Deck from Charles Moldow's presentation at FinTEx in Chicago

1. Consumer FinTech
Charles Moldow
General Partner

2. Financial Engines and Envestnet
Share price through funding rounds ($US)
5.52
11.65
7.65
10.23
45.00
50
45
40
35
30
25
20
15
10
5
0
S-A S-C Sec. IPO Curr.
+1,280%
1.25
3.79
0.54
10.68
4.75 6.28
17.25
34.45
40
35
30
25
20
15
10
5
0
+100%
S-B S-C S-D S-E S-F Sec. IPO Curr.
+85%
+340%

3. Financial Services Portfolio
Lending Wealth Management Personal Investing Payments

4. In 1994 the S&P 500 had an Aggregate Value of $5.2T
Market Capitalization of S&P 500 (Year End, $T)
$5.2
1994*
*Adjusted to 1994 dollars
Source: ThomsonOne

5. By Year-End 2013, It had Reached $17T
Market Capitalization of S&P 500 (Year End, $T)
2013
$5.2
*Adjusted to 1994 dollars
Source: ThomsonOne
$17.0
2013
6.4% CAGR
1994*

6. By Year-End 2013, It had Reached $17T
Market Capitalization of S&P 500 (Year End, $T)
$5.2
*Adjusted to 1994 dollars
Note: Sectors defined by Industry Classification Benchmark; Financial Administration included within Financials
Source: ThomsonOne
$2.1 Technology 17% of Growth
9% CAGR
2013
1995-2013 Growth
$12T
1994*

7. Which makes sense

8. Healthcare Accounted for 12% of that Growth
Market Capitalization of S&P 500 (Year End, $T)
1995-2013 Growth
$12T $1.5 Healthcare 12% of Growth
$2.1 Technology 17% of Growth
9% CAGR
2013
$5.2
*Adjusted to 1994 dollars
Note: Sectors defined by Industry Classification Benchmark; Financial Administration included within Financials
Source: ThomsonOne
7% CAGR
1994*

9. Which makes sense

10. The Financial Sector Grew Even Faster
Market Capitalization of S&P 500 (Year End, $T)
1995-2013 Growth
$12T $1.5 Healthcare 12% of Growth
2013
$5.2
*Adjusted to 1994 dollars
Note: Sectors defined by Industry Classification Benchmark; Financial Administration included within Financials
Source: ThomsonOne
7% CAGR
$2.1 Technology 17% of Growth
9% CAGR
$2.3 Financials 20% of Growth
9% CAGR
1994*

11. Which makes
no sense…

12. Financials saw essentially no employment growth
between 1997 and 2013
Total Sector Employment
14
12
10
8
6
4
2
0
Financials IT Healthcare
Source: Occupational Employment Statistics, Bureau of Labor Statistics
1997 2013
0.3% CAGR 4.2% CAGR 2.0% CAGR

13. Market cap value per employee has sky-rocketed
Market Cap Per Employee**
$700
$600
$500
$400
$300
$200
$100
$0
Financials IT Healthcare
*Note: Adjusted to 2013 dollars
**Note: Market cap data from 1994, employment data from 1997 (inflates IT and Healthcare 1997 result)
Source: Occupational Employment Statistics, Bureau of Labor Statistics; Thomson One S&P 500 Data
1997 2013
0.3% CAGR 4.2% CAGR 2.0% CAGR
Thousands

14. Yet, few major banks are becoming more efficient
70%
stayed the same
or became
less efficient
30%
of the top 500 global
banks improved cost
efficiency between
2009-2012
Source: McKinsey

15. Financials Growing Despite an
Adverse Environment

16. Financials Growing Despite an Adverse Environment
Consumer Dissatisfaction Regulatory Overhang
Macro Trends
2008 Correction

17. Banks Walked Away From Financing Small Businesses
Source: FDIC, data for C&I loans <$250K

18. Financials Growing Despite an Adverse Environment
Macro Trends
2008 Correction CCoonnssuummeerr DDiissssaattiissffaaccttiioonn Regulatory Overhang

19. Friends Don’t Let Friends Use Banks
Source: Bain & Company, 2012 NPS Survey

20. Millennials REALLY dislike banks
Source: Viacom Media Networks

22. Financials Growing Despite an Adverse Environment
Macro Trends
2008 Correction Consumer Dissatisfaction RReegguullaattoorryy OOvveerrhhaanngg

23. A thicket of regulation
A (non-exhaustive) list of federal
marketplace lender laws
Equal Credit Opportunity Act (ECOA)
Fair Housing Act (FHAct)
Bank Secrecy Act/OFAC
Truth in Lending Act (TILA)
E-Sign Act (FDIC)
Dodd-Frank - Wall Street Reform and Consumer Protection Act
Know Your Customer (KYC)
Fair Debt Collection Practices Act (FDCPA)
Fair Credit Reporting Act (FCRA)
Fair and Accurate Credit Transactions Act (FACTA)
CARD Act (CARD)
A (non-exhaustive) list of federal
regulatory bodies
Securities and Exchanges Commission (SEC)
Federal Reserve (FED)
Financial Industry Regulation Authority (FINRA)
Office of the Comptroller of the Currency (OCC)
Federal Deposit Insurance Corporation (FDIC)
National Credit Union Administration (NCUA)
Consumer Financial Protection Bureau (CFPB)
Federal Trade Commission (FTC)
Financial Stability Oversight Council (FSOC)
Commodity Futures Trading Commission (CFTC)
Federal Housing Finance Agency (FHFA)
And there are state-by-state licensing requirements
specific to each asset class and business model.
Source: https://www.fas.org/sgp/crs/misc/R43087.pdf

24. What’s fueling banking’s 9% CAGR?

25. Banks are capturing ever more value

26. Where is growth going to come from now?

28. The fundamental driver of growth in tech
Transistor count
1971 1980 1990 2000 2008
2,000,000,000
1,000,000,000
10,000,000
1,000,000
100,000
10,000
2,300
$ per 1M transistors
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
$1000.00
$100.00
$10.00
$1.00
$0.10
$0.01
$527
$.05
Moore's Law Computing Costs
Note: Y-axis on graph is logarithmic scale
Source: John Hagel, Deloitte , 5/14.

29. Enables a financial services revolution
Moore's Law Computing Costs
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
400
350
300
250
200
150
100
50
0
Smartphones
Internet-Enabled Computers
Bloomberg Terminals
Online Debit Terminals
CC/Debit Terminals
ATMs
1990 1995 2000 2005 2010
Source: Comscore, Internet World Stats, 2003 Kansas City Fed Guide to ATM + Debit Card Industry, Nilson Report, ATM & Debit News

30. A Financial Services Revolution

31. A financial services revolution
Consumer Trends
1. Simplification 2. Transparency 3. Analytics 4. Reduced Friction

32. Sunrun distills the complexity of solar panel installation
and financing into a few simple clicks
Let’s see if your home and
solar are the perfect match
Our innovative software Lightmile™
gives you multiple design options
for you to choose from. You’ll save and lock
in low monthly rates for 20 years
Lower your utility bill with solar
• Find out how much you can save
• Zero to little down means virtually
nothing to worry about
• Low monthly payments leave more
money for just about anything
• Free quote to get started – who doesn’t like FREE?

33. A financial services revolution
Consumer Trends
1. Simplification 2. Transparency 3. Analytics 4. Reduced Friction

34. Investors know what they’re getting with Lending Club

35. A financial services revolution
Consumer Trends
1. Simplification 2. Transparency 3. Analytics 4. Reduced Friction

36. Motif Investing brings complex portfolio
optimization to the masses
Make any motif your own
Want to modify a motif to better
suit your interests or your existing
portfolio? No problem. We give you the
tools to easily customize any motif.
Add and remove stocks, change
weightings – all at no additional cost.

37. A financial services revolution
Consumer Trends
1. Simplification 2. Transparency 3. Analytics 4. Reduced Friction

38. Friction is being taken out of the system
Consumer
Payments
Remittance

39. Consumer Finance is massive
Estimated annual US revenues generated by sector
90
2,147
300
Lending
189
697
Personal Payments
Insurance
Total
Finance
872
Wealth Management
Source: Federal Reserve, SBA,; Goldman Sachs, Bloomberg, FRBNY, McKinsey, SwissRE

40. Opportunities abound
1 Lending
2 Wealth Management
3 Personal Investing
4 Payments
5 Insurance

41. A Trillion Dollar Market by the People, For the People
How Marketplace Lending will remake banking as we know It

42. Big opportunity in front of us
Annual Lending Revenues IN 2013 (US$B)
Traditional
New Players
Source: Federal Reserve, SBA,; Goldman Sachs, Bloomberg, FRBNY, McKinsey, SwissRE

43. Big opportunity in front of us
Consumer
Consumer
Pay Day
Purchase Finance
Student Loans
Real Estate
Merchant Cash
Advance
SMB Credit
SMB

44. Loan originations by marketplace lenders have exploded
We expect close to
$9B
in marketplace loans
to be originated in 2014

45. And Lending Club is the Leader
Total loan Issuance
5.5
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2007 2008 2009 2010 2011 2012 2013 2014
Total Loans Issued ($)
Billions

46. Marketplace lending could generate >
400 BP cost advantage vs banks
Source: Lending Club based on St. Louis Fed, Federal Reserve

47. A financial services revolution
1. Simplification 2. Transparency 3. Analytics 4. Reduced Friction

48. Applying for a loan can be easier than buying an iPhone
1. Simplification

49. Cost to the borrower is fully disclosed
2. Transparency

50. Underwriting leverages a vast array of data
Consumer Lending Underwriting
Ownership
Relationship FICO
Performance Data
FICO
. .
.
Education
Ownership
Income
Heuristics
Social Graph
Performance Data
FICO
1970 1980 1990 2000 2010 2013
3. Analytics

51. Investors can ‘set it and forget it’
4. Reduced Friction

52. Customers actually like marketplace lending
Average NPS Scores
Insurance
80
60
40
20
0
79NPS
Lending Club Credit Unions Community
*Note: Adjusted to 2013 dollars
**Note: Market cap data from 1994, employment data from 1997 (inflates IT and Healthcare 1997 result)
Source: Occupational Employment Statistics, Bureau of Labor Statistics; Thomson One S&P 500 Data
Banks
Regional Banks Credit Cards National Banks
Industry Averages
Technology
Travel/Hospitality
Banking
Borrower

53. The free markets have spoken
Marketplace vs. Fintech in the market
Trading Multiples
Marketplace Traditional Fintech Lenders
Trulia, Inc.
Shutterst…
HomeAw…
Zillow, Inc.
Mercadol…
Yelp, Inc.
LinkedIn…
Source: Yahoo Fiannce
3.84
13.72
17.41
9.42
8.94
9.7
19.59
7.78
0 5 10 15 20
eBay Inc.
1.33
3.22
3.83
3.54
2.05
2.84
7.1
3.16
Farmers…
Marlin…
NewStar…
Wintrust…
GATX…
Jack…
CIT…
ORIX…
0 2 4 6 8
11.3 3.4

54. “People have long thought that the
Internet is overhyped. But when you realize
that it now has the power to reinvent the
multi-trillion banking industry – I argue
that it still hasn’t been hyped enough.”

55. The next generation of crazy ideas
• Origination costs approach zero =
auto-refi’s to optimize leverage
• Real-time + continuous underwriting
• Fractionalized labor connected directly
to consumption
• Distributed ownership
• Conventional transactions become free +
micropayments enabled =
machine-to-machine payments
• Micro insurance policies

56. Thank You!
Charles Moldow
General Partner | Foundation Capital
@cmoldow