Baked in Facebook, Social Lending StartUp Raises VC Cash

14 Comments

[qi:021] It may turn out to be a new way of proving your model: Launch an application on the Facebook Platform, see if it works, and if it does, take your hard data to a group of VCs and raise capital to grow your business.

At least that’s the way it worked for Lending Club, a Sunnyvale, Calif.-based startup that is going to announce $10.26 million in Series A funding from Canaan Partners and Norwest Venture Partners tomorrow.

The company offers personal loans ranging from $500 to $25,000 to people with credit scores at or above 640. All of the loans are funded by individual lenders; to date, lenders have funded 80 percent of all loan requests. The startup, headed up by founder Renaud Laplanche, soft-launched its offering on Facebook in May 2007, yet it currently has 13,000 users and has given out — so far — $750,000 in loans.

The peer-to-peer lending is an interesting (and growing) business, as indicated by the early success of startups such as Prosper, which has been funded by Accel Partners, Benchmark Capital, Fidelity Ventures and Omidyar Network. Other players in this market include Loanio, Zopa and CircleLending. (see a related story from the WSJ: Options Grow For Investors to Lend Online)

But back to Facebook as a pre-funding lab: Think about it, and tell me if that can actually work.

14 Comments

Colin

I would find it very worrying to lend money to someone I didn’t know! I guess you need the security of a large company behind you. Thanks

csven

I was thinking along the same lines. The only thing that seems somewhat at odds is that on the one hand you have Facebook as a potential testbed for start-ups who hope to gain funding to move out to the broader web beyond FB’s walled garden, and on the other hand Facebook is supposedly trying to become the practical web for its users (e.g. their attempt to open up email). While these two things aren’t exclusive, my money is currently on the friction caused by Facebook’s attempt to expand.

Jimmy Huen

I thought that Lending Club is very smart to start off in facebook first, and one of the earliest app at that. It gave them instant pool of user base and credibility.

One thing I do hope for Lending Club to expand to is to lighten the restriction of the minimum credit score, and let the interest rates be more market driven. I know Prosper is doing this, but Lending Club can benefit by allowing the option for lenders to participate if they choose to.

Rex Dixon

@ugh – please go to the site, and read the information. All the information is laid out in plain English for you. If there is something you do not understand, just leave a comment on the fb forum or even the blog. You can also send an e-mail. Someone will get back to you as soon as possible to address any concerns you might have.

Rex

Rex Dixon

@cdub – it’s not “random” people, it’s people you either know from school or from some group. Whether or not you loan that person money is up to you as a lender.

@Prashant – they are alive and doing quite well from what we read.

Rex

Rex Dixon

Maybe that is “how we roll… ” :) Seriously, great angle you took on the announcement. Thanks for covering it.

Rex

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