Google Buys Stake in LendingClub Startup Valued at $1.55 Billion
Google Inc. (GOOG), owner of the world’s most popular search engine, acquired a minority stake in LendingClub Corp. as the peer-to-peer lender closes in on $2 billion in funded loans.
Google was joined by earlier investor Foundation Capital in purchasing $125 million in equity from current shareholders, according to a statement. Google provided the bulk of the investment, Renaud Laplanche, LendingClub’s chief executive officer, said in an interview. The firm’s technology and large customer base made the opportunity attractive, he said.
“We’d be hard-pressed to find another company that has a better alignment with how we are using technology to innovate,” Laplanche said yesterday. “Now that they are onboard, we can start exploring some ideas.”
LendingClub issues loans of as much as $35,000 to help consumers pay off student loans, remodel their homes and take vacations, offering interest rates that are typically lower than credit cards. About 40 percent of the roughly $1.7 billion in loans that the San Francisco-based company has funded have come in the last six months.
Today’s funding, known as a secondary transaction in Silicon Valley parlance, allows early backers to sell some of their equity to new investors and keeps the company from having to issue additional shares. Laplanche and other employees didn’t sell shares in this round, the CEO said.
The deal values the company at $1.55 billion, an almost threefold increase over the $570 million implied in June when venture-capital firm Kleiner Perkins Caufield & Byers led a $15 million investment, Laplanche said.
Google, based in Mountain View, California, is expanding beyond its core search-based advertising business. David Lawee, Google’s former head of mergers and acquisitions, led the investment and will serve as a board observer at LendingClub. Lawee, who remains at Google, also participated in a January investment in SurveyMonkey.com LLC.
“We would all be very disappointed if all that comes out of this is advertising value,” Laplanche said. The partnership is intended to lead to “more ambitious projects,” he said. Laplanche declined to elaborate.
The search firm approached LendingClub initially, Laplanche said. Google spent $291 million on acquisitions and assets during the first quarter and also runs a venture-capital arm called Google Ventures.
LendingClub’s business model, which takes funds provided by retail and institutional investors and directs them to consumers looking for loans, hasn’t been tested by a credit crunch. While the company was founded in 2006, almost all its growth has come since the financial crisis of 2008 and 2009, with the economy on an upswing.
There is also competition emerging. Prosper Marketplace Inc., another startup based in San Francisco, offers a similar peer-to-peer online market and recently received a $20 million investment from Sequoia Capital.
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