Last night at Bloomberg’s San Francisco headquarters, Kleiner Perkins partner Mary Meeker took to the stage to deliver one of her famed presentations on the prevailing trends in the tech ecosystem. It was a somewhat unexpected mid-year update, which elaborated on her annual report published earlier this summer, and discussed the continuing strength of mobile, the skyrocketing adoption of Android phones and iPads, among other things. Josh has the full breakdown here.
However, buried under the buzz over Meeker’s trends report was an announcement from Lending Club that is worth some ink. The Kleiner-backed company, which has become one of the largest platforms for investing in and obtaining personal loans, announced last night that it has now enabled more than $1 billion in personal loans. Thanks to increasing revenue from loan originations and servicing, the company also announced that it had become cash-flow positive for the first time.
In the five years since its founding, Lending Club has today helped 80K borrowers pay off their debt and has grown its pool of investors to 45K, who now see an average return on their investment of between 5.7 percent and 13 percent.
The company’s facilitated loan volumes have doubled each year since its founding and are on pace to triple in 2012, with $82 million in personal loans facilitated in October alone. To date, the company has paid out $85 million in interest and has seen 21 consecutive quarters of positive platform returns, which looks pretty good in comparison to playing the stock market or relying on an S&P 500 ETF.
Essentially, Lending Club proposes to help consumers reduce the cost of traditional banking by offering them better rates than they’d find with typical credit card structures — and, in turn, offering investors better returns. The growth of the platform has unsurprisingly been fueled by the former, given the financial collapse in 2008 and the ensuing credit squeeze. While the platform allows users to receive loans for most purposes (up to $35K), like to find a wedding or pay for their car or motorcycle, the most popular target is credit card debt, with 72 percent using their personal loans to pay off credit cards.
Peer-to-peer lending is a somewhat new form of borrowing (and asset class) and has received its fair share of doubt and skepticism as a result. The idea can be anxiety-producing in and of itself, especially as regulations limit the states in which one can take advantage of Lending Club, as well as putting limits on creditworthiness, like income and net worth — depending on the state.
For those who enjoy underdog stories or classic startup-undermines-big-company tales, Lending Club is one to watch. Of course, the company is far from deserving all of the credit, there are a number of peer-to-peer lending sites that are helping whittle away at the armor of big banks, which have been able to consistently keep rates in their favor. Companies like On Deck and Prosper, for example, are doing their part as well.
The growing popularity of the peer-to-peer model and Lending Club’s take on it have enabled the company to raise over $100 million in venture capital and add 50 employees in 2012, bringing its staff to 150. The company has also attracted some big names this year, including the former CEO of Morgan Stanley, John Mack, who both invested in Lending Club and joined its board of directors (along with Mary Meeker), along with hiring former Visa head of global development and Morgan Stanley CTO John MacIlwaine and E-Trade general counsel Russell Elmer.
Lending Club brings together investors with creditworthy borrowers, reducing the cost and complexity of traditional lending to offer borrowers better rates and investors better returns. Focusing on prime and super-prime quality borrowers enables Lending Club to provide investors with steady returns, even during the economic downturn. Lending Club Notes have provided investors with a Net Annualized Return by grade between 5.73% for A grade Notes and 11.56% for G grade Notes. Creditworthy borrowers can borrow up to $35,000 with...