SoFi is One Quirky Lender, But It’s Working

May 12, 2017, 12:59 PM UTC
Unicorn 2016 Michael Cagney SoFi
Photograph by Elena Graham

“Fintech” companies have been in the dumps lately, as Mike Cagney, CEO of a lender called Social Finance, or SoFi, is the first to tell you. Cagney is quick to add that his company is the king of these midgets, an innovative operator in a staid industry that is a making a go of things.

I visited Cagney Thursday at his office in San Francisco’s historic Presidio. An avid cyclist, Cagney was dressed in jeans and a SoFi t-shirt and already was wolfing down a pizza when I arrived. (His office kindly had a delicious beef enchilada waiting for me.) I’d been curious to meet Cagney precisely because it’s a startup that hasn’t seemed to miss a beat.

Cagney started the company in 2010, midway through a Stanford fellowship he did as a way to clear his head from a career in banking and hedge funding. His epiphany was that students with great earnings potential paid the same high rates on their school loans as everyone else. He’d use math—now it’s called data science—to recalibrate risk and offer those students a lower rate. And he’d acquire customers by building a sense of community among like-minded borrowers.

Fast-forward seven years and SoFi is on fire, the rare example of a startup that hasn’t seemed to flounder after advertising during the Super Bowl. Building on its initial student loans business, SoFi now offers mortgages, personal loans and wealth management. It’s not a bank, and Cagney wants to keep it way—despite having taken steps to accept deposits as a broker-dealer. Banks move too slowly, he says.

SoFi is one quirky lender. It literally plays matchmaker, as in offering a dating service to “members,” or borrowers, in New York, Los Angeles and San Francisco. It also holds networking events in 60 cities, a pure marketing expense it highlights as a way for customers to get ahead in their careers. (A note on the dating service: Cagney learned by hosting some events himself that attendees care about precisely two things in a potential spouse, their FICO credit worthiness scores and their income.)

Whatever SoFi is doing is working. Cagney says the company originated $8 billion in loans last year, a figure that will double this year. He reckons the company will earn $200 million on a pre-tax basis in 2017 on revenues of $650 million.

Now that I think of it, “fintech” is one of those dumb terms like “cleantech.” All good businesses apply technology to be better. Social Finance is building a new kind of lender using some clever technological and human techniques. And it even facilitates love connections. Who could ask for more?

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