Analysis Featured

Will Upgrade Live Up To Its Name?


It can be argued that the same qualities that make Renaud Laplanche a world-class yachtsman are also those that make him the type of innovative thinker and driven doer to be a world-changing captain of finance. It can further be surmised that these qualities are what brought about the loan irregularities that led to Laplanche’s resignation from Lending Club in 2016.

The thing about elephants in the room is that they are sometimes so large that we forget that there are other things in the room. In this case, those other things are Laplanche’s proven record as a pioneer in fintech.

From its beginnings in 2006, as one of Facebook’s first applications, Lending Club continuously set records. A peer-to-peer lender (P2P), Lending Club was designed to leverage existing connections among users. The idea paid off in spades.

It was the first P2P lender to register its offerings as securities with the SEC, which opened the door for it to become the first lender to offer loan trading on a secondary market. It is the world’s largest P2P lending platform with more than $20B in loans to Americans to refinance debt at lower rates and pay off credit card debt with personal loans with fixed and lower rates. It raised $1B in the largest tech IPO in the U.S. in 2014, and, as of April of this year, the company had raised nearly $400M through 14 funding rounds. The result of all of that was nothing short of this: Two million American families have access to more affordable credit due to the company’s efforts.

And when he speaks of the problems that brought about his exit from the company, Laplanche details just how a driven person of business, a proven winner who sometimes lets his gut get out in front of his reasoning, might be entangled by issues in a new world of thought and an ever-changing world of technology.

“What I learned was that we had a compliance issue, and it reinforced in my mind how critical compliance is when you run a financial service. With fintech companies, the balance is critical. We want technology attributes and to generate a culture of trying things that have never been done before. You have to balance that with discipline and compliance, risk management. That balance is really hard to strike. At Lending Club, we were trained to find the right balance, and we were very focused on compliance, but not sufficiently.”

Laplanche Launches Upgrade

And also like a winner of races, Laplanche couldn’t stay out of the game long, and thus we have Upgrade. Launched in April with co-founder, Jeff Bogan, who made the move from Lending Club as well, Upgrade is a Series A early stage venture, which offers a one-page application and a decision within seconds and causes no negative to the credit score, whatever the decision. The company sports an online lending platform that combines personal loans with free credit monitoring, helping the borrower to secure more affordable credit in the long run.

Offering loans up to $50,000 and with available repayment periods of 36 and 60 months, Upgrade offers low fixed rates, low monthly payments, and no prepayment fees.

Looking at those attributes, it’s evident why Laplanche and Bogan chose to call the company Upgrade. A lot of the information on the company resembles what Lending Club must have looked like a decade ago. It’s all similar except for the upgrade, of course. And what is the upgrade?

The upgrade is the use of technology for credit monitoring tools to give what Laplanche refers to as “a new standard of transparency.” By combining the credit monitoing features of a service like Credit Karma with a Blockchain protocol to protect data integrity—plus working on a process to create “an immutable timestamp record of every borrower transaction by committing each document to a public ledger”—Laplanche states the company goal of a “very strong record and the establishment of better data integrity.” He also says that he and his partners at Upgrade have taken their “experience and everything [they’ve] learned to design version two of online lending, technology that wasn’t available to them 10 years ago, which will make the company more efficient and valuable to customers.

Laplanche and Upgrade Look Into the Future

Things seemed off to a good start for the company in March when the initial funding round raised $60M from 10 investors including Union Square Ventures, Sands Capital Ventures, and Silicon Valley Bank. Things have been slow going since then, however, and Laplanche tells us that was because they “spent the first few months testing the compliance framework with management.” Having made some changes based on data in late July, he says the company then “felt ready to upscale and started ramping up.” When we asked if he could share with us the company’s main performance numbers he said the company has not reached the point when it is ready to start releasing performance data publicly.

Laplanche’s Thoughts on the Future of Online Lending

Experts project $200B in worldwide loan originations by 2020, and Laplanche doesn’t see Upgrade having any competition in the market in which online lenders continuing to capture market share; rather, he sees the company’s main competition coming from the inertia of consumers doing nothing about the trillion dollars in outstanding credit card balance that currently exists in the U.S. “We educate consumers on the fact that a credit card balance is essentially a loan, and since it is a loan, you can refinance at a lower rate.” We use “modern technology and online delivery to lower costs. We pass that on to consumers and help them save money on their credit card bills.”

Laplanche’s zeal may have caused him to move too fast and overlook some things he should have seen at Lending Club, but his caution and due diligence in these first few months of Upgrade indicate that he has seen his error and is focused on doing the things to not repeat it in the future. So, if there’s a race to see which fintech companies can grab a good share of this expanding market, Laplanche probably isn’t someone we should count out without serious consideration.


Written by Paul Keenan.


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