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The following post was originally published on Medium by PeerStreet Co-founder and COO, Brett Crosby. His previous Medium post was also posted on this blog and became an article on Fast Company.

Short Answer; Quality Matters

At PeerStreet, we’ve structured our business on a few basic principals. First, serve up the highest quality investments possible. Second, build a business that can scale. Third, keep it local. Most people will agree, real estate is a local game. So having a community presence, knowing the best local borrowers (those who do repeat projects and know what they are doing) is not only a risk mitigant, it removes one of the hardest parts of the business to scale, making the actual loan. To build a national platform for investing in real estate backed loans, we knew becoming a lender wasn’t the answer. Instead, we applied a simple concept that I’d used successfully at both Urchin and Google: the fishing boat strategy. (I originally mentioned this concept in this post, but am taking the metaphor a bit further here.)

The Fishing Boat Fleet Provides Scale 

Imagine for a moment that PeerStreet is a sushi restaurant, instead of a marketplace for investing in real estate backed loans. No one wants the fishy tasting stuff. We have to serve up the highest quality sushi possible, right? To do that, should we go out and catch our own fish and just serve what we catch? Some days we might get a decent catch, but if we want to grow nationwide, it would be very hard to maintain quality. So instead, we partner with the fishing boats all around the country, then tap into their higher quality fish, or in PeerStreet’s case, loans. Just like sushi, quality matters with loans.


Just Like Sushi, Quality Matters with Loans

By accessing the largest supply funnel possible, we can curate the marketplace and pass loans onto investors that adhere to high underwriting standards. In fact, our funnel is so big (and growing), we use a lot of technology to help us pre-sort our loans to ensure they fit our credit box before we double check everything with a full manual underwriting of each loan as if we were the original lender. We even send a third-party out to see the property and conduct a valuation. Maybe I’ll discuss all the technology, data science and process we’ve built in another post. Or maybe not. After all, that’s the secret recipe to our special sauce…

I’m hungry. Time for lunch. Sushi?

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