LendingClub, a peer-to-peer lending network, announced on Wednesday it's raised a hefty $24.5 million round of funding. Foundation Capital led the round. Existing investors including Morgenthaler Ventures, Norwest Venture Partners and Canaan Partners also joined the round. This brings the startup's total funding to $52.7 million.
So what are these investors betting on exactly? LendingClub is a site and service that offers an alternative to the traditional banking loans and investment model. On LendingClub, users can choose whether they want to invest or get a loan from another user. The company claims to eliminate the high cost and complexity of traditional bank lending to offer borrowers better rates and investors better returns. This is all made possible by cutting out banks from the process.
Lending Club isn't the only company in this space offering this alternative loan process. Prosper is its main competitor and has also raised around $41 million in funding.
Some of the types of loans you'll find people looking for on LendingClub include: debt consolidation, pay off credit debt, car and vehicle, home improvement, business, special eventss, and green loans. These start at 7.89% APR.
Founded back in 2006, the Sunnyvale, Calif.-based startup said it captured 79% of the US peer lending market in March 2010 with $8,664,750 in monthly loan originations.
Charles Moldow, General Partner at Foundation Capital commented in a press release, "Lending Club is ideally positioned to capture a significant share of the US banking and investment market over the next five to ten years...the Lending Club team has built a stellar track record in a challenging environment and now has the data to show that the economic model works and delivers tremendous value to both borrowers and investors."
LendingClub said it would use the funds to further develop its platform, launch new products, expand its reach to new customers.