Great news today – Lending Club has a fantastic new equity investor and partner in USV (Union Square Ventures), one of the top venture capital firms in the country and an investor in some great companies like Twitter, Zynga and Foursquare. You can hear from Fred Wilson and John Buttrick on why they chose to invest in us. While we weren’t actively looking for new investors, this partnership and capital will allow us to accelerate our pace of innovation and growth and to add more value to both our borrowers and investors. Our existing venture investors, including Canaan Partners, Foundation Capital, Morgenthaler Ventures, and Norwest Venture Partners all participated in the round as well.
Lending Club Blog
In an era of social networks and blissful sharing over open platforms like Twitter, Facebook and Yelp, we have grown accustomed to sharing more about ourselves. At Lending Club we embrace new technologies and open communication, but also provide a financial service that calls for a higher level of privacy and identity protection.
Lending Club investors have the ability to ask questions of potential borrowers before committing investments into their loans. This ability has raised concerns in terms of protecting the privacy and identity of both borrowers and investors. These concerns led us to adjust our Q&A mechanism for the benefit of both borrowers and investors.
Starting tomorrow, investors will only be able to ask questions from a predefined set that was created based on the most frequently asked questions logs over the last 2 years and reviewed and edited by our compliance team. As an investor, feel free to submit additional questions that you would like to see added to list to firstname.lastname@example.org.
As always, your comments are welcome as we continue to make improvements to our platform.
Image courtesy of Sean MacEntee.
We’ve been hearing much about quantitative easing recently. What exactly is quantitative easing, and more importantly what does it mean for you as an investor?
The Federal Reserve is expected to announce a second round of quantitative easing (dubbed “QE2”) at its next meeting on November 3. Quantitative easing means that the Fed, which can no longer lower interest rates –which are already close to 0% - to stimulate growth, will inject more liquidity into the economy by buying government debt and mortgage-backed securities. The notable difference between QE2 and the previous round of quantitative easing implemented earlier this year is that the Fed might also buy corporate debt this time around.
The likely impact of another round of quantitative easing is higher bond prices and lower yields. Historically, the role of fixed income instruments such as corporate bonds and the Prime Consumer Notes offered by Lending Club was to offer a dampener to overall portfolio volatility, while also providing investors with sufficient current income to either reinvest or spend. However, today’s world offers very little in terms of current income given historically low rates. Your return from many fixed income instruments, such as bond mutual funds, is now heavily dependent upon future price appreciation/depreciation, rather than current income.
Yields on most fixed income instruments were already near all-time lows and the next wave of quantitative easing will likely result in even lower yields. So, where can fixed income investors go to get yield?
In the chart below you can see a traditional fixed income yield spread analysis that highlights the BA Merrill Lynch High Yield Master Index, Lending Club Notes, and U.S Treasuries (3-5 year durations). The Treasuries are represented here as the baseline. What the data show is that spreads on high yield corporate bonds have fallen a great deal and are now back to pre-crisis levels, while the spreads on Lending Club’s notes remains very large.
Today, Lending Club has lowered rates on its personal loans in response to the overall economic environment, and in an effort to continue attracting prime and super-prime borrowers, who typically make decisions based on rates and monthly payments. Even after taking into account today’s rate reduction, the yield spread on Lending Club’s Prime Consumer Notes remains near all-time highs. Our Notes also offer a relatively unique opportunity to earn current income in today’s market.
Our friends at Foundation Capital invested quite a bit of money in our company this morning, and were joined by existing investors Morgenthaler Ventures, Norwest Venture Partners and Canaan Partners.
Besides bringing our team the pleasant feeling of waking up with an extra $24.5M in our bank account, the additional resources will be helpful in many ways. This investment will help us complete new projects faster, including new loan products for borrowers, new investment tools for investors, a series of improvements to our website (including performance improvements, thank you for your patience) and other enhancements that will continue to make your Lending Club experience increasingly more rewarding. The funds will also help us expand our reach to a larger pool of customers and continue growing our community.
We would like to take this opportunity to thank our shareholders for their enthusiastic support, and thank you our members who have grown the Lending Club community at an incredibly fast pace over the last 12 months, increasing our monthly loan volume from $2.3M in February 2009 to $8.6M in March 2010 to capture 79% of the US peer lending market last month.
So the day started quite well here. How’s your day going? Leave us a comment.
Identity verification is a critical fraud prevention tool used by banks, credit card companies and other lenders. Lending Club has recently begun to leverage the information available on social networks to help confirm a potential member’s identity.
We continue to rely on methods of identity verification used by traditional lenders, but in an era of online identity theft, Lending Club is continually redefining industry best practices.
We cannot disclose our exact methodology, practices, or sources of information, as this could simply empower the fraudsters we are trying to disarm. But what we can say is that we use information gathered from social networks to help give us more confidence that a member is in fact who they say they are.
When we do find a case of identity theft, we work with the true owner of the identify and law enforcement authorities to track down and prosecute anyone who has committed identity theft. In addition, we will reimburse lenders for the unpaid principal balance of loans where we have confirmed that the borrower has committed identity theft.
As a financial services innovator, Lending Club is constantly assessing new methods to better secure our platform. Identity confirmation measures are simply a next step in the evolution of financial services.
Our member’s privacy is our top concern.
Image courtesy of scansnap
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