Google has made a $125 million equity stake investment in Lending Club, an online peer-to-peer network that taps connections to make and secure personal loans. Foundation Capital, another shareholder, also participated in the funding.
Lending Club's business model relies on members investing and borrowing from each other, creating something similar to a social network of anonymous financial backers and those who need the funds. The company has funneled about $1.5 billion in loans since its inception in 2007.
Borrowers apply for loans, while investors open accounts to invest in a portfolio of accounts. The lenders and borrowers never have direct contact with each other. The borrowers get funded based on the investor's portfolio. Borrowers repay the loans with interest that investors earn.
The lending company generated about $40 million in revenue last year, and estimates put this year's total around $80 million. About $126 million in interest has been paid to investors since inception, according to CNBC. A strict lending policy declines nine out of 10 potential borrowers to retain high-quality credit standards. "If someone doesn't pay, the risk is sufficiently diversified," Renaud Laplanche, lending Club founder and CEO, told CNBC.
Reports value the investment of Lending Club at $1.5 billion, about triple since last raising funds in summer 2012. As part of the agreement, Google Vice President of Corporate Development David Lawee will take an observer seat on the board, alongside existing board members Mary Meeker, John Mack and Larry Summers. He adds the spot to an existing role with SurveyMonkey that he took earlier this year, after Google joined Tiger Global Management in making a $444 million investment.
Depending on market conditions, Lending Club could go through an IPO in 2014.