Failure Analysis
Ezubao was a Ponzi scheme from inception, not a failed startup. The mechanics: 95% of listed projects were fabricated. The platform created fake borrowers,...
Ezubao \China
Ezubao promised Chinese retail investors extraordinary returns (9-14.6% annually) by pooling their money into what appeared to be legitimate peer-to-peer lending for infrastructure and leasing projects. The psychological hook was powerful: it offered middle-class Chinese citizens—who faced limited investment options due to capital controls and a volatile stock market—a seemingly safe, government-adjacent alternative to low-yield bank deposits. The platform leveraged China's P2P lending boom (2013-2015), where tech-enabled finance felt modern and trustworthy. Ezubao's slick mobile app, celebrity endorsements, and omnipresent subway advertising created an aura of legitimacy. The 'why' was simple: it tapped into a massive unmet need for yield in a savings-heavy economy where real estate was overheated and traditional wealth management products were opaque. For investors, it felt like participating in China's infrastructure growth story with tech-era convenience.
Discover the reason behind the shutdown and the market before & today
Market Analysis
China's P2P lending industry collapsed post-2016 due to Ezubao and similar frauds, triggering a regulatory crackdown that eliminated 99% of platforms by 2021. Today,...
Startup Learnings
Business Model Lesson: High fixed returns (9-14%) in a lending model are a red flag. Legitimate P2P lending has variable returns tied to borrower...
Market Potential
China's P2P lending market effectively died after 2016 (from 5,000+ platforms to near-zero by 2021). However, the underlying demand—middle-class Chinese seeking 6-10% returns on...
Difficulty
Rebuilding trust in P2P lending post-Ezubao requires navigating China's draconian fintech regulations (2016-present crackdown), overcoming deep retail investor trauma, and competing against state-backed wealth...
Scalability
The original Ponzi model scaled horrifyingly well—900,000 investors in 18 months—because it had negative unit economics by design (paying old investors with new money)...
Rebuild & monetization strategy: Resurrect the company
Execution Plan
Phase 2
Build a permissioned blockchain ledger where each invoice is tokenized with metadata (supplier ID, buyer ID, invoice amount, due date, verification hash from ERP).
Phase 3
Recruit 3-5 family offices or corporate treasuries (minimum $5M commitment each) as pilot investors. Offer 7% target yield with first-loss protection (platform takes first 2% of defaults).
Phase 4
Manually underwrite the first 20 invoices (credit check on buyer, not supplier) and advance funds to suppliers. Track repayment and default rates over 90 days.
Phase 5
Automate credit scoring using buyer payment history data. Launch self-service supplier portal where SMEs upload invoices, get instant pre-approval, and receive funds in 48 hours.
Monetization Strategy
Revenue model: 2.5% factoring fee on each invoice financed (e.g., $10,000 invoice = $250 fee). Platform takes 1% annual management fee from investors. Target unit economics: $250 revenue per $10K invoice, $50 cost (underwriting, ops, blockchain gas fees) = $200 gross profit per transaction. At $50M annual invoice volume (achievable with 200 active suppliers), revenue is $1.25M/year. Breakeven at $30M invoice volume (~18 months). Scale to $500M invoice volume by Year 3 = $12.5M revenue, 60% gross margin. Exit via acquisition by Ant Group, WeBank, or a licensed microlender seeking supply chain finance capabilities.
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