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Six Alt-Lending Unicorns Worth Combined $15 Billion: Lending Club, Prosper, On Deck, Sofi, Avant, Funding Circle

Fortune_feb2015_coverPayments companies, especially mobile, have dominated the fintech news cycle for much of the past four years. But as those well-funded payments companies vie to become global standards, attention has turned to the lending arena. At least six alt-lending startups (not including China) have now passed the billion-dollar valuation mark:

1. LendingClub: $7.2 billion (public: LC)

The company launched as one of the original Facebook desktop apps in May 2007 and made its industry debut at the first Finovate in September 2007. Its December 2014 IPO briefly valued the company at $9 billion, the largest-ever IPO for a fintech startup.

2. Prosper: $1.9 billion (valuation from $165 million round announced last week)

The company was the second person-to-person lender in the world (after the U.K.’s Zopa) and the first in the United States, launching in Feb. 2006. It also made its industry debut at the first Finovate in 2007. It was much larger than Lending Club during its first few years; however, high default rates from its pure auction model scared away early investors. But the company retooled its underwriting and has become the third largest consumer P2P marketplace in the USA (and the world outside China).

3. On Deck Capital: $1.5 billion (public: ONDK)

Small and mid-sized businesses (SMB) were hit hard in the 2008 recession with lower profits combined with a massive dry spell in traditional bank credit. So, naturally, entrepreneurs moved in and picked up the slack. On Deck was one of the first on the scene, making its Finovate debut in 2009. Originally, On Deck was dipping its toes into the direct lending space as a proof of concept for its small-business lending platform it hoped to sell to banks. But it turns out they were in the right place at the right time, and, after a December IPO, On Deck is a successful public lender valued at $1.5 billion.

4. Sofi: $1.3 billion (based on Goldman Sachs fundraising efforts for the Feb 2015 round; however, recent press reports say the company is looking to raise $500 million in a 2015 IPO valuing it at $3.5 billion)

With $700 million in loans originated in Q1 2015, Sofi just passed Prosper to become #2 in the United States—and in the world, outside of China. The company initially focused on refinancing student loans for graduates of elite universities, but it has diversified into other types of consumer and SMB lending.

5. Avant: $1+ billion. Forbes recently estimated its value at $875 million; we think that’s low based on the $1.4 billion, including $350 million in equity, that startup has raised.

Like On Deck, Avant is targeting a segment abandoned by traditional lenders in the aftermath of the 2008 financial crisis. But Avant’s specialty is sub-prime borrowers, a segment with higher margins in good times, but risky bets in downturns.

6. Funding Circle: $1 billion, based on an estimate in The Telegraph this month

The only non-U.S. company on the list is London’s Funding Circle (although Wonga is probably still close, and has been above $1 billion in the past). Funding Circle, which specializes in SMB marketplace lending, was founded in 2010 and moved into the U.S. market last year with the acquisition of Endurance Lending.


Also in the running: Finovate alums Kabbage—meet them at FinovateSpring next month, along with a handful of other promising newcomers; CAN Capital; Kreditech; and Wonga, which was valued well above $1 billion in 2012, but has had a falling out with U.K. regulators. Several peer-to-peer lenders in China are believed to have obtained unicorn status, the biggest being Lufax, which was said to be valued at almost $10 billion by the Wall Street Journal last week.