Google Moves Into Finance with LendingClub Stake

LendingClub, operator of a peer-to-peer site for personal loans, has sold a minority stake to Google in a transaction that values the fast-growing startup around $1.5 billion.

Google’s investment came as part of a secondary transaction, in which existing backers sold about $125 million worth of equity to the search giant and other investors, including Foundation Capital. Previously, six-year-old LendingClub had raised about $96 million from investors including Canaan Partners, Bay Partners, Foundation, Kleiner Perkins Caufield & Byers, Morgenthaler Ventures and Norwest Venture Partners.

LendingClub CEO Renaud Laplanche says the secondary transaction came about because the company was not looking to raise more operating capital, but did want to make room for Google to come in as a strategic investor. In particular, Laplanche says, he’s hoping LendingClub can draw from Google’s technical expertise as it works to scale from its current run rate of about $2 billion in loans annually.

Laplanche didn’t detail any particulars about planned collaborations between his company and Google, but said there were numerous projects discussed during contract negotiations, details of which will be released at a later date. David Lawee, Google’s vice president of corporate development, will also take an observer seat on the Lending Club Board.

The move into the lending sector appears to represent a somewhat novel strategic move for Google, which Laplanche says has not, to his knowledge, made a previous investment in the lending sector. That said, he sees plenty of reason why it would hold appeal.

“It’s one of a few industries that have not been fully transformed by the Internet,” says Laplanche, who says he envisions LendingClub applying a disruptive model for financial services similar to “what Amazon.com did for books and CDs and Expedia did for travel agents.”

San Francisco-based LendingClub markets itself as an alternative to traditional banks for borrowers and lenders. Borrowers apply for personal loans up to $35,000, which they pay back at an interest rate that averages a little under 7% for those with strong credit histories, according to the company website. Lenders, meanwhile, see their money distributed across a basket of individual loans, with the vast majority earning an interest rate between 6% and 18%.

As LendingClub has become more established, Laplanche says, it is attracting a wider cross-section of lenders. Wealthy individuals have long been a key source of loan capital, he says, but more recently, larger investors, such as insurance companies and pension plans, have also been staring to invest in the platform.

Image courtesy of LendingClub.