Peer-to-peer lending platform Lending Club is announcing a huge new investor today: Google. Google and existing investor Foundation Capital have put $125 million in Lending Club, which was valued at $1.55 billion in the round. As part of this investment Google will take an observer seat on the Lending Club Board alongside existing Board members including Kleiner Perkins' Mary Meeker, ex-chairman and CEO of Morgan Stanley John Mack and former U.S. Treasury Secretary Larry Summers.
The investment by Google came as part of a secondary transaction whereby new and existing investors acquired shares from existing investors. Last year, Lending Club raised $17.5 million from Kleiner Perkins, bringing its total outside investment to just under $100 million. Because this is a secondary round, there is no new money being raised, as Google and Foundation are buying out existing early investors.
Lending Club, which brings together lenders and borrowers who want to cut out banks in the process of investing among peers, has facilitated a total of $1.65 billion in loans. In the last quarter, Lending Club saw $350 million in loans made through the platform, and has generated 22 consecutive quarters of positive returns. Lending Club expects to issue $2 billion in loans this year alone.
The company's wholly-owned subsidiary LC Advisors, an SEC Registered Investment Advisor, has launched several funds in the last 2 years and now has more than $450 million in assets under management.
To put Lending Club's growth in context, when peer-to-peer lending began to establish itself about five years ago, there was a lot of excitement. By taking banks out of the equation altogether to connect investors directly with those in need of a loan, p2p lending almost immediately had tons of appeal (for both consumers and investors). However, thanks to heavy scrutiny from the SEC, companies like Lending Club and its main competitor Prosper faced a few challenges. However, the SEC finally greenlit the model, and Lending Club has been growing ever since.
The company announced last year that it is cash-flow positive for the first time. Last year, the company added 50 employees, including the former Visa head of global development and Morgan Stanley CTO John McIlwaine and E-Trade general counsel Russel Elmer. Lending Club is also reportedly gearing up for a potential IPO in the next year or so.
"Lending Club is using the Internet to reshape the financial system and profoundly transform the way people think of credit and investment" said Google's VP of corporate development, David Lawee. "We are excited to be a part of it."
Having Google (not Google Ventures) as an investor is a huge deal. It's not that often that Google makes a corporate and strategic investment in a company. In fact it's pretty rare. The investment was made through Google's new last-stage investment arm, headed by Lawee. Most recently, Google participated in Survey Monkey's recent funding.
"The Google team is excited that Lending Club could transform the banking space," says CEO Renaud Laplanche. "The company believes that our technology brings better value for consumers.
"By promoting the transparency and democratization of data, Lending Club is opening up tremendous opportunities for disintermediation, which is disrupting the traditional banking model," said Charles Moldow, general partner at Foundation Capital, which has invested $more than $50 million in the company. He adds that the investment was the one of the few largest in the firm;s 18-year history, which is "a testament to the magnitude of the opportunity" for the company.
Laplanche explains to us that this year will be spent continuing to raise awareness for company and grow fast, specifically focusing on helping borrowers with good credit pay off credit card balances, and access lower interest rates from borrowers.
As for the rumors of an IPO, Laplanche confirms that Lending Club is preparing for a potential IPO and hopes to be ready sometime in 2014 for a public offering.