Renaud Laplanche’s vision for a second generation lending platform seems to have struck a chord with borrowers and investors alike. We learned at LendIt Fintech USA 2018 that the company was originating around $100 million a month at the time, and now has crossed $1 billion in originations
Today, the firm announced their Series C financing round of $62 million, led by the CreditEase Fintech Investment Fund. This new funding round reportedly values Upgrade at $500 million, an impressive number given they made their first loan just 16 months ago.
We spoke with CEO and Co-Founder, Renaud Laplanche, who gave us an update on the business and what is driving investor interest.
The CreditEase Fintech Investment Fund is not a new name to those who follow the fintech space, but many people don’t realize that it is the largest fintech-focused investment fund in the world. The $1 billion fund has participated in every Upgrade round, but this is the first time they are leading a round in a US based fintech. They have chosen to take a more active role in Upgrade and Anju Patwardhan, Managing Director at CreditEase will be joining the Upgrade board.
When we asked Laplanche to give us his perspective on their investment he shared that the CreditEase Fintech Investment fund understands Upgrade’s value proposition of building a second generation online lender.
Upgrade builds upon what he and others have learned over the last decade or so in online consumer lending. Laplanche also believes that Upgrade can become a household name and deliver products to meet all of a consumer’s credit needs. Upgrade was built from the ground up to offer a full range of consumer credit products. They have already made inroads on delivering on that vision with their launch of the personal credit line and Laplanche hinted that development on new products and innovations are well underway.
It’s still early days for the new personal credit line which launched just a few weeks ago, but Laplanche stated that initial interest is high and they have received some positive anecdotal feedback. When the product was first announced we wondered whether a brand new product such of this would cause confusion for some consumers. After all, there has been very little in the way of truly new consumer lending products in decades. The personal credit line product is a hybrid between a credit card and an installment loan taking the best attributes of each product.
Over the coming months marketing on the new product will ramp up across a variety of channels including digital ads, direct mail and partners. Laplanche noted that the product could be marketed towards those looking to do home improvements, cover moving expenses or buying furniture. With each one of these use cases Upgrade could find a relevant partner to help them reach these customers.
One other product that makes Upgrade unique is Credit Health – a suite of credit monitoring and educational tools that help consumers better understand and improve their credit standing. Over 25% of Upgrade’s more than 100,000 Credit Health users actively use the tools each month. This allows Upgrade to make better credit decisions and also allows borrowers to keep a closer eye on how they are doing financially. This is not used as a lead gen tool, but a great way for Upgrade to help their customers (and also declined loan applicants) better understand their credit profile.
In terms of loan performance Upgrade has seen success with their underwriting approach which relies heavily on a borrower’s cash flow. They also believe that Credit Health is playing a role in keeping financial health front and center for current borrowers leading to an uptick in loan performance. What’s unique about looking at free cash flow is it varies significantly across borrowers and takes into account expenses other than debt such as local and state taxes, insurance, cost of living in a specific city etc. With this information, Upgrade is able to make a better assessment on the borrower’s ability to repay a loan.
Conclusion
Upgrade has now secured $142 million in equity from some of the biggest VCs since they first started in 2017. The scale the team has been able to achieve in such a short timeframe is impressive. It’s going to be fascinating to see what Renaud Laplanche has in store for the future of Upgrade as he looks to make his second generation lending platform a dominant force is consumer finance.
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