Hey guys!
Since I've always have noticed groups will demonize the other side before actually talking to them, I emailed LC about the topic of this thread. I told them we as a forum were worried about P2P become B2P (loved that, whoever came up with it).
Well, I just got off from a phone call from LC today (called me the same day). A gentleman named Eric wanted to talk and tell me why LC is not forsaking retail investors. He started by noting I'd been investing since 2009 with LC, so he knew I've seen rapid changes. These were the takeaways:
1) The average note takes 5 hours to fund.
2) LC has tried to balance the amount of retail and institutional money. LC is actually designing a few products that are coming out in a the next few months geared to helping retail investors out. I didn't ask specifics about this.
3) In the past month or two, both retail demand and institutional demand has increased dramatically and they haven't gotten enough increase in borrowers yet.
4) The problem with the high yielding notes disappearing quickly is known by LC. The problem is that the high grade notes represent a small amount of the total notes offered, but it represents a large amount of the type of notes investors want. Roughly 40% of notes are A and B and roughly 70% are ABC.
5) LC is very concerned about retail investors and view them as the source of long term success for both loans and investors. They want to be very proactive in making sure they aren't edged out.
He said that if I was concerned about the platform edging out retail investors, feel free to email or call him with additional observations. He thanked me for bringing this to his attention.
Respectfully, I think you are being very naive. Let's sort through a few of his answers:
1) The average note takes 5 hours to fund. Ok, how quickly do the best notes fund (answer: within minutes or less)? Sure, after institutions and sophisticated individuals pick off the best loans, there are some left. You can bet that the remaining loans have a much lower return on a risk-adjusted basis.
2) LC has tried to balance the amount of retail and institutional money. LC is actually designing a few products that are coming out in a the next few months geared to helping retail investors out. I didn't ask specifics about this.My guess is it is similar to their auto invest product where they blindly invest across loans for you. I suspect that such a solution would have a negative selection bias.
3) In the past month or two, both retail demand and institutional demand has increased dramatically and they haven't gotten enough increase in borrowers yet.Hence the reason LC decreased interest rates across the board for loans. Don't count on this supply-demand imbalance correcting itself until rates go much lower.
4) - no disagreement here
5) LC is very concerned about retail investors and view them as the source of long term success for both loans and investors. They want to be very proactive in making sure they aren't edged out. 
I do believe they are concerned about getting more individuals in as borrowers.
I'm shaking my head at some of these posts on here. "Us individuals deserve more time", "LC needs to protect individuals", "They owe us", etc. Fellow individual investors, understand this: LC does NOT care who funds a loan. If anything, they prefer institutions. They would rather deal with 100 institutions that invest $100 million each than 1 million individuals that put in $10k each. Institutions are easier to deal with, have lower return expectations, and carry far more weight. Even one modest-sized institutional investor would invest more than everyone on this board combined. We have no bargaining power in this situation.
Rant over, hope I dispelled some myths. I do believe that good returns will continue to exist on LC, at least for awhile
