|Power Score: 43.25||Momentum Score: 14.00 (9)||HQ: San Francisco, CA||CEO: Scott Sanborn|
Valuation: $2.15 Billion (+86% YoY)
Amt. Raised: $1.13 Billion
Lobbying Spend: $0
Industry Orgs: Structured Finance Association, American Fintech Council
Headcount: 1,359 (+6.5% YoY)
Engineering Headcount: 224 (+9% YoY)
Big Tech Experience: 3.3%
Open Roles: 116
R&D Spending: n/a
Patents Applied For: 0
Patents Owned: 19
Acquisitions: Radius Bank (February 2020)
Exec Team Exits: Bahman Koohestani (CTO)
Diversity Data?: Yes
LendingClub is a good reminder that high-flying fintech companies with next-big-thing business models will eventually need to make a consistent profit. The company was one of the first to give loans to a new category of sub-prime users, benefiting from a lack of brick-and-mortar expenses, an easy-to-use interface that made it attractive for consumers and a peer-to-peer lending model that meant the company didn’t need to hold capital reserves. But ever since its highly anticipated 2014 IPO that heralded the company as more tech and less consumer finance, LendingClub has failed to live up to the hype. The company is worth less than one-eighth what it was at its peak in late 2014 after years of slower-than-expected growth, a lack of investor appetite for its risky loans and issues with its lending process that cost the company millions.
Following years of disappointing results for investors, LendingClub looked like the comeback kid with its 2020 announcement of the acquisition of Radius Bank, which gave the company a bank charter and the chance to combine its loan business with a burgeoning challenger bank. The company completed the acquisition in 2021, entering into competition with its competitors that are also vying to combine innovative loan programs with neobanks. Despite the success of the purchase and the division’s relatively high margins, the company’s stock has been hammered in the recent market selloff as investors increasingly question the high premium they are paying in return for promise of future profits (LendingClub was still trading at 94 times earnings during the collection period, though it expects 7x higher net income in 2022).
Since the Radius Bank acquisition, LendingClub has been busy finding ways to best leverage the company’s assets to bring them in line with its overall strategy to target “everyday Americans” rather than the high-income market that LendingClub has historically found success in. The company announced in January that it would end Radius’ yacht loans business and reevaluate their relationships with several fintech partners that cater to the upper class, though it did not specify which partners that would include. The company is also expanding its auto refinance and purchase financing businesses, both of which cater more directly to the middle class and are easier to tackle now that the company has funding from its banking division.
They Said It
“Consumers want financial services that are seamless and on their terms, and they want personalized and predictive tools and information so that they can make better and faster decisions.” – Sanborn on a January 2022 earnings call
Return to the Consumer Lending Power Index here.