LendingClub (NYSE:LC) became a public firm in an IPO held on December 11, 2014 – ten years ago today. At that time, the transition of the high-profile Fintech from a private firm to a publicly traded company was heralded as a coming-of-age moment for the Fintech sector. Gross receipts for the IPO generated around $800 million from the offering. Shares were priced at $15/each, generating a significant return for early investors. One writer called the event a watershed moment. The company was valued at nearly $9 billion.
At the time of the public offering, LendingClub, led by founding CEO Renaud Laplanche, was a marketplace lender that engaged smaller and institutional investors to fund loans for individuals. Today, LendingClub is a far different firm, having shifted from an online lender to a chartered digital bank. While loans are still originated on the platform, the money to fund these loans comes from institutions or the company’s balance sheet.
As for investors who may have held onto their shares following the promising IPO, the coming months and years were not so kind. The valuation of the company declined, compelling the Fintech to pursue a reverse split as it adjusted to the market and its changing business model. Today, LendingClub’s market cap is around $1.78 billion.
While LendingClub is no longer the new shiny of financial innovation, the company has turned the corner of profitability, and share prices have reflected this improvement, moving the valuation higher.
In recognition of LendingClub’s tenth anniversary of becoming a public firm, CI connected with Laplanche – a Fintech OG, who led the company at the time of the IPO and is today the founder and CEO of another Fintech, Upgrade. Rumblings indicate that Upgrade may also be a candidate to trade shares on a public exchange at some point in the near future.
CI asked Laplanche what, after ten years as a public firm, he thought about LendingClub’s decision to go public. Did LendingClub move too quickly to trade shares on the NYSE? Is the transition from online lending to a digital bank the correct path? Laplanche pointed out that LendingClub was the first Fintech IPO, and since then, we have seen many other firms go public, including big names like Square, Affirm, SoFi, Upstart, Robinhood, and others. Laplanche noted that while early private investors made much money, early public investors did not.
“The company went public at about a $5 billion valuation, and despite beating and raising earnings expectations every quarter, was worth about $3 billion when I left,” said Laplanche. “Part of the issue was going public at the peak of the market at very high multiples (over 12x revenue), which put pressure on the stock price as valuations decreased across the board. And yes, we went public too soon as some of the control functions, in particular, did not have the level of maturity and quality necessary to operate as a public company, and part of it. The digital bank – or neobank – path is definitely gaining traction as a business model offering a comprehensive suite of banking and lending products to consumers. It’s still an open question whether having your own bank charter is beneficial or not; some of the fastest-growing credit Fintech companies today (like Affirm and Upstart) do not have their own charter.”
The online lending industry has changed dramatically since its inception. At one point, there were many peer-to-peer (P2P) lenders, then marketplace lenders, and today, few exist. In hindsight, what are your thoughts on the profound changes that have taken place in the online lending sector?
Certainly, the peer-to-peer lending experiment didn’t pan out, shared Laplanche, but marketplace lending has become the norm. It has sparked the creation, growth, and mainstream adoption of the entire credit Fintech industry.
Laplanche noted that currently, very few credit Fintech firms fund all their loans on their balance sheets. LendingClub, SoFi, Affirm, Upgrade, and Upstart all operate either as pure marketplaces or at least sell a significant portion of their loans to investors.
So, how will digital credit and online lending evolve going forward? Will online lending continue to be a standalone product, or will other services be added – perhaps becoming digital banks or neobanks? Is it more advantageous to offer more services instead of specializing in just a few?
“I think the industry is definitely moving toward full-service Fintech, offering a comprehensive suite of banking and credit services. My current company Upgrade is probably the most advanced down that path, offering a full suite of mobile banking products (checking, savings, debit, and credit cards) as well as personal loans, auto loans, BNPL products and home improvement financing. That coverage helps us be top of mind for our customers as they know we can address both their everyday needs and the more occasional financing needs like buying a car or renovating their homes.”
Laplanche said that additional services turn into greater customer loyalty and eventually greater lifetime value. The multiplicity of distribution channels (auto loans through auto dealerships, BNPL through merchants, home improvement through contractors, etc.) also creates more efficient distribution and lower CAC.
Financial services is one of the most regulated industries in the world. All financial firms must be highly cognizant of the pressing need for compliance and the changing regulatory environment. That said, some observers believe financial services are overly regulated, driving higher costs for consumers and businesses. Asked what he would like to see changed or what policymakers have gotten wrong, Laplanche said that, by and large, US regulators have done a good job enacting the right type of consumer protection regulations and focusing on prevention rather than enforcement for the most part.
“It’s hard to get the balance between enabling innovation and protecting consumers exactly right. Among global regulators, I think Singapore is generally doing the best job in that respect.”
Digital assets and blockchain technology continue to drive interest and innovation in financial services. While not all financial firms are engaged in digital assets they are all watching the development of the sector. We asked Laplanche his opinion on distributed ledger technology and digital assets. Is it evolutionary? Or revolutionary? Laplanche is of the opinion that it is “absolutely revolutionary.”
“There is great promise in DeFi,” said Laplanche, “particularly in the developing world where it can help create modern banking infrastructure and financial markets for a fraction of the cost and time it would otherwise take.”
And what about his current venture – Upgrade? Is there a public offering it the company’s future?
“Upgrade is doing extremely well. We serve close to 6 million users; we grew 40% YoY in 2024 and are projecting to keep growing at that pace next year, with revenue exceeding $1 billion. The company was most recently valued at over $6 billion, as investors appreciate our unique combination of proprietary distribution channels, scale, and growth,” stated Laplanche. “We’ll certainly go public at the right time, but to your point, Fintech companies tend to stay private longer nowadays: Klarna was founded 20 years ago and is expected to go public next year, while Stripe, one of the largest US fintech companies, is still private. Interestingly, Upgrade is now four times the size LendingClub was when I took it public.”