Online Lender Ascend Taps VCs

Steve Carlson, chief executive of online lender Ascend Consumer Finance, which offers personal loans.

When Steve Carlson, chief executive of emerging online lender Ascend Consumer Finance Inc., considered fundraising this year, he realized the market wasn’t nearly as receptive as a year ago, when his startup received a $1 million equity seed round.

The sector has been beset by problems this year, including lower demand from debt investors for loans originated by alternative lenders, to the ouster of the chief executive at LendingClub Corp., one of the largest online lenders.

So Mr. Carlson opted to take new money in the form of a convertible note, rather than equity.

“My current investors came to me and said, ‘In today’s market, let’s move this fast, let’s not quibble over any of the valuation,’ ” he said. Convertible notes convert into equity at a later date, when a new funding round typically sets a valuation.

And so San Francisco-Ascend became one of the few online lenders to raise new capital this year.

It raised $11 million in new funding, the company told The Wall Street Journal. About half of that was in the form of debt to be used to underwrite loans; another half was in the form of convertible notes from OCA Ventures, Mucker Capital, Partech Ventures, Tekton Ventures, Cendana Investments, as well as the venture arm of Securian Financial Group.