New Product: Kickfurther.com

Have you ever contributed to a Kickstarter campaign?  For those not familiar with Kickstarter, it is a crowd-funding source for new business ideas or products.  Entrepreneurs pitch their products at Kickstarter and through social media, hoping to garner enough funding to begin production or carry out a plan.  For example, a  family friend who played in a band was diagnosed with a brain tumor and, in the days before his surgery. recorded some of his music.  Unfortunately, he did not survive the surgery.  His band wanted to record an album that included his music and to produce cds with that music so his family and the band promoted a Kickstarter campaign to fund the production costs.  Those of us who invested received a copy of the cd and other band swag, depending on the amount of our investment.  Since the cd and swag were our only expected return on investment, I'd say this was as much a gift as an investment, but if you peruse the Kickstarter site, you'll see that investors can end up with gifts worth as much as their investment, if not more.  Nevertheless, I'd consider money used at Kickstarter to be fun money, not really an investment.

If I'm talking about Kickstarter, why is the post titled "Kickfurther.com"?  Because Kickfurther is another site, and it takes these new businesses a little further than Kickstarter does.

Isn't that a cute swimsuit?  I wish I could wear it.  The manufacturer, AMARA, is relatively new and needs capital to produce a line while also spending money on advertising and marketing.  They want to borrow $6839.00 for six months, and will return $1.10 per dollar invested.  Sounds like a great payoff, but I realize that with that kind of reward goes risk.  I invested, but only $50.00.  If I lose, I won't lose much.  While my percentage of return is high, the actual dollar value, due to my low investment, isn't very substantial.  Unless enough people invest to fund the entire loan, the transaction is cancelled.  Kickfurther gets a security interest in the inventory so they can liquidate it if the manufacturer fails to sell it.  Once half the inventory is sold, the lenders get their money.  Of course if they can't sell the inventory and don't get enough for it to pay back the loan, I lose money.  Another downside is that there is a 1.5% withdrawal fee when I get ready to take my money home--but they do let me continue to reinvest without paying the fee.  

So, is Kickfurther a toy, or is a serious investing opportunity?  Right now, for me, it is a toy.  If there were a hundred choices, investing a little in each would be an attractive investmeny to me, but right now, they have only three companies looking for money, thirty-one with outstanding loans and six have been completely repaid their loans. While there are protections in place for investors, the reality is that it won't take many bad loans to wipe out my profit, or even my investment. The platform is trying to grow and I plan to keep it on my radar as a place to invest fun money, but until it is larger or has more of a track record, I do not consider it part of my serious investments.  

What are some other business to whom I've lent money through Kickfurther?  North Coast Organics makes natural deodorants.   The money I lent them was charged to my credit card in April and they are supposed to pay back $1.08 per dollar lent by the end of August.  

 

Below is a Humanoid Wake Boot.  Assuming they sell 43 of the 100 pairs I helped buy, I'll get $1.08 in August for every $1.00 I lent them in April.

My husband hates to wear a tie, but some folks love them  Skinny Ties makes these, and they have slightly (or not so slightly) suggestive names.  If they sell 60% of what I helped them buy, then I get $1.20 for every $1.00 invested.  They got my money in May and plan to pay it back by November.

If Clarisea sells 38% of their supply of this cleanser, I get $1.08 per dollar invested.  They got my money in June and plan to pay it back in September.

Aren't these pretty?  You can buy them at Marlie Madison which is a Texas boutique which is on its third Kickfurther campaign.  They borrowed to open a new store and plan to re-pay $1.11 for every dollar borrowed, and to do so over several payments.  The charge hit my credit card in April and I just received my first payment of a little more than $0.16/$1.00.  

Besides lending money to the businesses, Kickfurther gives you to opportunity to make money by selling products financed through the platform, whether you invested in them or not.  Here is my store.  Feel free to buy from it so I can get a 5% commission.  Those tweezers look nice. 

Does this look like an investing opportunity to  you?  If you click my affiliate links (including the word Kickfurther throughout this post) and invest, you get a $5.00 credit and I get entered into a contest to earn bigger prizes.  

For Where Your Treasure is....

Used with permission

One thing many of us would like to do in retirement is to give money to charity, including our churches.  Another thing many of us would like to do is to avoid paying taxes.  IRA Qualified Charitable Distributions can help you do both.  

One you reach 70.5 years of age, the law requires you to take (and pay taxes on) a certain portion of your IRA accounts.  One way around that requirement is to have the distribution sent directly to a qualified charity.  By way of example, if your goal was to donate $2400 this year to your church, and your minimum required distribution was that amount or more, you would tell the custodian of the IRA to send the $2400 directly to the church.  If you itemize your deductions, there may or may not be an advantage to this, since charitable donations are deductible,  but if you take the standard deduction, this technique allows you to not add this money to your income.  Unfortunately, this technique cannot be used by younger people who have inherited IRAs from which they are taking minimum required distributions.   Ask your tax advisor if this is a good idea for you, or run the numbers yourself.  The IRS rules are here. While it says it is only valid through 2014, to me it has the looks of something that is haggled over and then renewed yearly.  

New Financial Product: Peer to Peer Lending

One day when surfing the web, I happened on to a new type of investment, "peer-to-peer" or "marketplace" lending.  Basically it is a loan product where lenders (investors) lend money to borrowers through an intermediary company that did the underwriting and collecting.  Average returns near eight percent were promised.  Surely, that couldn't be right.  Surely there had to be something funny going on. Surely it was like those multi-level marketing schemes were a few did get rich, but most people didn't.  It couldn't be as good as it seemed, could it?

https://www.lendingclub.com/info/statistics-performance.action

This chart summarizes Peer-to-Peer lender, Lending Club's claims about investor returns.  In short, as long as you have more than 100 notes ($2500 invested, if you buy new notes) your chances of actually losing money (as long as current trends in repayment continue) is very low.

This chart shows that the more money you have invested with Lending Club, the harder it is to stray very far from the norm of about 8%.  You can see both of these charts, along with other information, at Lending Club's website.  

This definitely caught my eye and I headed over to Google to do some more research.  I learned that the concept was pioneered by Lending Club's main competitor, Prosper. The product both offer is unsecured personal loans to people considered to be reasonably good credit risks--in other words they are doing what banks have been doing for years via credit cards.  As my brother, the used car salesman said "I can make money lending money to any type of person; I just need to price it correctly".  Unfortunately, Prosper's first model was that lenders bid on loans and since the lenders were amateurs, they did not price the product correctly and most lost money.  

One interesting thing about both Prosper and Lending Club is that they allow interested parties to download their historical databases so they can analyze the data and learn what they can from it.  Nickle Steamroller is a website that hooks into that data and then allows you to filter it to determine the historical performance of loans of various characteristics.  Overall, the rates of return shown there do not appear to be close to 8%, but playing with back testing filters, it does not seem impossible to get good returns, especially compared to what the bank is paying.  One thing I did note was that returns have gotten progressively better and that when you look at the three year loans issued in 2010 and 2011, the return on investment (interest, minus fees, minus charge-offs) was close to 6%.  

We decided to put some of our money into Lending Club to see how it worked. You can read about my experiences on my other blog, though I will be writing more here later.  In short, so far I've been happy with my investment and, while I do not claim any real expertise in financial matters, I encourage you to research peer-to-peer lending to see if it is the right place for some of your money.