid markets are exchange traded assets and the reason that they’re high volume and highly liquid is you can see a price on a screen and it’s easy for you to buy and to sell. At the other end of the spectrum, something like a commingled real estate fund is not very liquid because it’s very hard to create a price. In the middle are many of the over-the-counter markets. Our ability to create a flow of information where investors can see a price is an important way we enable liquidity by bringing transparency. And connecting these assets and these securities through to institutional investors will be incredibly important to developing the downstream secondary markets that will allow this market to generate real momentum.
Exchange: How did Thomson Reuters and Crowdnetic become partners?
Cox: I was in the data business for years before starting this company, so I knew Thomson Reuters very well. But Deb and I first met through the Springboard accelerator program for women led companies – she’s been very involved in Springboard for many years as an advisory board member, and as a mentor.
Walton: I was sitting in a Springboard boot camp and saw Luan’s presentation of Crowdnetic … it was probably three years ago. I had just a tiny fledging notion of what crowdfinancing was all about, but I was very deeply interested in what Luan was doing and the potential for Thomson Reuters.
I agreed to provide coaching and mentoring to Luan as she started to build the business and it’s through that we’ve actually been able to develop the relationship that’s now a valuable partnership.
It’s the ultimate win win. I’m passionate about growing Thomson Reuters businesses into new areas. I’m passionate about helping women into leadership. So to me, Springboard was a great place to bring those together, and the fact that we’ve been able to do that together with Luan is a great proof point of that.
Crowdnetic’s data will be available through Eikon this year. Please contact your Thomson Reuters representative for more details.
About the interviewees
|Debra Walton is Thomson Reuters chief product and content officer, Financial & Risk, where she leads more than 4,000 employees around the world with responsibility for setting strategy and managing operations for Thomson Reuters information and analytics offerings. Walton has been a member of the Thomson Reuters senior management team since 2003 with roles across sales, marketing strategy and product development. Prior to joining Thomson Reuters, she held senior executive roles at Cantor Fitzgerald, Nucleus Financial and Dow Jones Telerate.|
|Luan is president and CEO of Crowdnetic and has over 15 years of executive leadership experience. She has previously served as general manager of Interactive Data Managed Solutions – Americas (IDC acquired by Silver Lake and Warburg Pincus), executive vice president of Global Sales and Marketing for Stockpoint (acquired by ScreamingMedia, now part of IDC) and executive director for Quote.com (acquired by IDC). She also serves as a technology advisor to the Springboard Accelerator program and serves on the advisory board for the American Banker-sponsored marketplace/P2P lending events.|