First, let me say this is not an April Fools joke. This announcement is legitimate news. Lending Club has just announced that Google is the lead investor in a $125 million secondary round that also includes existing investor Foundation Capital.
Being a secondary round means that none of the $125 million is going into Lending Club’s coffers. Several existing investors have sold off a small portion of their shares to Google and Foundation Capital although I have been told that nobody sold more than 20% of their shares.
I chatted with Lending Club CEO, Renaud Laplanche, earlier today about this investment by Google. The first thing I asked him about was Lending Club’s new valuation. While this is not part of the official press release he did share with me that this secondary round valued Lending Club at $1.55 billion.
That is a very impressive number. The last funding round at Lending Club was 11 months ago when Kleiner Perkins made a $15 million equity investment that valued the company at $540 million. The current valuation is roughly triple that number. No doubt some of the early VC’s have done very well offloading just a small portion of their Lending Club shares.
Google Approached Lending Club
I was curious about how the Google deal came about – did Lending Club go to Google or vice versa. “Google approached us because they were intrigued by the kind of disruption that Lending Club is doing in the banking industry,” said Laplanche. “In some ways it is similar to what Google has done to disrupt advertising – making it more efficient, more transparent and more consumer friendly.”
Google wanted to be involved but Lending Club didn’t really need to raise additional capital; they are generating cash every month and have a strong balance sheet. So Laplanche went to Lending Club’s existing investors and asked if they would be willing to sell some of their shares. Several of them agreed.
Google will have an observer seat on Lending Club’s board (there are no available board seats) where they will be represented by David Lawee, who until recently was head of corporate development at Google but who now oversees their late stage investment group according to this article from Reuters. But the collaboration between the two companies will go far beyond that.
“We are going to be working together with Google on a number of different ideas focused primarily on the borrower side of the business,” said Laplanche. When I tried to press him further on details he was coy only saying that it was “something more ambitious than just borrower acquisitions.” What that means exactly is hard to say. Google has their hands in so many areas including the new Google Wallet initiative that the options are endless. It will be very interesting to see what develops here.
Moving Steadily Towards the Mainstream
Google is one of the highest profile and most valuable companies on earth. The fact that one of the world’s leading companies pursued an investment in Lending Club is big news for p2p lending. It further cements Lending Club as the world leader in this space and is another step towards the mainstream for p2p lending.
What do you think? I am interested to hear your reaction as well as any ideas that you think might come from this new collaboration.