SoFi Raises $1 Billion and Continues to Shake up the Industry

 

SoFi Raises One Billion Dollars

The SoFi story continues as today they announced a staggering $1 billion financing round led by SoftBank. This equity round is the largest funding round ever by a fintech company – larger even than what Lending Club raised in their IPO late last year. SoFi currently offers mortgages, student loan refinancing and unsecured personal loans. Although the round itself is big news, it is what is going on behind the scenes that is most interesting. Peter and I had the chance to talk with Mike Cagney, CEO of SoFi to learn more about what this money means for the company.

While Mike acknowledged that this is a large round, he stated that he is not racing to raise the most money. In fact, when they were looking for equity financing earlier this year, they were intending to raise much less than $1 billion. They spoke to SoftBank and their team was interested in putting in quite a bit more as they believe the opportunity is vast and think SoFi can move even faster. Mike Cagney agrees. This capital also gives SoFi the luxury to wait to do an IPO, but Mike mentioned that the decision to IPO will still depend on the market at the time. It’s important to note that SoFi has already been operating as a profitable company since 2014.

We asked Mike to tell us about their originations and their growth anticipations for the future. SoFi had anticipated doing $4 billion of originations this year, but have now revised that to $5 billion. What does this mean for next year? The plan was previously $7 billion, but now they are looking at doing $13 billion in 2016. Mike said with this additional capital, they are taking what they had planned to do in 2017 and moving it into this year and 2016.

Mike believes that there is still a lot of room for innovation in an industry that has historically been known for being dogmatic. The team at SoFi moves very fast and is able to test products and get them to market efficiently. The equity capital will be rocket fuel for both existing product offerings and new ones alike. SoFi plans to continue to expand into new categories and address underserved markets.

The First Marketplace Lender to Move into Wealth Management

Their vision is to have SoFi products replace your bank, and Mike told us that SoFi is moving into wealth management products. Although nothing has been announced, they are looking at offering asset allocation solutions to individuals to help execute their investment approach. As a part of that, a SoFi member may be able to take their fixed income allocation and invest it into SoFi loans, potentially being able to specifically invest in students that attended their own Alma mater. This also means that we are likely to see more retail investor involvement, something that most companies are not focusing on in this industry. As Mike put it, they want to get you out of debt faster and then turn you into a successful investor. We were told that their wealth management products will be released in the 4th quarter of this year. Additional personal finance products are something that no other company in this industry is offering, so it will be interesting to see what SoFi comes out with.

As to some of the other upcoming projects in the pipeline, Mike said they are really looking to push the envelope on the mortgage side. Improved delivery was mentioned in the press release and Mike provided an example of what the future of a home mortgage application process could look like. They will continue to focus on mobile and use contextual data for home buyers. A couple with two kids could be looking for a mortgage in a great school district. As they are taking a walk, an open house could be occurring a few blocks away. SoFi could automatically push them a mortgage pre-approval for that specific house, which may prompt them to take a look at the property. Mike said we should see some innovations coming in the next two quarters from SoFi.

We also asked Mike to talk about where they are in the market today. SoFi currently has 400 employees and in September will do $500 million of originations between their three offerings. Mike told us that 60% of that is student loan refinancing. The remaining 40% is split about equally between personal loans and mortgages. What is most surprising here is that SoFi is doing $100 million a month now in unsecured personal loans.

While SoFi has already seen success in the marketplace lending industry it seems they are just getting started. As the most well funded company in this space, we are likely to see much more innovation and some exciting new products. As Mike said, the team feels like a kid in a candy store, every month is a record month and they see so much opportunity. This capital only accelerates their plans.