SoFi

Not to be confused with the eponymous US non-profit organization Social Finance (US non-profit organization), its UK counterpart Social Finance Ltd., or with non-profit organization RSF Social Finance, also based in San Francisco.

Social Finance Inc (SoFi)

Type	Private
Industry	Financial services
Founded	September 2011 (2011-09)
Headquarters	San Francisco, California
Key people	Mike Cagney (CEO) Nino Fanlo (CFO) Joanne Bradford (COO) Rob Lavet (General Counsel) Tony Morosini (VP, Product Development)
Products	Student loan refinancing Mortgages Personal loans Parent loans MBA loans
Website	sofi.com

Social Finance, Inc. (commonly known as SoFi) is a marketplace lender that provides student loan refinancing, mortgages and other types of loans, such as parent and personal loans. The company is a non-bank alternative focused on offering loans at lower rates than traditional lenders. SoFi’s primary customers are early stage professionals. Some of its products, such as parent loans and mortgages, are popular with a broader demographic.

Overview

SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students who met at the Stanford Graduate School of Business. By leveraging the interest fellow alumni have in seeing graduates of their alma mater be successful, the founders hoped SoFi could provide more affordable options for those taking on debt to fund their education. The company’s inaugural loan program was a $2 million pilot at the founders’ alma mater – the Stanford Graduate School of Business. For this pilot, 40 alumni invested an average of $50,000 to 100 students.

In September 2012, SoFi raised $77.2 million, led by Baseline Ventures, with participation from DCM and Renren. Mark Cuban passed up on investing in the company.

On October 2, 2013, SoFi announced that it had raised $500 million in debt and equity to fund and refinance student loans. This total funding amount came from $90 million in equity, $151 million in debt, and $200 million in bank participations, with the remaining capital from alumni and community investors. The $151 million in debt includes a $60 million line of credit from Morgan Stanley, and a $41 million line of credit from Bancorp.

As of September 2013, SoFi had funded $200 million in loans to 2500 borrowers at the company’s 100 eligible schools.

In November 2013, SoFi announced a deal with Barclays and Morgan Stanley to create a bond backed by peer-to-peer student loans, and this would create the first securitization of these loans to receive a credit rating.

In April 2014, SoFi raised $80 million in a Series C round led by Discovery Capital Management with participation from Peter Thiel, Wicklow Capital, and existing investors. Money was raised to expand the footprint of the company's student loan refinancing business and to extend into new products like mortgages and personal loans.

In February 2015, the company announced a $200 million funding round led by Third Point Management. That same month, the company officially began offering personal loans.

By March 2015, the company was offering mortgages in more than 20 states, up from its initial launch that included under ten states in October, 2014.

By April 2015, the company had funded more than $2 billion in loans, including student loan refinancing, mortgages, personal loans and MBA loans. To celebrate its $2 billion milestone, SoFi announced a contest, #2BillionTogether, to pay off one of its members student loans.

In September 2015, Former SEC Chairman Arthur Levitt was added as an advisor. The firm also raised a $1 billion round of investment from SoftBank and said it had funded $4 billion in loans.

In January 2016, SoFi surpassed $7 billion in outstanding loan volume.

Model

SoFi originally utilized an alumni-funded lending model that connected students and recent graduates with alumni and institutional investors via school specific student loan funds. Investors received a financial return and borrowers received rates lower than the federal government offered. The company sought to minimize defaults by focusing on low-risk students and graduates.

As SoFi’s product offerings expanded to include mortgages, mortgage refinancing and personal loans, the company moved away from an alumni-funded model to a non-traditional underwriting approach focused on lending to financially responsible individuals. In early 2016, SoFi discontinued using FICO credit score as part of the underwriting process for all of its products. Instead, SoFi says it analyzes forward-looking factors to determine a prospective borrower’s future potential and ability to repay.

In addition to competitive interest rates, SoFi offers 'community' benefits to its borrowers such as career services and startup mentoring.

External links

• Official website