With over $3 billion in loans processed on its platform in the past year, P2P lender SoFi, which focuses on the student loan industry can claim another milestone; a multi-billion dollar valuation. According to documents reviewed by the Wall Street Journal, the lender has closed on a new round of around $1 billion in new funding, with the investment providing the firm a $4 billion post-money valuation.
According to the WSJ, the investment round was led by SoftBank, which marks an interesting participant. A mobile, telecom and internet provider in Japan, Softbank has been active in assisting later-stage startups through both direct investments and partnerships. However, despite having ‘bank’ in its name, the firm has had little involvement with fintech startups such as SoFi, and more involvement in the internet of things and digital healthcare sectors.
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Like many other P2P lenders, SoFi utilizes non-credit score criteria when conducting risk profiling of customers requesting loans. Examples include analyzing the university being attended and individual neighborhoods to calculate expected default rates. Specifically in the student loan sector, credit scores are less reliable due to minimal work and credit histories. As such, risk profiling of loans can be more of a forward looking process of expected earnings of students.
The funding news occurs as SoFi announced the hiring of Joanne Bradford as its COO earlier this week. Arriving from Pinterest where she had been the Head of Partnerships, Bradford will continue to be involved with forging new business, of which referrals are an important part for SoFi and marketplace lenders. Upon announcing Bradford’s hiring, SoFi also revealed that it expects to reach $5 billion in total funded loans by the end of the year.
After Lending Club and OnDeck Capital went public last year, SoFi emerged as another IPO candidate. However, with the funding, it joins many other high valuation technology startups electing to postpone plans to go public in favor of receiving funds from late stage investors. Within the fintech credit and loans sector, SoFi joins Credit Karma which raised $175 million with a $3.5 billion valuation in June.