Renaud Laplanche is known for his path-breaking startup “Lending Club,” the world’s largest online marketplace connecting borrowers and lenders. He had an ignominious end at Lending Club, but is back with Upgrade, “ a lending company offering credit monitoring for free.” But long before his rise, fall, and return, he started his professional career as an attorney with a New York law firm Cleary Gottlieb Steen & Hamilton. After quitting the law firm, he started his entrepreneurial journey with “TripleHop Technologies” in association with Franck Nazikian. In 2003, TripleHop launched MatchPoint crawler and search engine for enterprise content and soon became the preferred search engine among the big U.S. media companies. Oracle Corporation bought it in 2005 and Laplanche made a reported $10 million from the acquisition. He moved to California to work as head of product management at Oracle before quitting to launch Lending Club in 2006.
Laplanche studied business and law. He received a post-graduate DESS-DJCE (J.D.) degree in Tax and Corporate Law from Université de Montpellier, Montpellier, France, and an MBA degree from HEC Business School in Paris, France, and London Business School.
Renaud Laplanche and Lending Club
Laplanche saw an opportunity in the massive gap between what was being offered to savers on their deposits versus what was being charged as interest on their credit card debts. He developed a platform where borrowers and individual lenders could meet directly by eliminating banks as intermediaries thus delivering lower rates for borrowers and higher returns for lenders. Lending Club was born in 2006 and the prototype was launched on Facebook to test user’s trust and readiness to help each other. After receiving $10 million in Series A from Canaan Partners and Norwest Venture Partners, the company raised multiple rounds from storied names like Foundation Capital, Union Square Ventures, and Kleiner Perkins Caufield and Byers. Laplanche took Lending Club to new heights and grew from facilitating a mere $4.8 million in loans in 2007 to $6.2 billion in origination in 2014.
Lending Club IPO
In late 2014, Lending Club became the first-ever online lending platform to offer its shares in an initial public offering (IPO). With shares priced at $15, the company managed to raise $870 million in its IPO, valuing the company at $8.9 billion.
It was on the list of CNBC Disruptor 50 for two consecutive years (2013, 2014) and achieved another major milestone under Laplanche by facilitating over $16 billion in loans in 2015.
Awards and Recognition
In 2014, Laplanche won the Economist Innovation Award in the consumer product category and was also named “best CEO to work for” by Business Insider. In 2015, he was ranked in the Bloomberg Markets’ Most Influential List, an annual list that includes 50 of the top leaders in the field of technology, finance, and politics around the world.
Downfall of Renaud Laplanche
In May 2016, he was asked to resign because of corporate governance irregularities. It was not a single incident but a series of events that led to his downfall. An internal review discovered a change in dating of a $3 million loan, and there was also a case of mis-selling of $22 million in loans. It was reported that documents had been falsified, and the probe also revealed that Laplanche and his family took out 32 loans from the Lending Club platform in late 2009 to boost the company’s loan volume, just four months before the closing of a round of venture capital funding. Laplanche had also owned a stake in a fund called Cirrix Capital; Lending Club bought an interest in Cirrix at Laplanche’s urging without knowing that he was a limited partner in the fund.
The effect of his ouster was felt immediately by Lending Club’s share price as it plunged by 27% to $5.17 in pre-market trading.
Wasting Little Time
Laplanche is back with his new startup Upgrade, within one year of his acrimonious ouster from Lending Club.
Upgrade is an online lending platform that creates a happy union of personal loans with free credit monitoring. He has partnered with Soul Htite, the founder of Chinese online lender Dianrong along with Jeff Bogan who was head of investor group at Lending Club. The startup raised $48 million in equity and $12 million in convertible notes from Union Square Ventures, Credit Ease, FirstMark Capital, Noah Holdings, Ribbit Capital, Sands Capital Ventures, Silicon Valley Bank, Uprising, Vy Capital and Apoletto. The company was given a cool $120 million pre-money valuation by investors. It has roped in WebBank of Salt Lake City, Utah to issue loans; part of the total loans will be bought by Upgrade and will appear in the company’s balance sheet while the rest of the loans will be sold to investors.
Loans originated on the Upgrade platform can be purchased only by accredited investors, thus moving away from the business model he successfully used at Lending Club. The startup will also be using Jefferies for advice on capital market strategy. Jefferies is expected to participate in loan purchases, as well.
After learning from his past mistakes at Lending Club, Laplanche put extra emphasis on compliance management and internal control. Therefore, he is using blockchain technology to create “time-stamped, immutable transaction records.”
Will Upgrade Live Up to Its Hype?
Avant has tried before what Upgrade is trying to accomplish now, when it acquired debt consolidation tool ReadyForZero. But it was shut down within a year because it did not yield enough business. But Laplanche is a pioneer and has been able to gather a star-studded team at Upgrade. If anyone can change the landscape of the industry, it is the guy who is credited with creating the industry in the first place.
Despite all the potential, there are multiple tailwinds in this highly competitive online lending market. Margins have shrunk considerably, and with the presence of already established players like Lending Club ($25 billion in loan origination), SoFi ($20 billion in loan origination), and banks launching their own platforms, it will be interesting to see how Upgrade chips into their market share.
For now, odds seem stacked against Laplanche, who once quite literally stretched the boundaries of traditional banking and created a new ecosystem of “marketplace lending.” Whatever the results of Upgrade, he will be recognized as a true leader of the alternate lending industry.
Written by Heena Dhir.