Editor’s note: Guest author Semil Shah is an entrepreneur interested in digital media, consumer Internet, and social networks.  He is based in Palo Alto and you can follow him on twitter @semilshah.

Many years ago, after graduating college, I came home before moving to NYC, wondering how I would scrounge together the money for the first month’s rent and security deposit so my friends and I could all live together in the Big Apple. I had one month to get the cash, and instead of going out for traditional, hourly-wage work, I decided to go through all of my old stuff and throw it on eBay. In those days, I got online through dial-up, would have to mail a hard copy of the pictures to interested buyers, and would ship items to auction winners only when their check arrived by mail and cleared into my bank account. In one month, I got rid of winter jackets, sports equipment, and baseball cards to the tune of $7,000, tax free, enough to buffer the move to NYC.

A few years later, when I moved to San Francisco, it was Craigslist to the rescue, helping with initial sublets, furniture, stereo equipment, and the odd jobs I did to soften the transition. Without knowing it, I was stumbling through life fueled mainly by a peer-to-peer (P2P) network and economy that helped me connect supply and demand, as well as time and money. Instead of using consignment shops or hosting a garage sale, or instead of buying new items in a traditional store, I buffered my moves to NYC and SF primarily fueled by P2P networks.

That was P2P 1.0, anchored by eBay and Craigslist, networks that have connected billions. And, while these companies continue their march, we are already into the next peer-to-peer evolution: P2P 2.0.  Unknowingly at the time, I was exposed to the thought a few years ago in graduate school, when my classmate, James Reinhart, came up with the idea for a “Netflix for used clothes,” which has morphed into venture-backed thredUP, a P2P network connecting parents to trade gently-worn baby and kid clothes, goods that are very expensive to buy new. Another success is Lending Club, a peer lending site connecting lenders with borrowers primarily for refinancing credit card debt or small business loans.

Today, P2P 2.0 is in full-swing, and that’s putting things lightly. Y Combinator breakout Airbnb began as an ad-hoc solution for the founders to earn a little extra scratch during a convention when tight hotel supply provided an opportunity to rent out air mattresses in their apartment, with the added touch of breakfast. The result today is a rapidly growing company and brand that aims to connect those who seek space with those who need it—you can rent boats, treehouses, and even castles. Airbnb has been so successful that it’s spawned a handful of international copycats and motivated the likes of GetAround, a P2P car-sharing network.

The newest entrant into the P2P space is the concept I’m most excited about: Zaarly. The founder, being taller than average, realized prior to boarding a flight in economy class that he would be willing to pay someone on the same flight to swap for an exit row seat. That moment gave birth to Zaarly, a new service that will leverage a mobile device’s location to connect those who demand something to those who can provide it. Imagine busy New Yorkers with disposable cash demanding something immediately, delivered right now: “Zaarly it.” The Zaarly concept connects time and money in the P2P vector, just like eBay connects sellers and buyers.

All of this activity in P2P 2.0 is now possible because of advancements in location sensors in mobile devices and social network platforms. The time is ripe for even much more advancement in P2P ideas, leveraging today’s technologies in new ways. Even as consumer-focused entrepreneurs work to build the next solutions, they are raising money on P2P services like Angel List, which connects fundraising entrepreneurs with seed stage capital and has shaken up the early stage investing game. Task Rabbit connects individuals and businesses with “task runners” that provide an outsourced task service, and Listia is an eBay for trading free stuff, where site users earn and spend credits. (Many others are also emerging, please add them here.)

During all these P2P transactions, companies like Square, Roam, and Bump leverage mobile phones to help drive payments. For instance, buyers and sellers can trade data by bumping their phones together, where Bump technology measures the movement from the accelerometer and pairs two users together. Square connect buyers and sellers using a credit card and mobile device. A merchant can charge a customer for goods or services by using the Square reader attached through a device’s audio jack to read a buyer’s credit card (like a cassette tape) and transmit the signal to help complete the transaction. (Surprisingly, not many others have yet fully leveraged the phone’s audio jack or accelerometer, making Square, Roam, and Bump standout.)

The driving force behind all of this P2P activity is the fact that today’s technologies make many more types of transaction possible between average consumers by finding an equilibrium between time and money, supply and demand. Transactions once locked up and never realized now create entirely new economies, free of established brands and fat middle-men.

In a world where everyone is rushing to drive all commerce online, some P2P solutions sprinkle a dose of humanity into the transaction. Will P2P services keep bringing more of this human element, personalization, and discovery into the foreground? Will services like Housefed, which provides a personal meal service, create a welcome alternative to nuking frozen food for dinner? It will be fascinating to see what new types of businesses are built on top of these P2P engines, and what traditional businesses they will disrupt.

The U.S. economy, struggling its way slowly out of a major recession, will only benefit from a continuous flow of new ideas to help connect people and keep things going. And, the potential for these services overseas is just staggering, especially within cultures that already have strong informal economies baked into their DNA. So big, in fact, that the simple desire to swap airline seats or find a reasonably-priced place to crash during a convention could create, accelerate, and fortify new informal micro-economies in the far corners of earth.

Photo credit: Flickr/ NASA Robonaut

Main rival Prosper is closing in on $200 million in personal loans funded in total – last time it has broken out the monthly statistics was for February 2010, when the company announced it had reached roughly $1.7 million in loan volume for that month.

In related news, Lending Club has appointed Scott Sanborn as chief marketing officer. The new CMO comes from publicly traded ecommerce company eHealth, where he served as chief marketing and revenue officer. Prior to his role at eHealth, Sanborn was the CMO and interim president of e-commerce and catalog retailer RedEnvelope, where he oversaw the sale of the business to Provide Commerce.

Lending Club, which originally started out as a Facebook app, recently secured a $24.5 million Series C financing round led by Foundation Capital. In total, the amount of capital raised by the company exceeds $52 million.

A big round for a company that originally started out as a Facebook app: peer lending network operator Lending Club has secured a $24.5 million Series C financing round led by Foundation Capital and joined by existing investors including Morgenthaler Ventures, Norwest Venture Partners and Canaan Partners.

This brings the total of capital injected into the company to $52.7 million.

Lending Club says the additional funding will be used to further develop its platform, which brings together lenders and borrowers who want to cut out banks in the process of investing among peers. Lending Club says it will also use the extra money to launch new products, improve customer service and expand sales and marketing efforts.

The company hasn’t had it easy over the past few years. In April 2008, it put a hold on lending activities because of regulatory issues, and ultimately filed for SEC registration during the summer of that year. Then, the economy collapsed and Lending Club along with other P2P lenders were heavily affected. One of its main rivals, Zopa, hightailed it out of the U.S. market not long after.

According to a press release issued by the company earlier this morning, Lending Club has now managed to capture 79% of the US peer lending market in March 2010 with a whopping $8,664,750 (PDF) in monthly loan originations.

Its biggest competitor is Prosper, which has also raised tens of millions of dollars (and is reportedly raising some more).

The Securities and Exchange Commission is now greenlighting Prosper to facilitate peer-to-peer lending in 14 states with more on the way, borrowing nearly nationwide. Prosper is now the first and thus only Internet auction-based P2P loans platform to have its registration statement declared effective by the SEC, which is evidently good news for other players in the P2P lending industry, such as Lending Club.

SEC’s approval of Prosper’s secondary marketplace, which enables people to loan money directly to other individual and institutional investors, comes a couple of months after the startup had already reignited its lending platform in the State of California (update: and apparently had to suspend it again a few days after).

Chris Larsen, CEO and co-founder of Prosper, is happy the dry period is over:

“With the financial system in crisis, P2P lending – Americans investing in fellow Americans and small businesses – is needed now more than ever. It has been extremely frustrating to be on the sidelines in the teeth of a credit crunch.”

Starting today, Prosper is available to lenders in California, Colorado, Delaware, Georgia, Illinois, Minnesota, Montana, Nevada, New York, South Carolina, South Dakota, Utah, Wisconsin, and Wyoming. Borrowing is permitted in the District of Columbia and all states except Iowa, Kansas, Maine, and North Dakota.

Prosper has raised approx. $40 million in capital to date from Accel Partners, DAG Ventures, Fidelity Ventures and Benchmark Capital, among other investors. The company was the first to introduce the concept of people-to-people lending in the U.S. when it launched in 2006. From the time the startup officially launched up until the time it entered an SEC registration quiet period in October 2008, Prosper claims to have grown to more than 800,000 members, facilitating approximately $180 million in personal loans.

Prosper has now enhanced its auction model to include a so-called hard bid floor for each listing, which helps lenders appropriately price for risk while investing online. The bid floor for each listing is calculated by adding the national average certificate of deposit rate that matches the term of the borrower loan to the minimum estimated loss rate assigned to each listing. In addition, Prosper has lowered its minimum bid requirement to $25 (previously $50), which should make it easier for lenders to diversify, particularly smaller ones.

More details are available on the Prosper blog.

But now Prosper is back despite the fact that the SEC hasn’t yet approved its operations, and while they have respected the requested silence up during the six-month hiatus, they haven’t exactly stalled development of the service. The company relaunched its lending services yesterday for the State of California (borrowing can be done throughout the U.S.), and is hoping to take the whole thing nationwide soon.

There are new features, too. Prosper announced its Open Market initiative, which will allow other financial institutions (e.g. auto lenders, small business lenders and community development lenders) to place their already funded loans the Prosper website for auction. The company will vet lenders and require three payments to have already been made on any loan up for sale.

Prosper has raised $40 million in capital to date from Accel Partners and Benchmark Capital, among others. It’s up against well-funded competitors such as Zopa and Lending Club.

The company, which started out as a Facebook application for social money lending, hasn’t had it easy so far. In April 2008, it put a hold on lending activities because of regulatory issues, and ultimately filed for SEC registration during the summer of that year. Then the economy collapsed and Lending Club along with other P2P lenders were heavily affected. The SEC suspended loan activities one of Lending Club’s main competitors, Prosper, at the end of last year, citing obvious reasons that these companies should be regulated by the SEC as a securities seller. Another P2P lender, Zopa, hightailed it out of the U.S. market at about the same time.

With some of its main competitors out of the battlefield (but others remaining), the company will no doubt use the new capital to push for dominance in the space. Lending Club says it’s growing quickly, doubling its user base over the past 5 months and handing out returns to users of over 9% net. It also announced a new chief marketing officer, Pamela Kramer, who joins from Etrade, where she held the same position.

If the company manages to weather the storm without too much damage, it will be very interesting to see how social lending evolves in the future – now that banks and other ways of loaning money have lost a lot of credibility across the board – and how vital the role of Lending Club in that story will be.

Lending Club previously had to do the same thing and suspend new lending last April . (The S.E.C just gave it the green light to start lending again on Tuesday). Zopa shut down it’s P2P lending site in the U.S. last week.

Even before the increased regulatory scrutiny, P2P lending took a massive hit along with the rest of the financial industry. As Brad Stone points out in an excellent piece in the NYT:

Monthly loan volumes at the company have been declining since the credit crisis worsened this spring. Prosper, which is unprofitable after raising $40 million in venture capital, now faces the damaging possibility that lenders may take their money off the site instead of waiting for the S.E.C. to allow lending to resume. That could take several months.

You can see on Lending Stats that Prosper”s membership growth and the number of active lenders and borrowers took a dive starting last April. And delinquencies for loans more than 18 months old are trending at higher than 30 percent. That is because a large portion of Prosper’s loans are in the sub-prime category. People who couldn’t borrow from a bank, borrowed from their neighbors on Prosper instead.

Now they are temporarily shut down.

Lending Club, the P2P money lending site, has filed registration forms with the SEC. Pending their approval, the site should be able to relaunch its lending service, which has been on hiatus since April (while the company didn’t provide an explanation for the shutdown at the time, we speculated that they lacked the proper licenses).

From the release:

The registration statement seeks to register the offer and sale of up to $600,000,000 in Member Payment Dependent Notes to be issued by Lending Club in a continuous offering following the effective date of the registration statement. The Notes will be issued in series with each series of Notes corresponding to a single consumer loan to a borrower member.

Lending Club originally launched as a Facebook app that allows users to lend money between themselves. But because the company acts as a middleman for transactions rather than connecting users directly, it requires a broker-deal license from the SEC. For time being Lending Club will remain in hibernation, but the company hopes to resume business as soon as the forms are approved.

http://documents.scribd.com/ScribdViewer.swf?document_id=3506575&access_key=key-2m8aaa7cxqhdmedv3mne&page=2&version=1

If you are having trouble paying for college, maybe you can hit up your social network for a loan. That’s the idea behind GreenNote, another peer-to-peer lending startup that is launching this week. (The site is still going through load testing, but should be up fully by Wednesday). Prosper, Zopa, and Lending Club (which is under regulatory scrutiny) already offer general P2P loans, but GreenNote is more like Fynanz or China’s QiFang, in that it is focussed only on student loans.

These tend to have lower default rates and there is a rising need for them. The funding gap between the average four-year cost of going to a state college and available federal loans is at least $22,000, according to the company. For private universities, that gap can be more than $100,000. P2P lending startups like GreenNote see that gap as a huge opportunity. In aggregate, there was a $113 billion funding gap in 2007, $95 billion of which was paid for by personal and family funds.

But GreenNote is not about matching high-risk borrowers with lenders who want a higher return. It is about tapping into the altruism of family and friends who want to chip in to help finance the college education of a student they already know. CEO Akash Agarwal says:

This is really getting your social network to help you—asking your social network to step up, and not asking for a hand-out.

The loans are designed to mimic a federal Stafford loan—the interest rate at launch is 6.8 percent. The rate is fixed, payments are deferred for up to five years, and then students have 10 years to pay back the loan. No co-signers are needed, and GreenNote loans are open to non-U.S. citizens.

Lenders can pitch in as little as $100. In that sense, it takes more of a micro-finance approach. GreenNote keeps track of who owes what to whom, takes care of the paperwork, collects the funds, and then distributes the payments after the student graduates and starts paying back the loan. GreenNote takes a 2 percent fee up front from the student out of the principle of the loan, and another 1 percent from the lenders out of the interest. (Fynanz, in contrast, only takes a 1 percent fee).

GreenNote raised $4.2 million in a series A round last October from Menlo Ventures and Glenbrook Partners.

Lending Club, a P2P lending service that started off as a Facebook app, has temporarily stopped accepting new loans and lenders.

According to a brief “quiet period” note on its website:

Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

While the company will not talk to media “until the registration process is completed,” we suspect that Lending Club is looking to obtain a broker-dealer license from the SEC that would legitimize its operations.

Since Lending Club both loans and borrows money from users, instead of connecting them directly, it’s not a pure P2P service. While the legality of its lending practices is not in question, its borrowing practices could be interpreted as the sale of securities, which requires a license Lending Club doesn’t appear to have.

This suspicion has been reinforced by Veronica McGregor, an attorney with the law firm Perkins Coie. She says that “it looks like they are getting themselves a license to buy and sell securities.”

These are issues that other P2P lending sites – such as Prosper, Virgin Money, and Zopa – will have to face if they haven’t already.

Center Networks has more thoughts on the situation here and here.

Prosper is about to get a lot more competition. After more than a year of waiting, UK-based Zopa got the go-ahead from regulators to launch its U.S. Website last week. Zopa, which doesn’t allow sub-prime loans at all, has a 0.1% default rate, whereas Prosper has a 3 percent default rate.

And Lending Club, which started as a Facebook-only application, just got clearance today to operate nationwide. (It had been awaiting approval from half a dozen states, including big ones like California, Michigan, Illinois, and Pennsylvania). Lending Club launched six months ago on Facebook, and opened up its own Website three months ago. In that time, its members have issued 489 loans worth $3.5 million. Of that amount, only $16,000 worth are between 16 and 30 days late on payments (see stats here). It also does not allow sub-prime loans.

Lending Club’s loan portfolio is too small and its loans have been out too short a time to really know what its average default rate will be. But if it can match its larger competitors, it should do fine. Social lending is here to stay.

Zopa’s peer to peer lending service differs from U.S. rivals by working with credit unions to offer person-to-person loans instead of a loans coming directly from lenders on the service like Prosper and Lending Club (works through Facebook). GlobalFunder.com is a yet-to-launch competitor. With Zopa, lenders will place their money in Zopa branded CDs that are then loaned out online. Borrowers apply for loans through their online community by posting their case for the loan and filling out relevant details about their credit risk. Interest rates on five year loans can range from 8.75% to 16.99%, depending on their credit risk.

It’s worth noting that Zopa’s investor, Benchmark also invested in Prosper. The lending market is anticipated to be very large. According to the research firm Online Banking Report, around $100 million in new P2P loans will be issued this year, mostly by Prosper, with new loans growing to as much as $1 billion in 2010 and $9 billion in 2017. Prosper already registered an S-1 with the SEC and reported $96.4 million in loans.

Adding further details to the launch, Allen Stern received an email outlining some differences between the U.S. and U.K. (which TCUK covered) versions. The key differences listed are:

• No risk for investors.
  Your funds will be federally insured. No more worrying about whether your borrowers will pay your loan back.
• Pick who you want to help.
  Investors will choose exactly who they want to help.
• Set your rate.
  Investors will choose how much they want to earn, up to a ceiling.
• No waiting.
  Borrowers will get their loans immediately upon approval.
• Lower your monthly payment.
  Borrowers can actually reduce their loan payments after they’ve borrowed. They’ll do that using rich profiles…

The milestone comes just short of 3 months since the the site hit the $100,000 mark, and 3 1/2 months since going live as an original Facebook Platform partner.

Lending Club will also announce today that it is expanding beyond Facebook and will now offer similar ways to connect borrowers and lenders through thousands of alumni associations and professional organizations.

The new site includes tools for building diversified loan portfolios composed of pieces of 20 to 30 individual loans, hosts a forum for financial experts to share their knowledge with the Lending Club community, and “Better Rates Together,” a blog community that features expert advice on P2P lending and personal finance.

Lending Club recently secured $10.26 million in Series A financing led by Canaan Partners and Norwest Venture Partners.

Lending Club was an original Facebook Platform/ F8 partner having launched with F8 on May 24. The company closed its first loan on June 6, and has since closed 27 more loans for a total of $101,250. An additional $212,650 in loans will close in the next 12 days. More than $180,000 is currently available from 271 lenders with around 10-15 new lenders transferring money to Lending Club every day.

The social networking angle of Facebook allows Lending Club to leverage trust by enabling lenders to find borrowers within shared networks. Lending Club uses technology to pair the two parties based on shared connections without giving lenders direct access to the borrowers Facebook profile.

P2P lending is a rapidly growing market. Lending Club faces stiff competition from companies such as Zopa, CircleLending and Prosper. Although it may not be the market leader in terms of volume, Lending Club’s growing success demonstrates the potential of Facebook as a sales and finance platform.