Lending Club: Why Google Is Settling for Minority Ownership

Last week Google acquired a minority stake in consumer loan company Lending Club.  The exact amount Google invested was not disclosed, but it was part of a $125 million round of financing for the Lending Club.

Lending Club is an online company that uses technology to match borrowers with lenders. Since its inception in 2007, the company has facilitated $1.65 billion in personal loans.

So why did Google opt for a minority interest rather than an outright purchase?

I see minority interest as a chance for Google to invest in Lending Club without fully committing. With minority investment, Google doesn’t have to control or operate Lending Club and the company still adds value to Google.

David Lawee, Google’s Vice President of Corporate Development, will have an observer seat on the Lending Club board, giving Google a chance to observe and see if their application of technology is complimentary to Google’s overall strategy.

Minority interest may be a gateway to later acquisition.  Google has a long history of acquisitions, buying over 100 companies since 2001, many for their technology. According to Lawee, two-thirds of these acquisitions have been successful. Depending on what Google finds, the company could acquire Lending Club for its technology, easily exit from its investment or continue to hold a minority stake. Whatever Google learns from this investment is likely to make the company more powerful and strategically focused.

The story of minority investments is one that’s rarely told, but it can prove an excellent pathway to external growth. I encourage you to consider the option of minority interest acquisitions as you develop your company’s growth strategy.

 

Photo Credit: Håkan Dahlström via Compfight cc