Usually when it comes to big sums of funding, companies like to boast. Online lending startup Social Finance, better known as SoFi, took another tack this morning, quietly announcing in a press release that it has closed half a billion dollars in a single funding round led by Qatar Investment Authority, a Doha, Qatar-based private equity and sovereign wealth fund.
Even in a world now awash with rounds in the multiple hundreds of millions of dollars, the financing is notable. First, it’s the third giant round in recent years for the nearly eight-year-old, San Francisco-based company. Its biggest round to date came in September 2015, when SoftBank led a $1 billion round in the company. SoftBank’s then COO, Nikesh Arora, who was part of the funding announcement, abruptly left the Japanese conglomerate the following year, but SoftBank CFO Alok Sama maintains a board seat.
In February 2017, SoFi raised $500 million more in funding led by the private equity firm Silver Lake, but there would come another twist five months later when SoFi’s founder and its CEO at the time, Mike Cagney, was forced to resign following a sexual harassment lawsuit.
Indeed, the new, Qatar-led round is the first big vote of confidence for SoFi’s newest CEO, Anthony Noto, who joined the company in January of last year after spending three-and-a-half-years at Twitter, first as its CFO and later as its COO — roles he took on after spending several years with Goldman Sachs as a managing director. (Noto also participated in the company’s newest financing.)
Still, the round — which pushes SoFi’s total funding to $2.3 billion altogether — appears to be a flat one. According to SoFi’s release about funding, its pre-money valuation is $4.3 billion, the same valuation it was assigned at the time of that Silver Lake-led round two years ago.
Seemingly, that owes to competitive pressure in the space, including a flood of non-bank lending companies that includes Lending Club and Prosper for consumer loans, OnDeck for small and mid-size business loans, StreetShares for veteran-owned businesses and CommonBond and SoFi for student loans.
That’s saying nothing of newer online lenders like Affirm, the Silicon Valley startup that’s led by serial entrepreneur Max Levchin and is aggressively chasing millennial shoppers who need loans, or can be easily persuaded to take one, in any case.
Little wonder that SoFi, which also largely markets its services to younger customers, has been rolling out new products, including two no-fee exchange-traded funds that it introduced last month.
The move gives SoFi a way to access the $3.9 trillion U.S. ETF market. The products’ debut also reminded many that when dealing with non-traditional institutions racing to grow their businesses, there can be kinks.
In this particular case, customers of SoFi’s new ETFs weren’t told beforehand that SoFi intended to liquidate their existing ETF investments and funnel the proceeds into its own new funds, as reported by the WSJ. Indeed, one customer with whom the outlet spoke said that the tax bill he’ll owe because of the move will outweigh 35 years of fee savings.
Above: SoFi CEO Anthony Noto.