I'm at the airport again, headed for a family reunion in Oregon. NOt much to write now.

I spent the week talking to legal teams, accountants andventure capitalists in San Francisco. I met a ton of smart people and Kiva is gaining access to some of the smartest people in these spaces. I'm really thankful.

I'm also thankful to all the people who read and comment on this blog. The last round of comments really helped us make some critical product decisions.

I will write more early next week.

Thanks

Matt

Two weeks ago I spent 6 days in New York with Premal. We were out there for two main reasons: to interview for a fellowship and to make contacts in NYC. I ended up meeting a bunch of people I would have never expected.

One great gift that Kiva has brought is a network of great people in places all over the world. Our user base of early adopters is made up of incredibly engaged people who just want to help. A cool thing we have been able to do is speak at small house parties hosted by such people.

We were at one such party in the West Village just off of Washington Square Park in Manhattan. I was telling the story of how Kiva began to a room of down-to-earth, but incredibly influential members of the media. These were producers of popular television shows, editors of key magazines, and even an assistant to an unnamed former US President. I told the story of how Kiva began in Uganda, how we were moved by the stories of a few entrepreneurs who had emerged from total poverty because of starting a business. Because of this, Kiva began by starting 7 businesses in Tororo Uganda. These included a goat herder, fish monger, fruit seller and more.

Then, after the storytelling, it was time to demo the user experience. I brought up the site on the projector. The first thing I saw was this:





An then this:





And then two others just like these.


Wow. These were businesses listed on our site right next to the rest. They had been listed that night -- uploaded straight from Bulgaria. A few things stuck out. These were the first music businesses on Kiva. There were four, listed side-by-side, all members of a band called "Southern Nights". They were actually applying for funds to help finance their first record, buy uniforms, pay for a tour, and more. Never in my wildest dreams did I anticipate raising money for a band's travel costs through Kiva.org.

I quickly made a point of scrolling right past them to focus on a few others further down. I wasn't sure what to think of these businesses and I wasn't exactly sure this was the kind of thing the NYC crowd had in mind.

I've been to Bulgaria. I know how much poverty exists there, especially among the Roma (gypsie) people. I also know that the Roma have a huge musical tradition and have often supported themselves through street performance. The coast of the Black sea is full of that (poverty and music).

That said, they look wildy out of place on the site. I wonder what we should do. Outlaw certain genres of businesses? Guide our partners to only post people who appear (to Americans) to look very poor? What would you do if you were trying to create an open lending platform for the sake of poverty alleviation?

Premal was staying in midtown, myself in Brooklyn. We ended the night with our first big fight, about this very issue, yelling as we walked to the subway. Clearly, the stress of getting this off the ground had gotten the worst of me...

It's jaw dropping to see a movie like this:

I am somewhere in the process of making the transition from donut shop code-warrior to CEO. It won't be a seemless transition, so my colleagues will hopefully concede me a few stutter steps. The last 2 years were a slow, incremental birthing of a vision Jess and I first had in Africa. Every few weeks, another piece of the organization steadily came together. It was like we were coloring in the lines of a silhouette we saw long ago. Doing it alone was isolating and inefficient. However, having intimate knowledge of every corner of a web site and an organization is hard to give up.

The core feature set of Kiva 2.0 is live on the web and looking fantastic. Less frequently do I stay up until sunrise -- just in time to release a new feature. A few times lately, I have instead awoken to see the amazing work of Kiva's dev team. To see so many people now contributing is a joy.

For instance: partner pages, like this one. That's an important aspect of where we are going, and how we view ourselves. Kiva is creating an open market for international, person to person, micro-lending online for the sake of alleviating poverty. Our (MFI) partners post the profiles of their client entrepreneurs directly to the site (sort of like auctions), and people like you and I can loan to them. Important agents on the site are the MFIs. They, as well as their clients, are in the process of developing online reputations with Kiva. The reputation will be a factor of their payback rate, content quality, content frequency and more. Lenders like you and I can decide where to place loans based on these reputations.

I am a broken record on this blog: Kiva can scale. I can't stress that enough. If you are someone out there in the micro-finance industry and you don't believe me, write me a note and we can talk. A few months ago, Kiva was being scrutinized by a major influencer in Silicon Valley. This influencer asked me: Can you scale? I said "yes". The influencer then proceeded to interview a host of pundits and experts from the most respected American MF-related organizations. Emails were flying around about Kiva. As they do, alot of these emails ended up in my inbox, even if they weren't written to me. What did they say? Among other things, they said "Kiva can't scale"! Many also questioned my inexperience. If only people talked to me before the were so quick to judge...

Why can we scale? The primary reason is that it makes financial sense to work with Kiva. MFIs pay, on average somewhere in the range of 8-18% interest on debt they receive from local and international sources. This is a large part of the reason that clients (poor borrowers) pay in the range of about 30% on their individual loans. Kiva is, right now, providing them with debt at 0% (with help from PayPal who has agreed to give us free payment processing). In the near future we will allow our partners to choose to get their debt at non-zero rates. Partners will be able to choose the rate of return they want to send to the lender. Kiva won't dictate these things and is merely a connector.

Some MFI experts might argue that posting pictures, payments and journal entries is unwieldy and unrealistic to expect. How can an MFI, some with 100,000s of clients, plug into a system like that? There are many ways to respond, and I will write more of them down later. A key thing to note is that there IS an extra cost for most to work with Kiva. Sure, it costs something to post up a picture and other info online. However, I would argue that, for many, this cost is MUCH less than the cost of accepting traditional, commercial debt.

Case Study: One of our partners pays its loan officer $10 per Kiva post. An average Kiva loan is around $600 or so. That $10, then, is less than 2% of the total loan. For them, Kiva costs them 1.5 - 2% per loan. That is something that, at scale, can significantly improve their business model. Ultimately, savings like that go to help a microfinance institution grow and serve more of the poor.

Do I sound like I have a chip on my shoulder? Probably, and I should let it go soon. I wonder how I can do that...

I'm writing from JFK airport. It's 70 degrees in NYC now and I am still chained to a laptop. Working for Kiva can sometime be a very isolating experience. There is this huge desire to connect with the borrowers/lenders/friends who come to our site. However, in the end, I am simply staring at a titanium and plastic object most hours of most days.

A few months into launching Kiva Beta, we were working with only 1 partner in one area of Uganda -- Tororo. Jessica and I realized, after a year of research, that it would be hard to get traction working with established microfinance institutions. We had this business plan that painted a grand vision of a great future. It talked about how Kiva would drive low cost debt capital to microfinance institutions (MFIs) world-wide, who were very undercapitalized. One thing we realized early was that there was a lot of investment capital being thrown at a very small number of MFIs. Something like 5% of MFIs were taking in about 100% of all investments in microfinance. Thus, a large part of our mission would be to attract the softer, p2p debt to smaller, developing institutions. These are the orgs that can not attract true commercial debt capital. So our plan was to find these orgs and to have them list their businesses on our site.

However, as two people in an apartment, doing this in our spare time, it wasn't easy convincing even the smaller orgs to list their businesses on our site. Basically, we had no reputation and no money to offer them. We had only the plan that we would list their businesses and attract debt through "viral marketing." It was an uphill battle calling organizations from all over the world. Finally, we just decided to start by listing the businesses found by our friend in Africa -- Moses. Moses, working with VEF, found 7 businesses and posted them to our site. They were funded fast and then we just waited around to see what would happen.

Lots of great stuff happened, some of it intentional, some of it unexpected. One "unintended consequence" was this "virtual bulletin board" effect of Kiva in Tororo. Tororo has at least one internet cafe, and its surprisingly accessible even to people of very modest means. At that time, Kiva had no office in Uganda. Moses would go to the internet cafe every day and work there, posting journals and businesses to Kiva.org. To him, it definitely became his office. Right from the beginning, a problem he began having was that the loan recipients would come to the cafe to watch him post repayment info and blogs about them. They would also look over his shoulder and keep track on the other businesses on the site. Kiva.org was showing publically something that is otherwise very private in Africa -- personal financial info. Kiva.org was becoming a place where people could monitor the progress of other people in Tororo.

I think that, in general, the loan recipients felt immortalized and proud of being on the internet. It's unclear to what extent they felt added pressure to pay back their loans. Who knows whether this is a positive or negative side effect of doing microfinance on the web. The most interesting possibility is that a system like Kiva actually contributes to the "reputational collateral" aspect of microfinance. In a world where you have no physical collateral, all you have to lose is your reputation. The internet increases the stakes because it can make your payback/default public for the world to see.

This is a rather cheesy graphic from a recent Kiva powerpoint presentation:







Last November, when Kiva hit the blogosphere, I read so many entries saying how Kiva was a "Web 2.0 App?". For me, my first reaction was bewilderment. What is a web 2.0 app anyway? Does that mean you have AJAX? Tagging? Social networking? In no way did we think about web 2.0 when designing the site. However, I read recently that a characteristic of web 2.0 is "creating network effects through an architecture of participation." Are we doing that? Who knows...who cares!