Benner on Tech: Lending Club, Apple Protests and Stanford VCs

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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People are Talking About…

A day after Lending Club raised a larger-than-expected $870 million in an initial public offering, its stock continues to rise. As my colleagues Leslie Picker and Noah Buhayar note, the stock gained 56 percent in its first day of trading, giving the peer-to-peer lender a higher value than all but 13 U.S. banks.

That initial success has helped fuel interest in other lending startups, such as OnDeck Capital and Max Levchin’s Affirm.

But I’d caution against using Lending Club as a proxy for the alternative lending industry at large.

For starters, Lending Club is a pure marketplace, meaning that it matches lenders and borrowers, but doesn't take on any underwriting risk itself. It’s not unlike how Uber or TaskRabbit match service providers with customers. If a borrower can’t pay, the lender, not the platform, gets dinged. The company also worked with regulators to build an SEC-approved business, a position that many finance startups have long eschewed.

Lending Club’s proprietary credit ratings system, which is used to vet borrowers, seems to be working well. (Of course, only time will tell.) Each startup eager to follow in Lending Club's footsteps will have a proprietary system, and I doubt they’ll all perform well.

Perhaps most importantly, Lending Club has been able to restrain its lenders' hunger to bring potentially more profitable, but riskier, borrowers onto the platform (most of Lending Club's lenders are hedge funds).  Many of those hedge funds would be happy to make higher yield, risker loans to borrowers with lower credit ratings who have a higher chance of default - a move that would surely increase volume and also increase risk to the business and the brand.

Canvas Venture’s Rebecca Lynn, who led the Series B investment in Lending Club, said in an interview, “Lending Club has been pretty focused on the quality of the products it's been offering and it knew it didn't want to go down market in loan quality.” Resisting that temptation has also contributed to Lending Club’s success; but it’s a balancing act that other companies might not handle.

** Bonus: Equity Zen has an infographic that shows returns for early Lending Club backers like Canaan Partners and Morgenthaler Venture Partners (now Canvas).

** Readers write about Uber:

Mike: Enjoyed the story.  Perhaps as a follow up a focus on cancelled rides might be interesting.  In every major city I've been to, cancelled rides by the drivers are becoming more prominent and the inability to leave negative feedback in those cases misrepresent the star ratings Uber relies upon.

Russ: uber is napster and lift and other mobile apps that follow the local laws will dominate - the business is already moving in most cities to have licensed taxis have mobile apps.

Ventureland

New Relic raised $115 million in its initial public offering today. The shares were priced at $23 each, which valued the app analytics company at just under $1 billion.

Hortonworks raised $100 million in an IPO. The shares were priced at $16 each, which valued the big data startup at $665 million. As my colleague Jack Clark points out, the company was valued at $1 billion in its last venture fundraising round from investors including BlackRock and Passport Capital.

Fotolia, the stock photo site backed by KKR and TA Associates, has been purchased by Adobe for $800 million.

Wealthfront put together a venture capital primer.

Uber overseas…

** The company suspended operations in New Delhi following accusations that one of its drivers raped a passenger. The company is taking time to review processes in that country to address issues that are specific to the Delhi market.

** It may also receive a big $600 million investment from Chinese Internet company Baidu, as it seeks to compete with the dominant local ride hailing services Kuaidi Dache and Didi Dache. Baidu should be able to provide cash and local market expertise. As I wrote in a column yesterday, there’s no guarantee that Uber can successfully build a global ride hailing brand, largely because it hasn’t taken time to understand the quirks of local markets around the world.

** If your Uber driver sexually harasses you in London, you might get a 20 pound credit in your account.

People and Personnel Moves

Ev Williams -- one part Twitter co-founder, one part honey badger – does not “give a sh*t” that Instagram has more users than Twitter, according to Fortune.

Companies

Apple…

** Protesters led by the Reverend Jesse Jackson and United Service Workers West took to Apple's campus to decry working conditions for the hundreds of service employees that maintain the property, reports the San Jose Mercury News. The laborers who maintain the grounds, kitchens and other facilities are often contract workers who earn low wages and get few of the benefits afforded to Apple employees.

** Apple.com, the second largest online retailer in the U.S., is now accepting PayPal for shoppers in the U.S. and the U.K., Re/code reports.

** Jury deliberations could begin next week in the iPod/iTunes antitrust case, says CNBC.

** Canada's Competition Bureau is investigating accusations that the company struck anti-competitive deals with domestic wireless carriers, according to Reuters.

** The discontinued iPod Classic is quickly becoming the most expensive iPod you can buy.

Best Buy…

Is bad at tweeting.

Facebook…

** The social media company wants a New York appeals court to block search warrants asking it to turn over information from 381 customer accounts, Bloomberg reports. Manhattan District Attorney Cyrus Vance Jr. obtained the warrants as part of a disability-fraud probe. Facebook says that they violate the Fourth Amendment.

** Oculus VR has acquired startups Nimble VR and 13th Lab. Motion capture expert Chris Bregler will also be joining the team.

Google…

The search company has shut down its office in Russia, reports the Information’s Amir Efrati. He says the move could be related to the government’s decision to keep data related to its citizens in Russian data centers.

Microsoft…

The Xbox posted record sales in November, bypassing the PlayStation 4 and Wii U, Geek Wire reports.

Cybersecurity

Hackers are getting better at hiding where they’re from, writes the Wall Street Journal’s Danny Yadron.

News and Notes 

Intel, Qualcomm, IBM and nearly 60 other companies penned a letter to Congress and the FCC opposing the move to reclassify broadband service under Title II of the Telecommunications Act, the Verge reports.

Corporate tax breaks are often sold as a way to encourage companies to reinvest in people and technology. But tax breaks at AT&T and Verizon didn’t produce more jobs or more investment, according to the Wall Street Journal.

Officials in Chicago and New York want to build Uber-like apps that let riders summon cabs with the touch of a smartphone button, the New York Times reports.

Weekend Long Reads

The NYPD is using social media to help put teens behind bars, according to an in-depth report from the Verge.

Stanford is the alma mater for students who want to close a round as much as they want to get a diploma. Sarah McBride explored that dynamic in a special report for Reuters.

The dedication can come with a price. Last year social gatherings at the suite, Griffin 304, were rare. A small fridge held mostly soda, not beer. For most of the academic year, Barber was the only roommate with a regular girlfriend. One of his roommates, Jesse Leimgruber, complained that girls drain hours in the late evening, “the most productive time for a startup.”

Some on campus find the industry’s reach troubling. The students’ focus on doing business, they say, distracts from the scholarly mission of college and opens up instructors to potential conflicts of interest. The venture money also provides a temptation to drop out.

Watch This

Megan Smith, U.S. Chief Technology Officer and early smartphone pioneer, talks about her life and work. On women in tech she says: “Women have always done these jobs… even if they’ve been written out of the stories.”

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
Timothy L. O'Brien at tobrien46@bloomberg.net