Renaud Laplanche had a terrible no good very bad 2016. But the founder and longtime CEO of Lending Club is back with a new lending startup called Upgrade, along with the support of investors who’ve provided the company with $60 million in funding.

It’s a comeback that’s been roughly one year in the making.

It was in May of last year that Laplanche, who founded Lending Club in 2006 and took it public in late 2014, was forced to resign from his role as CEO. According to reports at the time, the company’s board lost faith in Laplanche after it was informed that $3 million in Lending Club’s loans had been sold to the bank Jefferies with falsified dates, and that Laplanche himself had undisclosed conflicts of interest.

Specifically, reporters were told, Laplanche owned a stake in a fund called Cirrix Capital in which Lending Club later bought an interest at Laplanche’s urging — unaware that he was a limited partner in the fund.

The board later acknowledged in a regulatory filing that some but “not all members” of the risk committee were aware of Laplanche’s investment.

Laplanche’s role in an approved stock buyback was also reportedly under investigation by the SEC at one point.

Laplanche said he wasn’t available to answer questions for this story, but in a Dealbook interview he disagreed with the board’s characterization of the problems at Lending Club last year and declined to discuss the issue further.

A source close to Laplanche further says he doesn’t think that Laplanche was ever “personally being investigated” by the SEC.

Either way, Laplanche wasted little time in launching a rival to Lending Club. By August of last year, Laplanche and several Lending Club veterans — including Jeff Bogan, who was among a group of senior managers who also stepped down or were dismissed when Laplanche resigned — rented offices in downtown San Francisco and began reaching out to financial institutions about their vision.

They also started phoning investors.

Those calls seem to have borne fruit. Upgrade is revealing today that it has 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, which is the low-flying, early-stage venture vehicle of billionaire investor Yuri Milner.

A source close to the company says the investors assigned Upgrade with a pre-money valuation of $120 million, suggesting they own a third of the company.

An “Upgrade” on Lending Club

Investors aren’t buying into a peer-to-peer lending company, as Lending Club was in its earliest days, before it began to rely heavily on Wall Street investors to fund the loans on its platform.

This time, the company is working exclusively with financial institutions, including, notably, Jefferies, along with three other unnamed financial institutions.

The issuing bank, WebBank of Salt Lake City, Utah, will issue loans to borrowers once they’re approved by Upgrade and these other investors have committed to fund the loans, which are expected to range from $2,000 to $50,000 and be used primarily to pay back credit card debt.

Upgrade will also be aggressively marketing tools that help users understand and improve their credit score, which need be 620 at a minimum to secure a loan from the outfit. Says the source familiar with Upgrade’s thinking: “Think of it as Lending Club plus Credit Karma,” a credit monitoring company that’s rumored to be an IPO candidate this year or next.

Whether the combination is enough to convince potential customers to try the service remains a big question mark.

Borrowers seemingly won’t be saving more money than they might elsewhere. According to the service Bankrate, it’s possible for a borrower with excellent credit to land a three-year loan at a 4.29 percent APR. Meanwhile, Upgrade’s interest rates range from 5.66 percent for a person with excellent credit, to an onerous 35.97 percent for a borrower with a riskier profile. (In fairness, lenders sometimes feature a very aggressive headline rate like 4.29, yet few qualify for it.)

Another big challenge for Upgrade is the current landscape. The market for online lending companies is far more crowded than when Laplanche started Lending Club, and once-nascent peers like SoFi have gained significant mindshare in recent years, making it tougher for new entrants.

Still, the market opportunity remains enormous.

According to the Federal Reserve, the U.S. consumer lending market is a $3.5 trillion business, yet only $36 billion in loans was made online in 2015. Given how fast even a small slice of that market can add up, it’s no wonder that Laplanche is back and readying for a fight.



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