What’s So Special About SoFi?
Your Iron Edge VC newsletter has told you a thing or two about Social Finance, Inc. (SoFi) a handful of times through the past year. Most recently, in SoFi Makes its Emphatic Mark (October 19, 2019), we marveled about the company’s claim to the naming rights of the $5 billion football stadium that will be the new home to the Chargers and the Rams starting next season. We opined that a sixty-acre, illuminated SoFi logo a couple of miles away from Los Angeles International Airport will be an immeasurably valuable form of exposure when it grabs the attention of LAX’s 63 million annual passengers.
As you were awestruck by the masterful engineering that’s going into SoFi Stadium’s construction, and by the personal finance company’s marketing prowess in planting their gargantuan flag there, you might have had a question that was too embarrassing to ask out loud: “What the heck is so special about SoFi? What makes them different from the thousands of other banks on the planet?” Well, pause a moment to silently rejoice, because you are about to receive clarity. When the topic next comes up, you will be the one answering those awkward queries.
We have often been heard describing SoFi as “Banking for Millennials”. While this may be a catchy and efficient phrase, it doesn’t do much to describe exactly what they do. Recently we came across an article that called SoFi “a bank with a really cool app”. This is an understatement to a cringe-inducing degree. It’s like calling the Beatles “a musical quartet that many people have heard of”. Still, it’s understandable if much of SoFi’s public perception is derived from their ad campaigns on CNBC and ESPN, leading observers to understand that it’s a modern — and somehow different — way of managing personal finances, but how? We hope this primer clears that up for you.
Founded in 2011, SoFi started as an experiment conducted by Stanford Business School pals Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady. They were hoping to address the seriously flawed student loan system that has buried countless young Americans in debt. The inaugural SoFi program connected 100 student borrowers with 40 Stanford alumni, who personally financed loans valued at an average of about $20,000. Everybody won: The students received funds at a reasonable rate, the alumni lenders collected a return on their investments, and SoFi retained a piece of the interest for their efforts. From there, the flagship student loan program has blossomed and expanded dramatically: within four years of this initial $2 million exercise, SoFi was the largest student loan provider on Earth.
It would have been unseemly to stop there. With the way the marketplace devoured the student loan idea, SoFi went to work at identifying other areas of need. It became a far-reaching quest to shine a light on every kind of financial service that was getting a little long in the tooth. Today, SoFi has an impressive suite of products that focus on a wide range of needs.
If you click here you will be taken to SoFi’s website, where you can peruse the many benefits in SoFi’s arsenal. Easier still, read on for our neat little summaries. The following may look like an extensive advertisement for Social Finance, Inc., but it’s not that. We simply want you to know your stuff when you’re bragging about the shrewd investments you’ve made through Iron Edge. Pay special attention to “Stock Bits”, our favorite perk!
Medical Resident Refinancing allows young doctors to consolidate federal and private med school loans with no compounding interest (fixed or variable) during residency. No more nervous and distracted brain surgeons!
Parent PLUS Refinancing is for you if you took out a student loan for your kid, and his newfound career as a professional gamer is giving you agita. Now you can consolidate at a low rate.
Undergraduate Student Loans is the present form of the original SoFi concept. Get an affordable loan to take care of tuition, and pay it back any way ranging from deferred or the more economic immediate payments.
Graduate Student Loans has more attractive interest rates for law school and business school students. You know, because those borrowers have a better shot at being rich and debt-free someday.
Parent Student Loans incur no fees and low rates for moms and dads who are kind enough to take care of Junior’s tuition.
Home Improvement Loans: Need to fix that leaky roof? Installing a trap door on the front porch to deal with pesky solicitors? Converting Junior’s bedroom into a media room while he’s away at college? These unsecured, no-fee loans are for you.
Credit Card Consolidation is for those who were seduced by the easy credit promises that turned out to have Faustian interest rates. It happens. This product helps you out of debt and beefs up your credit score.
Mortgages & Jumbo Mortgages are loans that help you pay for a house. You already knew that. But with SoFi’s offering, you can do it with as little as 10% down.
Mortgage Refinancing Is SoFi’s way of helping you out if you agreed to too high a rate for a previous home loan, with several different ways to refinance.
Crypto is where we really start to get “millennial”. Invest in Bitcoin, Ethereum, Litecoin, and many other cryptocurrencies through the SoFi app. We predict that this capability will become increasingly relevant in coming years.
Stock Bits has your friends at Iron Edge VC very, very excited, due to our prolific equities trading backgrounds. So you’d like to invest in Amazon.com but can’t spare a couple of thousand bucks for one measly share? No problem. The SoFi app lets you buy as little as $25 worth of publicly traded equites. They will buy the whole shares and break off a piece for you.
Active Investing allows you to have a hand in your own financial destiny by building your own investment portfolio with no additional fees.
Automated Investing is for those aspiring investors who have less confidence in their own trading skills. This “robo-advisor” will set goals, diversify, and rebalance your holdings without charging a management fee.
ETFs, or “Exchange Traded Funds”, are baskets of related stocks, commodities, or bonds that you can buy through SoFi. It’s like buying into a whole financial index instead of one specific company.
SoFi Money is SoFi’s Cash Management Account (CMA) that, with no account fees, offers you a generous Annual Percentage Yield on your cash. Oh, and they will reimburse your ATM fees.
SoFi Relay is your big picture. Your view from 30,000 feet. Your mammoth sized dashboard. Use it to set goals, track spending, and delete debt.
SoFi Protect recognizes that millennials are woefully underinsured. The company is on a mission to right that wrong by partnering with meticulously curated insurance providers, specifically:
Renters Insurance by Lemonade Insurance Company,
Homeowners Insurance, also by Lemonade,
Auto Insurance by Root Insurance Company, and finally
Life Insurance by Ladder Life Insurance Company.
We’ll state once again that this is not an advertisement for SoFi, despite how it appears. SoFi isn’t paying us a penny for listing (and praising) the services they offer. Ask yourself, though: does this look like an ordinary bank to you now?
SoFi is not yet publicly traded, but there is a way to claim a piece of this exciting company’s innovation and growth potential before any IPO. We at Iron Edge VC are very proud to have pre-IPO access to SoFi shares. Last May, SoFi closed a $500 million funding round with the Qatar Investment Authority. We can get you in at a lower valuation than what Qatar paid. If you would like to learn more, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.
As always, shares are available on a first come, first served basis