Softbank Leads Bubble-like $1B Investment In P2P Lender SoFi

SoFi2The venture capital boom is not over until it is over . . . Japan’s Softbank has led a $1 billion, Series E funding in peer-to-peer lender SoFi in the Bay Area.

Perhaps this proves that something was clearly up when founder Mike Cagney showed up wearing pants instead of his usual shorts when he spoke at last week’s opening of the NASDAQ Entrepreneurial Center in San Francisco. His employees presumed wrongly that he was selling the company.

This large single financing round in the fintech space validates SoFi’s model to disrupt traditional banking. The new capital brings its total equity funding to $1.42 billion, following closely on a Series D financing in February this year. Existing investors participating in this latest round include Third Point Ventures, Wellington Management Company, Institutional Venture Partners, RenRen, Baseline Ventures and DCM Ventures.

Speaking at NASDAQ, Cagney noted that his fintech startup has been profitable since 2015. Its innovations include being the first company in 2011 to let graduates consolidate and refinance their federal and private student loans, and in 2014, becoming the first U.S.-based P2P lender to start offering mortgages. To date, the firm has funded more than $4 billion in loans, an amount that is expected to surpass $6 billion by the end of this year.

The new investment will be used to fuel SoFi’s growth and transformation into a deposit-holding rival to traditional banks within the highly regulated banking industry. Speaking at NASDAQ in San Francisco, Cagney indicated that financial regulations were the most challenging part of his business. (SoFi was  highlighted with a tech chat at Silicon Dragon event in San Francisco this past March.)

The consumer-centric company, which employs 400 full-time staff, aspires to charge lower rates on its loans, to offer credit and debit cards, and to expand more quickly into areas like wealth management and deposits.

The investment from Softbank gives SoFi a strong partner with a track record of good bets of fast-growing companies. Softbank put $20 million into Alibaba 14 years before its 2014 IPO.

 

Alibaba1

Alibaba and its financial services affiliate, Ant Financial Services Group, have invested in India’s largest mobile payments and e-commerce company, Paytm, via its parent company, One97.

Reports peg the deal at $600-$700 million, with Alibaba’s holding amounting to roughly 40 percent of Paytm, valuing the startup at roughly $4 billion. Alibaba had invested in One97 in February 2015, gaining a 25 percent stake for $575 million. With this latest investment, Alibaba becomes Paytm’s biggest shareholder. Previous investors in One97 include SAIF Partners, Silicon Valley Bank, Intel Capital, Reliance Capital and SAP Ventures, with rounds in 2007 and 2009.

Paytm claims more than 100 million “Paytm Wallet” users, and expects to reach 150 million users by March 2016. The company claims its service handles 75 million transactions a month, with Indians buying items online without the need for a credit card or banking.

The startup began as a provider of value-added services to telecom firms, later adapting its business model to become one of India’s earliest mobile wallet firms. The new funds will help Paytm to expand its mobile commerce and payment system in India, as well as invest in marketing, technology, and hiring.

As revenue growth slows at home, Alibaba has sharpened its focus on India. Just last month, Alibaba invested $200 million in Snapdeal, one of India’s largest e-commerce companies. With this latest investment in Paytm, China’s largest commerce and mobile payments player now owns 40 percent of its equivalent in India.

With India and China as the hottest markets for growth, this is a partnership to watch.

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