Why We Invested in Pigeon Loans
- Apr 26, 2022
- 2 min read
Updated: May 29, 2024
We are thrilled to announce The LegalTech Fund’s investment in Pigeon Loans, a company that provides a platform for seamless peer-to-peer lending.
Today, 22% of Americans do not have a credit score and another 11% have poor credit scores, meaning one third of people in the US are shut out of the traditional credit system. Unfortunately, this also varies disproportionately by demographic and geography.
So what happens when someone wants to start a business or buy a car and the usual financing options are off the table? The next go-to is usually friends and family. It turns out about $200B per year is loaned between peers in the US. However, even with this magnitude of money flowing between friends and family, these agreements are still made informally with nothing more than a handshake.
Despite the large market size, peer-to-peer lending today is a process that involves a lot of friction. First, it can be awkward to ask a loved one for a loan, and it can be awkward to get asked, too. A formal contract would make both parties feel more comfortable and secure, but it can be costly to draft a contract. Lastly, the payment process is segmented from the arrangement, with the only record typically being a Venmo message (💸 for 🚗 ).
That’s why Brian Bristol and Kaben Clauson founded Pigeon Loans. Pigeon Loans is a platform for friends and family to create, negotiate, and manage peer-to-peer loans. Customers can draft a loan agreement and build a payment plan in under 10 minutes. Reminders are sent automatically and payments happen in-app. The entire process is frictionless. Since its founding in 2020, Pigeon Loans has already seen impressive traction, with hundreds of loans being activated and its recent graduation from the prestigious Y Combinator program. We’re excited to be a part of this journey.
At The LegalTech Fund, we invest in companies transforming the world of law. The team at Pigeon Loans has developed a comprehensive offering for individuals to easily create contracts amongst themselves in minutes, without help from a banker or a lawyer. The company’s mission is aligned with our focus on increasing access to legal services. We were also inspired by Brian and Kaben’s passion and willingness to jump in and create a solution to a problem they and their loved ones were experiencing first-hand. We’re always looking for founders who not only see a vision for a better future, but help build it. Please welcome the Pigeon Loans team to The LegalTech Fund family and let us know if we can connect you to learn more.
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Insightful read on Pigeon Loans -the focus on balancing speed, compliance, and borrower experience really explains the investment thesis. For teams building scalable lending products, I also recommend exploring loan process automation as a practical guide to reducing manual touchpoints and speeding time-to-close.
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While peer-to-peer lending solves the credit access issue, my own experience taught me that for larger, structured financing, you sometimes need a more traditional path. When I needed to consolidate previous debts and renovate my flat, going through the proper channels with a licensed money lender actually made the process feel more secure. They provided transparent terms and a clear repayment schedule, which gave me peace of mind that a casual agreement between friends simply can’t offer. It’s good to see innovation in the space, but for substantial financial commitments, having that official regulatory oversight is still hard to beat.