Innovating in Fintech: Jason Hogg, CEO of Lending.com (Part 6)

Sramana Mitra: Chronologically, where are we? What year is this?

Jason Hogg: We’re midway through 2007. I’ve done my raise in 2006. In 2007, we had gotten the customer base that I was just describing to you both on the credit card and the peer-to-peer side. We completed a $50 million B round at that point in time. We ended up, I think, giving one of the keynotes at one of the earlier Web 2.0 conferences in September or October 2007. We were off to the races at that point in time. We continue to grow the network. We did  a whole series of partnerships with ATMs.

I’m a professor of entrepreneurship and innovation at Cornell. One of the things that I always tell entrepreneurs is, “In so far as you can get customer distribution through partnerships and the ability to plug into large ecosystems, you have a radically higher probability of success than you do if you’re trying to get one customer at a time essentially.

Sramana Mitra: No questions, but it’s not easy to do.

Jason Hogg: It’s not easy to do. That’s why I’m a very big proponent of either having a highly differentiated or disruptive angle to your business model, or some type of proprietary approach. You’re right. It’s very difficult, but if you’re trying to go for a hyper-scale type of business, I think it’s important. We were able to, through a series of 9 or 10 deals, become a large payment network. In addition to that, through a series of three of four deals, we ended up having 80% acceptance at ATMs in the United States.

We started to have ubiquitous acceptance in the United States. We started to look to figure out a larger ecosystem of consumers that we could get into. In 2008, we started to explore that. We have been building one side and they always talk about the tool platform problem. You have customers on one end, and in the payment industry, you have to have ubiquitous acceptance on the other end. We really focused on making sure that we had places for people to use it. We built this very large network of retailers, ATM locations, and online capabilities. Then we shifted into going out and finding partners in the consumer space.

We opened up discussions with American Express, Amazon, PayPal, and Visa. We were also talking, at that time, to Google and Facebook. That’s when white-labeling started for us in the 2007 and 2008 time frame. It became part of the core strategy where we realized that we have a platform to leverage. Leading into 2009, we started to talk to American Express about plugging into their consumer base and capabilities. Ultimately, that’s what led to the acquisition of the company by American Express.

Sramana Mitra: What year was that?

Jason Hogg: We were acquired in the Fall of 2009. Due diligence occurred over the summer of 2009.

Sramana Mitra: What price did you get for the acquisition?

Jason Hogg: We got $300 million.

Sramana Mitra: How much money had you put into the company at that point?

Jason Hogg: Probably around $85 million.

Sramana Mitra: It took you about four years to do this?

Jason Hogg: Yes, it took four years. I think we were on a trajectory that would have been more like three and a half, or we would have gone our own independent round but for the financial crisis. Liquidity became so difficult. Raising capital, at that point in time, to fund a rapidly scaling business started to become very costly. We completed a C round and the C round was essentially a flat type of valuation. From our perspective, we were saying, “Maybe we should start looking at some of these other opportunities. We’ve been talking about these strategic partnerships and some of them have expressed interest in acquiring the company. That might be a better outcome for the employees and shareholders.”

This segment is part 6 in the series : Innovating in Fintech: Jason Hogg, CEO of Lending.com
1 2 3 4 5 6 7