Big Funds Pour Money Into Online Lending Watch out. Interest from institutional investors is heating up.

Nobody is a bigger champion of the emerging online lending industry than venture capitalist Charles Moldow.

A general partner at Silicon Valley firm Foundation Capital, Moldow was an early backer of LendingClub and OnDeck Capital, which both held initial public offerings in December. And last year, he published a white paper that's been widely cited on the trillion-dollar market opportunity in what he termed marketplace lending.

So when an BIZ Experiences who wants to crack the fast-growing online debt market gets a dinner invite from Moldow, attendance is a no-brainer—especially when many of the industry's biggest names will also be at the table.

That's the setting Monday night for Moldow's second annual dinner tied to the burgeoning LendIt conference. In addition to the top execs from LendingClub and OnDeck, joining Moldow in New York will be the CEOs of start-ups including SoFi, LendingHome, Funding Circle, Orchard, RateSetter out of the U.K. and Germany's auxmoney.

"Last year, the conversation was intense for three-and-a-half straight hours," said Moldow, who's also an investor in LendingHome, auxmoney and a personal backer of Chinese online lender Dianrong. "There was a lot of energy around—when LendingClub goes public, this industry is going to explode."

Now LendingClub, which primarily facilitates consumer loans, is public with a market capitalization of about $7 billion, and business lender OnDeck is valued at $1.4 billion. Additionally, LendingClub rival Prosper Marketplace just raised private capital at a $1.87 billion valuation.

Peer-to-peer lending `here to stay'

If you need more evidence that the online lending market is exploding, just take a look at the crowd at this year's LendIt conference. (Tweet This) Launched in 2013 by industry analyst and blogger Peter Renton, the conference expanded from 350 people in its 2013 New York debut to 950 last year in San Francisco to an expected attendance of 2,200 this year. The two-day event starts Tuesday at New York's Marriott Marquis.

A year ago, at San Francisco's upscale Italian restaurant Flour + Water, Moldow started what he expects to be an annual tradition of bringing the industry's most influential minds together for a single night to discuss such issues as the economic, interest rate and regulatory environments and international growth challenges.

"There will be some point in time when it will be very hard to have this set of companies together, where they open up and are willing to share," Moldow said.

He's got at least one more night, and is taking advantage of it at a Mediterranean restaurant in Manhattan.

Matt Humphrey, CEO of San Francisco-based LendingHome, is dining with Moldow for a second straight year. But this time he has much more to share.

Humphrey co-founded the company in 2013 as a new kind of mortgage lender. LendingHome's technology does all the underwriting and servicing for the borrower, while the capital comes from a wide swath of institutions seeking fixed income returns.

At last year's dinner, Humphrey was mostly a listener, because his fledgling 15-person start-up had only originated $1 million in loans. He's since multiplied his staff by almost sixfold to keep up with surging demand that's pushed loan volume past $100 million.

"We're very excited to tell the story of where we've come," said Humphrey, who's also speaking on a panel at the conference. "It's 10 to 12 of the best minds in marketplace lending coming together to have an open dialogue about challenges, successes and strategies for growing."

Just as LendingClub and Prosper have taken on consumer loans by replacing bank capital with investor money, and companies like Funding Circle have done the same for small-business loans, LendingHome and others are similarly going after the mortgage market.

LendingHome is one of more than a half-dozen real estate companies in marketplace lending, and Moldow said in his white paper, titled "A Trillion Dollar Market by the People, for the People," that they're competing in a $230 billion real estate lending market.

The trillion dollars represents Moldow's rough (but catchy) estimate for 2025, based on the many areas where new software-powered lenders could displace banks.

Marketplace lending in its entirety is taking off fast, with almost $9 billion of loans issued in 2014, up from $3.4 billion in 2013 and half a billion dollars two years earlier, the report said

Sitting right in the middle of the action is Matt Burton, co-founder and CEO of Orchard Platform and a first-time attendee of the Moldow dinner.

Burton is taking a pure technology play, providing a platform that lets money managers invest in debt across the various consumer, business, student and real estate loan issuers.

Six months ago, New York-based Orchard saw about $1 million of new capital a day entering the system. That's now up to $6.5 million.

For Burton, a dinner with the leaders in the space means getting to hear from people he often shares the stage with at events but with whom he rarely has the chance to exchange tips, anecdotes and war stories.

One theme he expects to hear plenty about at the meal is the amount of money entering the market from some of the biggest financial institutions across the globe.

"This will be the coming out party for this space with institutional investors," said Burton. "Before, talk about institutional investors in the space was mainly about a handful of specialty hedge funds and BDCs (business development companies). Now, the largest asset managers in the world are aware of this space, and a lot are attending LendIt this year."

To that, the dinner guests will all raise a glass.