Have you ever wondered why a bank charges an 18+% interest rate on credit card balances (regardless of credit history), but only pays depositors 1% on their balance? These are fantastic economics for bank management and bank stockholders, but not for borrowers or depositors. We believe it is a market inefficiency ripe for innovation and disruption.
Renaud Laplanche noticed this inefficiency and in 2006 he founded Lending Club. Lending Club is the leading Internet marketplace for lenders and borrowers and expects to originate over $300mm in loans this fiscal year. The company is growing rapidly and it will not be long before Lending Club is originating more than $1bn in loans annually.
While Lending Club offers personal loans to people with a variety of borrowing needs, its primary class of borrowers are credit-worthy consumers who were paying high interest rates on credit card balances. The Lending Club platform allows consumers to refinance their debt with lower interest rates and offers investors direct access to these high quality borrowers. The company has built a sophisticated risk model and offers excellent risk-adjusted returns, currently in the range of 6-12%. If you are an investor, you should take a look.
Lending Club has built a terrific business and we are excited to announce that our Opportunity Fund has led a $25 million Series D financing round. This is the first Opportunity Fund investment in a company in which USV was not an early investor.
One of the many great things about Lending Club is the company's transparency. The website offers easy-to-understand information about the lending platform, credit risk and default rates. Moreover, in early 2008 Renaud made the tough decision to register its borrower notes with the SEC. As a result, Lending Club files public company reports and prospectuses. You can learn a lot more about the company here.
Renaud has built a superb senior management team and we have no doubt that Lending Club is at an inflection point. We're excited to be an investor. The company is always seeking strong talent and if you're interested, check out its jobs board.