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Wednesday, August 3, 2011

Does Lending Club's $25 Million Late Stage Funding Solidify The State of Business Funding?

Ir's only fair that a peer-to-peer lending site gets the money it needs to get other people the money they need, don't you think? Today, Lending Club announced its $25 million funding it received from Union Square Ventures, led by none other than Fred Wilson, VC to Twitter. 


What, if anything, does this say about the state of business funding?


In 2007, investor Fred Wilson stated his preference for seed investing; adding that seed investing--when someone invests in a company early on in the game--was better than late stage investing. He didn't think that VCs could impact the development of a company with late stage investing, that they would simply have to accept the direction of the company.


Why now? Well Union Square reached out to Lending Club precisely for the very reason Wilson was leery of late stage investing in the first place--Lending Club had already set the pace for their company. They had a direction and that direction was working well for them. 


When interviewed by Forbes' Nicole Perlroth, Wilson admitted that their company liked Lending Club's lead within their industry: the lower rates, better returns, and sophisticated investors. Undoubtedly, they liked their revenues too. Lending Club expects $20 million in revenue this year, and has grown by180% each year.


Late stage investing has become popular since 2008, so much so that in the first quarter 2011, it surpassed investments in clean tech startups.


With the state of the economy, perhaps investors feel better investing in companies that have:
  • Tried and tested business models
  • Target clients that make the business model work 
  • Consistency 
  • Core competency
And of course, having a solid revenue track record never hurt anyone.  

Cheryl Isaac is a business strategist and entrepreneur who has been in love with startups and their idiosyncrasies for years. She is a former investment and small business banker who believes in making business personal, an authorbusiness writer, and the founder of StartupBizTalk. You can find her here on Twitter and Facebook. 

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