LendingClub Files for IPO

September 2014 by: Alpha Tech

While most eyes are locked on to Alibaba’s imminent IPO – relatively few are paying attention to the upcoming market debut of a startup that is disrupting the financial services industry. LendingClub, a peer-to-peer loan marketplace, has just filed documents for an IPO to raise up to $500M.

Founded in 2007 by serial-entrepreneur Renaud Laplanche, San Francisco-based LendingClub aims to create a lower cost and more efficient alternative to the traditional banking system by providing lower rates to borrowers and better returns to investors (see video). Through the use of technology (software algorithms and an online-only model), the company lowers its costs to provide a credit marketplace for investors to provide loans to creditworthy borrowers. Instead of deploying its own capital but rather acting as a matchmaker, LendingClub charges 1-6% of the principal amount of loaned monies and charges investors a small fee (management and servicing fees).

The company posted net revenues of $87M for the first 6 months of 2014, up from $37M a year ago, and posted a net loss of $16.5M for the same period, down from a profit of $1.7M from the same period last year. To date, the company has raised almost $400M in funding from the likes of BlackRock, KPCB and Canaan Partners. In its latest funding round in April 2014, the company was valued at nearly $4B but analysts are expecting it to seek a higher IPO valuation.

Our Take LendingClub’s stellar growth (see figures) are testament to the disruptive effect the company is having on the financial services industry and institutions that find the P2P lender’s role too difficult or expensive to perform. The current climate of anemic interest rates and high credit fees putting a damper on savers and borrowers respectively are certainly playing to LendingClub’s favor. Technology certainly is leveling the playing field for new entrants of all shapes & sizes and banks may find competition on multiple fronts making their full-service business model unsustainable. But could LendingClub’s success be the root cause of its downfall as sophisticated hedge funds and financial institutions are drawn to the space? With today’s diversity in credit and investment needs, we certainly think there is room for all to play.