The funding round was led by Third Point Ventures and affiliates of Third Point LLC with Wellington Management Company LLP. SoFi occupies a niche market concentrating on the refinancing of student debt. Although it has expanded into other type of loans, including mortgages. The platform has also been an innovator in the space by obtaining ratings for its loans. In November last year it completed its third S&P rated securitization. At that time SoFi was the first marketplace lender to receive investment grade ratings for S&P and Moody’s for senior notes in securitization.
SoFi reportedly plans to use the money raised to strengthen its balance sheet and help it expand into new lending products.
One of the marketing documents stated:
“Student loans are the Trojan Horse in SoFi’s strategy — it is how they find the best and brightest and prevent them from attaching to a bank or broker.”
It continued:
“SoFi’s proposition is that banks are hampered by regulations requiring them to lend to all comers on the same terms and therefore are ill equipped to serve niche markets, especially a niche market that is the ‘next five per cent’ of wealth.”
Mike Cagney, CEO of SoFi, commented:
"Member response to the SoFi experience -- our nontraditional underwriting approach, product innovation, and seamless customer service -- has proven that we're becoming the preeminent financial services provider for early career professionals. This financing allows us to continue to expand our unique offerings to them while delivering access to premium credit for our marketplace investors."
SoFi currently has a cumulative lending volume of about $1.75 billon. There have been whispers that the platform is planning to IPO later this year. It would be following the successful precedent set by the IPOs of Lending Club and OnDeck.Lending Club was valued at $7 billion after it floated, with OnDeck valued at $1.1 billion. Now carrying a valuation of $1.3 billon, it’s clear that SoFi is a prime candidate for next-to-market.
