Upgrade, a two-year-old, San Francisco-based consumer lending venture founded by Renaud Laplanche, has raised $62 million in Series C funding led by CreditEase Fintech Investment Fund. The company’s earlier investors also joined the round, including Apoletto, FirstMark Capital, NOAH, Ribbit, Sands Capital, Silicon Valley Bank, Union Square Ventures and Vy Capital. The money brings the total capital that Upgrade has raised to date to $142 million.
It’s easy to appreciate investors’ interest in the company, which already employs 300 people. Since its founding, it says, it has amassed more than 100,000 customers and issued more than $1 billion loans. The average loan size is roughly $10,000.
The company is gaining traction without giving away the store, too. Though the interest rate that it charges compares favorably to average credit card rates of about 18 percent for consumers with good credit, Upgrade still gets away with an APR in the low to mid-teens, charging some customers up to 30 percent interest per year — which is similar to the highest rates on credit cards. Indeed, the minimum credit score that a consumer need have to secure a loan from Upgrade, its minimum is 620, which the credit reporting bureau Experian says falls into the range of subprime borrowers who may be offered less-than-ideal loan terms because of their perceived ability to repay a loan on time.
Yet Upgrade isn’t just making money of potentially risky — and, presumably, many more solid — borrowers. The company also recently introduced a personal credit line that’s a kind of mash-up of an unsecured personal loan and credit card. Borrowers can tap up to $50,000 if, say, they know they’ll need to make a costly home improvement, or (worse) need to pay off other loans. That balance is then converted into an installment loan with a fixed interest rate and a term of up to five years if it isn’t paid off immediately. Those APRs range from 6.46 percent to a whopping 35.9 percent, which might concern someone with a severe aversion to debt, like this editor, but as a business is hard to beat.
Put another way, while the first online lending venture of Laplanche, Lending Club, caters to people who are just beginning to borrow money, Upgrade appears to be focused on a slightly older demographic with more serious lending needs. Asked about this, Laplanche, who was somewhat famously ousted from Lending Club over a governance scandal roughly 18 months after taking the public — he launched Upgrade soon after — says simply that Upgrade building a “mainstream consumer credit brand.”
Its products, he adds, are designed to cater to “broad swaths of the population.”