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The round is the largest ever for a fintech company
Lending startups seem to do really well when they are private, raising big rounds of funding. When they go public, though, things don't seem to go quite as well.
So maybe it's a good idea for Social Finance (SoFi for short), whose CEO said earlier this year that his company would go public within the next 12 months, to have put those plans to rest, at least for time being.
Instead, the company announced on Tuesday that it has raised a monster round of funding, taking $1 billion from SoftBank, with existing Third Point Ventures and affiliates of Third Point LLC, Wellington Management Company LLP, Institutional Venture Partners (IVP), RenRen, Baseline Ventures, DCM Ventures, and other investors also participating.
The round comes only around six months after SoFi raised a $200 million round in February of this year. The company has now raised a total of $1.42 billion in venture capital.
This is historic news, as it is the largest single financing round in the fintech space ever, SoFi said. And the fact that it comes so quickly after its last round "is a testament to the company’s rapid growth and category leadership."
The peer-to-peer lending company focuses on refinancing student loans, allowing recent graduates to refinance and consolidate their federal and private student loans. It also offers unemployment protection, an entrepreneur program, mortgage refinancing, and personal loans.
The company has issued $4 billion dollars in loans since it was founded in April 2011.
SoFi said it will use the new funding in four areas: product innovation, delivery, community value and to expand its team.
With product innovation and delivery, the company said it will "broadly expand its offerings as it seeks to deepen member relationships and serve them across their lifetime financial goals." That means continuing to invest in its proprietary model for underwriting credit risk, as well as simplifying the user experience and doing more on mobile.
For community value, it will expand its member services, including its Entrepreneur Program and Career Services team, and "invest in other member services, from its rigorous job boot camp to an exclusive job board for the SoFi community."
The San Francisco-based company currently has more than 400 full-time employees and expects to add at least 100 more by the end of this year. That means doubling its office space in Healdsburg, California to 20,000 square feet, as well as growing its 50-person engineering office in Helena, Montana, along with its offices in Washington, DC and Frisco, Texas.
The decision for SoFi to put off its IPO is likely a wise one, especially when you consider the disparity between private and public lending companies.
In all, over $1.5 billion was raised in equity financings across 48 deals in the lending space in 2014. That is the most ever, up from just $382 million in 25 deals in all of 2013. Every quarter of 2014 had a least 10 deals and over $300 million raised.
There have also been some big financings this year. This news comes only a day after two other companies scored major fundings: Avant raised $325 million of equity in a funding round that valued it at more than $1 billion and Credible closed a $10 million Series A funding round that was led by Soul Htite, co-founder of LendingClub.
Other companies in the space that raised money this year include Harmoney, which raised $200 million; DriverUp raised a $20 million Series B round; Ledge raised $900,000 in seed funding; Grouplend closed a $10.2 million funding round; Iwoca raised a $20 million round; and Behalf raised $119 million.
Now, look at the two lending startups that went public last year, Lending Club and OnDeck Capital, which are both seeing their stocks way down from where they started.
OnDeck ended trading on Wednesday at $9.90 a share, down over 50 percent from its $20 IPO price, and down 67% from its high of $27.98, which it reached on its first day of trading.
Lending Club, meanwhile, ended trading at $13.23, down 12 percent from its $15 IPO price, and down 52 percent from its high of $27.90 in December 2014.
VatorNews has reached out to Social Finance for further comment on this news. We will update this story if we learn more,
(Image source: sofi.com)
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Lending Club is a social lending network where members can borrow and lend money among themselves at better rates.
Lending Club provides a much improved infrastructure for social lending: state-of-the-art technology to authenticate all users (ensuring making sure they are who they say they are); credit scoring systems which rate borrower risk; and, the automated clearing house (ACH) system to move the funds between both parties. In addition, we provide our LendingMatch™ system to minimize risk and allow community based lending.
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We’re 100% focused on small business.
We launched OnDeck in 2007 to solve a major issue facing small businesses: financing. We combined our passion for Main Street with cutting-edge technology to evaluate businesses based on their actual performance, not personal credit.
That’s enabled us to say “yes” more often and faster than traditional lenders. And that lets owners spend their time where it should be—on growing their business, not seeking financing.