This morning Upgrade, a credit-focused fintech startup, announced that it has raised a $40 million Series D round that the company says gives it a $1 billion valuation. The Upgrade round slots neatly into a few trends TechCrunch has noted in recent quarters, including fintech startups raising at new, higher valuations, and some startups seeing sharp valuation growth on the back of comparatively modest raises.
In its Series D, Upgrade managed to, ahem, update its valuation from $500 million set during its 2018 Series C. Santander InnoVentures, the CVC associated with the banking giant Santander, led the latest investment.
Given the sheer deluge of fintech news in the last few years, you’re forgiven if Upgrade slipped through your nets. The company is a fintech startup with a credit-focus today, though it intends to add more neobank-like tooling — digital checking accounts, and so forth — in Q3. So, instead of starting with a checking-and-savings structure like so many neobanks, Upgrade kicked off with personal loans and credit cards.
The result of that focus, to hear Upgrade CEO Renaud Laplanche tell it, is that the company has managed to quickly scale its revenue base. This helps explain why the company raised so little money in its Series D; the company told TechCrunch it is currently on a $100 million run rate (month12, not quarter4) and is cash-flow positive.
On that note, how Upgrade managed to secure capital during the current, less certain era is somewhat clear from its growth story. (Growth, as we keep seeing, is still something VCs want to pour capital into.) According to Laplanche, Upgrade rang up $60 million in revenue in 2019 and expects $160 million this year. That’s nearly a tripling from an eight-figure base in a year — not bad at all.
If Laplanche’s name sounds familiar, it’s because he was the founder and former CEO of peer-to-peer fintech company LendingClub, which went public in December of 2014. Laplanche ran afoul of regulators during his tenure, leading to his ouster; he founded Upgrade after leaving LendingClub.
Upgrade has a different philosophy than some credit card providers, in the view of its CEO. “Banks have an incentive to keep customers in debt as long as possible,” Laplanche said during an interview with TechCrunch. Upgrade, in contrast, offers lower rates — cards starting at 6.9%, under what the CEO described as a market-normal entry rate of 12% to 13% — and set repayment periods for debts so that customers don’t wind up in a credit cycle that never ends, sapping them of financial health.
The model and Upgrade’s other products, like personal loans, have proved popular, by its own…