The superb Lending Club success story is what the startup world is all about: a software-based reinvention of massive and inefficient industry; a product that puts consumers first and delivers undeniable benefits ; and an entrepreneurial mega-hit that brings incredible riches and returns to its founder and investors.
In some ways, Lending Club is a classic Silicon Valley story; in some other ways, it is pretty atypical. As a friend of Renaud Laplanche’s for over 20 years, I have had a chance to witness from up close some parts of his journey with Lending Club. It is full of interesting lessons for entrepreneurs and the tech industry in general.:
1. Nice guys don’t finish last. According to some, the tech ecosystem has been grappling with a proliferation of jerks with oversized egos at the helm of very successful startups (see Pando’s “asshole rollcall” here). Whether one shares that point of view or not, Renaud is exactly the opposite of that. Kind, loyal, generous and understated, he’s the living proof that world-class entrepreneurial talent, drive and persistence don’t necessarily come associated with arrogance and low EQ.
2. CEO focus does matter. Renaud has been focusing maniacally on his venture for the last eight years. Up until recently, he had spoken at comparatively few conferences. He doesn’t have a portfolio of cool angel investments on the side. Heck, he doesn’t even have a Twitter account.
3. Great founders can come from all sorts of backgrounds. Renaud defies a lot of current startup CEO stereotypes. He is not a technical founder. He started his career as a (gasp) corporate lawyer. He’s a sole founder. He is French, with an unmistakable accent.
4. Unicorns are not always “hot deals” at first. It took a while for Lending Club to get going and it was largely under the radar for a long time. Most VC firms missed entirely this unicorn in the making. Lending Club had to do a down round in 2009 to survive, albeit in the specific context of the financial crisis (see financing history here).
5. What matters is to be the last entrant. Like Google or Facebook, Lending Club was not the first entrant in its market. A part of the initial deck for the company’s seed round (when it was still code named “SocBank”) was devoted to explaining why prospective investors should not worry about Prosper, an early leader in the space (with 80,000 members at the time, and $18M cleared on the platform) and Zopa, a UK company with US expansion plans. It seems trivial now, but looked scary at the time.
6. Embracing regulators is also a strategy. Truly disruptive startups often operate at the edge of rules and regulations. Many choose to push forward with the hope that regulators will adapt to the new world created by the startup, rather than the other way around. When the SEC came down on the nascent peer to peer lending industry in 2008, Lending Club chose to comply and voluntarily shut down operations while registering. Market leader Prosper didn’t. Lending Club emerged from the process fully compliant while Prosper had to finally suspend operations. Back in the market as the only game in town, Lending Club took the lead from Prosper and never relinquished it.
7. An immigrant is, once again, responsible for enormous value creation in the United States. As a backdrop to the debate on immigration reform, something to ponder: Renaud and I were co-founders in a previous venture, both under H1-B visas. We both filed for a green card in 2001. Four years later, our process had gone nowhere. Our venture was acquired by Oracle and our visa situation was such that we couldn’t work legally for another company in the US or start a new venture. Renaud actually decided to leave the U.S. and moved back to France. Had his green card situation not finally unlocked itself a few months later (or, had his green card taken another two years to be granted, like mine did), he may have never come back to the U.S., and Lending Club may have (almost certainly) never existed.
Congratulations to Renaud and the Lending Club team for an incredible success!