Online lender Avant has just announced a rather large new funding round: $325 million. That big pick-up has led to a large valuation spike, and the firm is now likely a confirmed unicorn, with a value well over $1 billion — Fortune reports it is about $2 billion.
General Atlantic led the round, with participation from JPMC, Balyasny Asset Management and existing shareholders Tiger Global Management, August Capital, RRE Ventures and DFJ Growth.
“We’re trying to build a transformative company, that could be a $50 billion to $100 billion business someday, by becoming the preeminent provider of credit to small and middle-income consumers,” says Al Goldstein, Avant’s founder and CEO. “We’ve been talking to General Atlantic for the last couple of years and really believe they will be super valuable as we build our business.”
The new round brings Avant’s total fundraising to $600 million since its founding in 2012; the firm has additionally secured $1.1 billion in debt funding. The firm is also moving to sell $1.8 billion in loans via its institutional marketplace, which lets qualified institutional investors purchase loans originated through the Avant platform.
Online lending is a crowded space, but Avant’s marketplace offers a somewhat different value proposition than its competitors and a different method of monetization. The goal, notes some reporting, is to make Avant a natural partner for firms like Goldman Sachs that want to invest in those small loans but don’t have the institutional infrastructure to do so directly, while keeping it out of directly competing in the arena with much larger outfits like Lending Club.
Avant, despite its big pick-up, faces some immediate challenges, particularly as the U.S. Treasury Department is taking a closer look at online lending companies.
General Atlantic’s Jonathan Korngold says that they’ve been in regular contact with the Treasury task force and that they believe Avant’s model is in line with much of what is being discussed as best practice.
“Our conversations have been very positive, and a lot of things they’re focusing on happening — having skin in the game and other ways to have interests align — are things we already do,” Goldstein explains. “We have real transparency on the product, don’t have upfront fees and we don’t sell any credit insurance or other add-on products. Our interest rate is the APR, effectively, and we do 100 percent of our loan servicing.”
Korngold adds that he was not scared off by the stock slumps of Lending Club and commercial loan-focused OnDeck Capital. “The markets have made some very specific micro-moves against those companies, which is only about issues related to them, as opposed as to the online lending market opportunity.”
Avant is also coming up as outfits like Lending Club and OnDeck have struggled to maintain their stock price and attracted legislative attention.
Undaunted and now well-funded, going forward, expansion is on the menu for Avant. The company is reportedly developing an auto lending product and a revolving credit card product.
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