Upgrade Valued at $7.3 Billion After New Funding Round

Upgrade, the fintech startup spearheaded by LendingClub founder Renaud Laplanche, has secured $165 million in a new funding round, catapulting its valuation to a notable $7.3 billion. The round was spearheaded by Neuberger Berman, with further investment from LuminArx Capital Management, according to a company statement released on Thursday.

Laplanche, who launched Upgrade in 2016, highlighted in an interview that this marks the company’s first capital raise since 2021.

“We’ve maintained positive cash flow for the past three years, eliminating the immediate need for a new funding round,” Laplanche stated.

Initially known for its personal loan offerings, Upgrade has strategically diversified its services to include checking and savings accounts, credit cards, credit monitoring, and a buy now, pay later (BNPL) service. This expansion reflects a broader trend among fintech companies seeking to become comprehensive financial platforms. A key move in this direction was Upgrade’s acquisition of Uplift, a BNPL provider specializing in the travel sector, for $100 million in 2023.

Laplanche noted that Upgrade’s revenue has more than doubled since its previous fundraise, exceeding an annualized revenue of $1 billion in May, underscoring the company’s robust growth trajectory.

Having previously led LendingClub through its IPO in 2014, Laplanche indicated that Upgrade is also considering a public offering. The current funding round serves a dual purpose: to bolster the company’s balance sheet and to establish a new valuation benchmark as it explores employee liquidity options.

“We anticipated being IPO-ready within the next 12 to 18 months,” he explained, “and we wanted to ensure that our employees had the opportunity to realize some value from their equity before the IPO process.”

While legacy banks still dominate the consumer lending landscape, Laplanche argues that a significant portion of Upgrade’s customer base is migrating from these traditional institutions to take advantage of the enhanced automation and speed offered by the fintech platform. This trend highlights the increasing consumer preference for digital-first financial solutions.

“Our primary focus this year is on streamlining the customer experience across our diverse product offerings,” Laplanche elaborated. “We’re committed to ensuring a seamless experience for customers who initially engage with Upgrade through our BNPL service, fostering a cohesive and integrated platform.”

Upgrade has strategically targeted the home improvement and auto financing sectors, which have seen substantial growth, surpassing $2 billion and $1 billion in total loan originations, respectively, earlier this year. These figures underscore the company’s ability to tap into high-demand lending segments.

The fintech market is becoming increasingly competitive. Companies like Chime have recently gone public, while established players like SoFi are gaining market share. Moreover, tech giants such as PayPal and Block (formerly Square) are expanding their banking services, further intensifying the competitive pressure. This intense competition underscores the need for fintech companies like Upgrade to continuously innovate and differentiate themselves.

The BNPL sector also presents a dynamic landscape with established players like Affirm and Klarna, the latter having recently completed its IPO. Upgrade’s BNPL strategy is specifically focused on the travel industry, differentiating it from competitors with a stronger retail presence.

“Our focus within the BNPL space is concentrated on the travel sector, building partnerships with airlines, cruise lines, car rental companies, and hotels,” Laplanche clarified. “This targeted approach distinguishes us from the retail-centric strategies of Klarna and Affirm.”