This is day two of a conference in San Francisco on the broad topic of Capitalism at the Crossroads. It came to my attention via this post from Fred Wilson of Union Square Ventures.

Today Fred writes about a panel he’s moderating on how globalization and outsourcing are changing the future of labor. It triggers a concern on my mind a lot and one I’ve written about before, small businesses are more like consumers than enterprise. And, the failure to recognize that has left major gaps in how we think about the small business economy. By small business I mean the employer and non-employer firms that serve our neighborhoods and communities, maybe offer a unique product or service in a supply chain or marketplace. For many, the business is the owner and the owner is the business.

Of course this matters in credit because personal data about the owner, including his or her consumer credit scores, are used in business credit analysis. It’s why I hammer on the fact that consumer protections for abusive data collection or erroneous data do not protect the small business owner even when data is sourced from consumer credit. Our approach has been to offer a great data-sharing service for such business owners to fill the gap because we know it will give creditors greater visibility. In the coming weeks, I’ll be writing more on how and why this seemingly counter-intuitive approach works.

For now, my point is that we are witnessing a major shift in how we make a living. From counting on employment and perks, mostly gone but still in our dreams, to each of us is our own employer. At a time when even existing consumer protections are under attack, we must find better ways to provide basic tools of trust, from identity verification to proof of creditworthiness/ that are transparent and accountable.

In spite of my past as a lawyer, it excites me to think we can leverage technology to achieve the best of outcomes with no incredibly painful (and likely hopeless near term) advocacy for a broader regulatory framework.

–The founder

I spend more time listening to independent business owners than to bankers. That’s the point of the Lumenous platform after all. Listen and help them share their own story to show they are worthy of credit and trust.

What jumps out across the board is indie business prefers community banks. Why? They experience relationship banking at its best. Some examples:

“My banker understands me.”

“My banker is my board of directors and confidant.”

“Some days my banker is more important to me than my wife.” Okay, we do NOT recommend that as a good way to prioritize your marriage vs your bank relationships.

The point is relationships matter and there is a lot of quantified research to back up our anecdotal evidence.

Now this from the most seasoned community bank expert we know, Chris Nichols of CenterState Bank.

It costs the average community bank approximately $14k to book a new commercial loan, but only about $2k to modify or amend an existing commercial loan.

And this:

Stated another way, if you retain one existing loan, and concurrently book another identical loan with a new client, the existing loan has a 5.1% higher return on equity than the new loan.

Take a look at Chris’s list of how banks should think about relationships with borrowers and you can readily see that it’s good for the business too.

We identify profitable relationships and then identify any of the following variables that increase the likelihood of that customer being poached by competitors:

  1. Any expression of dissatisfaction with the bank, banker, terms or pricing of the existing loan
  2. Loans maturing within the next 2-3 years
  3. Borrowers that are paying above-market fixed rates or credit spread
  4. Borrowers with no, or weak, prepayment penalties
  5. Term loans with variable rate structures
  6. Borrowers with low switching costs (no treasury management, wealth management or investment management services)
  7. Customers with high probability of defection triggered by low product usage, lack of primary relationship, etc.
  8. Customer is not in a loan structure that best matches their asset-liability position

There you have it. High-trust small business/small bank relationships are good for the business owner and a better deal for the banker. Thanks Chris for another great insight.

–The Founder

Just catching up on the latest from the brilliant (well at least super rich) folks gathering in Davos to discuss the problems of the world. This New York Times piece notes, in part:

Yet the solutions that have currency seem calculated to spare corporations and the wealthiest people from having to make any sacrifices at all, as if there is a way to be found to tilt the balance of inequality while those at the top hang on to everything they have.

More entrepreneurialism, mindfulness training, education focused on the modern ways of technology: These are the sorts of items that tend to get discussed here as the response to the plight of those left behind by globalization. That perhaps private equity overseers should not be paid 1,000 times as much as teachers while availing themselves of tax breaks is thinking that gets little airing here.

There’s more meat in the coverage but let’s zero in on two points in these paragraphs. Attendees advocate solutions that involve no sacrifices and the talk about entrepreneurialism. Here’s a thought. Invest in entrepreneurs. Not just the ones out to build big companies just like yours but the masses who could make a better life for themselves if they could start or join a small business.

You (at Davos) can do this in a non-profit way through Kiva. Check out Kiva Zip. You could set up small business lending options to make access to capital available. And no, not the kind that sneak in effective APRs in excess of 50%. Do it at a level to match regulated banks.

Put aside the canapes and vintage wine please. Use your good minds. Get your hands dirty. Let’s build a super-strong and resilient base of the economic pyramid.

–The founder

I’m catching up on the mysteries of algorithms and small business credit. Here is a good and very recent panel discussion on the topic. A much more academic conference at NYU’s law school recently touched on related topics. You can find some of the papers by checking out the program.

Background. There are two schools of thought on the merits of algorithms or predictive analytics. One school of thought is excitement about the power and scalability of “objective” scoring based on data so, you know, rock and roll. The other school of thought is skepticism. How do we know we can trust these machine-driven beasts? We can’t see one or more of the following: 1) the training data used to inform the model used in the algorithm; 2) data against which the algorithms are applied (indeed we don’t know how the data are collected because of the degree of brokering among data publishers); 3) algorithm source code; 4) underlying logic expressed through source code that may not be obvious; 5) meaning of the outputs; and 6) statistically sound evidence of impact of the outputs.

What does it mean? We all are being profiled in a variety of ways using data we might not expect would be used to profile us. If that profiling takes place in the context of consumer credit decisions, the U.S. provides a measure of regulatory protection and recourse. If it takes place in the context of small business credit decisions, we mostly are left in the dark with no ability to understand much less contest. It’s a big issue because so many decisions rely on personal data and credit profiling as well as data about the small business.

At Lumenous we see this current reality as bad news and good news. The good news is there is a “green field” and therefore a very big opportunity to offer technology that fosters accountability, transparency, ethics, and fairness in small business credit.

We do that by following a very simple principle–put small business owners in charge of their credit profile. Give them (you) tools to collect data for your own credit profile that you may share with lenders, creditors, and others, on your terms.

It’s a hard set of problems to solve but we are weeks away from launching. Stay tuned and Happy Thanksgiving!

–The Founder

Like many U.S. citizens, I can hardly wait for this campaign to end. But I cannot let it go without pointing out that there is another oft-ignored side to defining others without their participation and on a public scale. Obviously, people running for major office expect a certain amount of this. What makes 2016 unusual is the degree to which the Internet has become a massive vehicle for defining/profiling candidates in increasingly uncontrollable ways.

Step aside for a moment and come with me to the world of small businesses and their owners. Their access to credit is one of the most opaque examples of “other-profiling” we have today. At least consumer credit comes with a regulatory regime.

Not so for small business.

A colleague relayed an example a couple weeks ago. He had moved his small company to a new office space and was mulling over the required performance bond. Before posting it he did an online credit search. The granddaddy of small business credit (actually of all credit bureaus) returned a stellar report. Great. Bond posted.

Then two days later he started getting alerts to his inbox. Credit downgraded. When he checked it out he discovered that a different customer had posted a negative review online and the credit bureau had picked it up as a bad credit signal. The company was putting their financial advisor on the case to get it fixed. If other cases we’ve seen hold true here, it will cost thousands of dollars and significant time to get it corrected.

Back to the moment at hand. If you haven’t already and are a U.S. citizen, please vote. It is so important. Then, the fact that you are reading this suggests you care about small businesses. Helping small businesses build and access credit is a bi-partisan challenge and opportunity. Let’s make sure it doesn’t get buried under all those contentious issues that get in the way of ensuring ever greater numbers of small business owners are contributing to the well-being of their communities and the larger economy!

–The Founder


I have long been a fan of Doc Searls from his seminal (co-authored) publication, The Cluetrain Manifesto, to his work with Linux Journal, and more recently his tireless battles for consumers who are tracked across the internet like so many bits of soulless data.

Today Doc features small business and how credit cuts against them in ways not unlike internet advertising. The concept is VRM, vendor relationship management. The point of it all is that vendors drive the conversation with consumers in a top down manner. The vision is to flip the balance of power, or at least create symmetry–a level playing field. Instead of CRM, both a software model and a paradigm driven from the vendor to customer, we have VRM, the model and paradigm in which customers drive their engagement with vendors.

Here’s an excerpt from one of my responses to Doc’s questions:

At Lumenous, we are applying the principles of VRM to transform the relationship between small business and creditors. As a result, up to six million small employer firms will be able to access the credit, capital, and commerce they deserve.. This will lead to better leverage of cash and ability to not only meet payroll and pay bills on time, but also better contribute to the economic well-being of their communities. Twenty-two million “non employer firms”—freelancers and sole proprietors, for example—will have access to credit, and more easily form trusted joint ventures to bid on otherwise out-of-reach projects.

See the entire post and many links to important research here!

–The especially proud founder today

I first learned of the Personal Data Ecosystem Consortium (PDEC) three years ago. I mostly thought the name was quite the mouthful. In time I discovered many kindred spirits in its ranks. After participating in the governance committee over the past year, I have agreed to step up my involvement. Here’s why that matters.

PDEC is the one non-profit organization I know that is dedicated to the cause of personal data. There are wonderful organizations that are related, such the International Association of Privacy Professionals (IAPP) and the Information Accountability Foundation IAF), but PDEC dives deep in an area others just touch.

At a time when personal data is growing exponentially and increasingly creative uses of it abound, PDEC is all in on driving innovation, policy, and understanding in the personal data ecosystem.

Looking at excerpts from the mission, you can see the relevance to Lumenous, the company. For example, we see a robust personal data ecosystem:

That gives people the rights and capabilities to control, access, manage and derive value from data about them and their lives regardless of how such data is derived.


In which businesses accept a fundamental responsibility for transparency and accountability regarding data that they retain, transmit or exchange about people.

We stand for protecting people – “empowerment, personal control over personal data and identity and transparency about where and how it is used.” And because many of our members are startups and other for-profit corporations, we actively support creative “business models and monetization strategies for companies operating in the personal data ecosystem.” By proving that transparency and accountability are good business, we hope to see the ecosystem grow.

I am excited to be a part of this organization that reflects the best thinking in technologies and innovations that do the right thing by personal data.

–LaVonne, Founder