Few favors are more likely to end in disaster than lending money to friends. Or at least that was the case before Ledge. The Peer-to-Peer mobile lending platform which launched on September 24, enables users to crowdfund small loans (under $5,000) from friends. Ledge takes the guesswork out of these transactions and tracks pledges, interest rates, and balances. Loans are then repaid automatically through Venmo.
Ledge Co-Founder Adam Neff explains that for young people who don’t use credit cards or have a credit history, the best option is borrowing from friends and family.
“What we’re trying to do is take that existing behavior and those existing transactions and make that a lot simpler, provide a lightweight structure and documentation and automated funding payment notification system around it, so people don’t need to worry about the weirdness and awkwardness and they can just be friends.”
The original idea for Ledge was to log IOU’s for informal debts like dinners or drinks, but some research revealed there wasn’t much interest in tracking those small payments. However, when it comes to more formal loans between friends and family, there was a need for a structure to make the transaction easier for all parties.
Neff says, “It’s an experience that I think almost everybody can relate to, because most people at some point in their life are in a situation where they need to borrow money or are lending money to someone they know.”
Neff has been in tech for ten years, and worked on his first startup as a new graduate. It was a social network called Essembly, which focused on helping people connect over issues, and share ideas. The platform later became Facebook Causes. After a year with the company, he returned to school to get his MBA at the University of Southern California.
When Neff finished his MBA in 2009, a friend from Essembly recruited him to move to Spain and work on strategy for his startup, the rapidly growing Spanish social networking platform Tuenti. Neff attributes the success of Tuenti to the simplicity of the core user experience, and performance and latency optimized for the Spanish market. The company was acquired by Telefonica in 2010 for approximately $100 million.
In 2013, Neff returned to his hometown of Los Angeles with Ledge Co-Founder Luke Weber, who he worked with at Tuenti.
“We were just really interested in this intersection of mobile and social and credit. A lot of Asian messaging platforms were coming into the Spanish market and I was looking at what they were doing on the payment side, and back here I started using Venmo, and it was this aha moment, like this is how you should pay people you know.”
Ledge completed a funding round in February 2014, launched in Private Beta in 2015, and closed an agreement with Venmo in early September 2015 to become an authorized developer. The process took 3-4 months, which was relatively fast, but can be an eternity for a startup, Neff says.
“When you’re dealing with a big company in a highly regulated space, any sort of business development or partnership like that, you should assume it’s going to be more complicated and take a lot longer than you think.”
Neff says the biggest challenge he faces is in navigating the uncertainty of working and developing something without a roadmap to rely on, and that’s a reality every young entrepreneur needs to be prepared for.
“For a lot of younger people coming out of school thinking about doing their own thing, when you’re in school there’s very clear guidelines about what you need to do, there’s a very clear feedback loop about whether you did a good job. And going out and doing a startup, especially in an area that’s relatively new, with a product that’s not super consistent with other things in the market, there’s a lot of ambiguity that you need to deal with.”
Ledge is working to launch new features later this year and spread the word about the app. Neff says he has been pleasantly surprised by the amount of enthusiasm Ledge has garnered so far.
“The idea seems to have struck a chord for people, I think because people are becoming more comfortable with digital money, a lot of younger people are turned off by banks and credit cards, and at the same time tremendously positive towards crowdfunding and the broader sharing economy.”
Would you be more likely to borrow or lend money if you were doing so through an app? Let us know what you think of Ledge by connecting with @StarterNoise.
From the markets of Budapest to the skyscrapers of London, Caitlin is our expert on all things European. Located in Copenhagen, Denmark, Caitlin keeps us up-to-date on the European startup landscape, plus culture, food and whatever she finds along the way.