Anger from retail investors, rampant speculation and doubts about competence of leadership and overall abandonment levels of the portal will probably start causing issues (if they already aren’t) for Bondora, and I think as the flagship of Estonian P2P investing, their failure to work well with investors is likely to destroy a lot of credibility for the whole field.
When I started investing in Bondora three years ago, then the overall advertised mindset was that it’s an investment opportunity by the people for the people to make people happy. The core values that Pärtel Tomberg (CEO) talked about in pretty much every media presentation were being transparent, allowing investors to hand-pick as many loans as possible, give out as much data as possible and overall lead the way to a post-banking world, that plays to the strengths of retail investors.
For those who haven’t invested into Bondora for such a long time, this mindset might be a bit surprising, since you probably haven’t heard much about this, since the current statements are much more growth and expansion orientated. Retail investors have lost a lot of their importance despite having been instrumental in allowing Bondora to survive the first couple of years, and the overall opinion you can read from forums and blogs ranges from slight displeasure to aggressive anti-campaigning. What caused this?
The first reason is the pivot. There’s a time in every start-up’s life when something’s gotta give – you either accept more VC money and push for growth or risk remaining stagnant and falling behind competition that is trailing close behind, while having the advantage of learning from the mistakes you had made as a frontrunner. While Bondora hasn’t really made the statement (and they probably never will), they have clearly reoriented from retail investors – and it’s understandable, looking at the US experience then for true growth you need institutional investors who can fund loans in the millions, and retail investors just will not allow for the growth that you’re aiming for.
The second reason is leadership. No one doubts that Bondora is Pärtel Tomberg’s “baby”. Though the idea of crowdfunding had many starts, then he definitely hit a sweet spot when it comes to appealing to retail investors who stepped on board despite the lack of history and evidence based risk assessment. This was, however, eight years ago. Between then and now many funding rounds have happened and millions of VC money have been added. No one seems to want to ask this question out loud – how much power does Pärtel Tomberg still have in the company? I mean, I have no doubt that he still holds the majority of the business, but that’s not as valuable as it seems, considering how Bondora is bleeding money, and the minority shareholders are the ones financing the push to profitability. While start-ups aren’t expected to become profitable too quickly, then most VC’s would assume for less of a loss rate at the 10 year mark.
The third reason is, ironically the investors. I think that to some extent investors we’re too optimistic about just how viable such a business model is based on just the funds that retail investors are likely to provide. This causes a kind of an insurmountable gulf between the business model as it should be to be profitable and the business model as we would like it to be. People are expecting to have very much autonomy, much data to make individual decisions while institutional investors are much more interested in big data based models where their involvement has to be minimal and the returns rate is highly predictable. In theory this information model could work for retail investors as well, but due to terrible management, communication and the unexplained pivot retail investors have lost a lot of trust towards Bondora as a whole, and trust is difficult to regain.
Why is Bondora messing up such a problem?
One of the bigger problems that Bondora causing such chaos causes is ruining the view of the market for the people entering. Most people start from Bondora, since it’s the biggest, has the longest history and most information written about it. However, after investing for just a bit you end up bombarded with complaints and issues, you start noticing problems yourself and become disillusioned with the whole P2P or crowdfunding based investment field.
For a long time I recommended Bondora for beginners due to those same reasons but I’d rather not recommend Bondora at this point. One of the core values of investing is stability, and there isn’t a whole lot of that going around for Bondora, which I think is a bad precedent to create – that they want your money but refuse to do anything investors ask for, and at this point they’ve even finished giving direct information (they’ve even deleted their Facebook).
How to fix Bondora?
Honestly, from the outside looking in, I think they should just revamp a whole lot of things. Realistically there isn’t just one easy fix to make it work, and there are dozens of ideas already thrown out there by the investors, they might as well listen to some. And while they don’t then it might be food for thought that more and more people make it to my blog with the search term “Bondora bad experience”.
Clearly there are three weak points that compound the problem:
1) The IT team – whatever it is they’re doing, it’s not helping them expand. Fundamental functionality such as the cash flow page being broken has zero excuse, and honestly is basis for writing some pretty mean complaints into the Financial Inspection. If the team is good, then the IT lead or business lead are dropping the ball.
2) The investor communication aspect is nonexistent. News are found out randomly, requests for data go unanswered and the customer service answers are just about as “canned” as they can be. While they hired people to do investor communications then those people have disappeared into the black hole of Bondora’s office and no one knows anything.
3) The company lacks an overall vision, or if it has a vision then it’s definitely not known by anyone outside of the company. You can’t have everything at once, and trying to have retail investors give your money while not providing them with anything in return is quite a lot like trying to eat your cake and having if later, still.