Upstart (that's the name) raises $32.5M, seeks to license tech to banks

Upstart, one of the new breed of Silicon Valley consumer lenders, said Thursday that it has raised $32.5 million in equity, while also unveiling plans to license its technology to banks and credit unions.

The San Carlos, Calif., company is following a similar blueprint as better established firms like Social Finance and Lending Club — launching with a particular loan product, refining its algorithms and then seeking to expand into other corners of the consumer finance realm.

SANDRA FAZZINO

Upstart, which was founded by several former Google employees, began making personal installment loans in May 2014. The firm reports that last year it lent out about $300 million, a number that it hopes to roughly triple in 2017. Upstart’s three- and five-year loans range from $1,000-$50,000 and carry average interest rates of 12%.

CEO Dave Girouard said in an interview that the company intends to add other types of consumer loans to its platform, including a financing option for shoppers who do not want to pay with cash or a credit card.

At the same time, Upstart is joining the increasingly crowded field of companies that are seeking to license their online lending platforms to traditional financial institutions. The company is pitching its product — Powered by Upstart — as a way for banks to get into the digital lending business without building their own systems from scratch.

“Given the pace of change in lending, technology partnerships will be critical in the years to come, and Upstart aims to be a partner the industry can rely on,” the company wrote in a blog post.

The privately held Upstart, which currently has 100 or so employees, hopes to use its most recent funding round to fuel rapid growth. The round was led by Rakuten, an e-commerce firm in Japan, and an unnamed U.S.-based asset manager. Also participating were existing investors Third Point Ventures, Khosla Ventures and First Round Capital.

Upstart’s latest funding round is slightly smaller than a $35 million round that the company announced in July 2015. And it is far smaller than the $500 million round that San Francisco-based SoFi, which is targeting a similar set of customers, announced last week.

Like SoFi, Upstart focuses on millennial customers, some of whom do not have deep credit histories, but who do have strong earnings potential. Upstart’s borrowers are 28 years old on average, and their average salary is $90,000, according to Girouard.

“They don’t expect to have to go walk into an office to figure out if they qualify for a loan,” he said.

Upstart also announced Thursday that it has hired Sanjay Datta, formerly vice president of global advertising finance at Google, as its chief financial officer.