SAN FRANCISCO--(BUSINESS WIRE)--Social Finance Inc. (“SoFi”) today announced that it has raised $77.2 million in series B funding led by Baseline Ventures and joined by DCM and Renren Inc. (NYSE: RENN), China’s largest social networking site. SoFi is an innovative lending solution that gives students access to lower loan rates than Federal Direct and PLUS loans with similar borrower protections by fostering social and economic connections with alumni investors. The new capital will be used to help SoFi grow its alumni investor base and reach new student and graduate borrowers as it expands beyond 78 schools this fall.
“With more students applying for loans for post-secondary education coupled with state budget cutbacks for higher education and a federal loan market that can punish good borrowers, the student loan and debt crisis is getting worse before it’s going to get better,” said Mike Cagney, CEO of Social Finance. “Through SoFi, we have been able to create a whole new market that gives students better alternatives to fund their education while strengthening ties to their alumni community.”
The SoFi program works as a dedicated lending fund that offers students a better fixed loan rate than today’s unsubsidized Federal Direct and PLUS loans. At the same time it enables alumni to connect with their alma mater while earning an attractive return. The program also fosters interaction between students and alumni through a unique social platform that combines on-line and off-line connections that facilitate financial literacy, career mentoring and in-school project assistance – ultimately helping to reduce lending rates and lower loss rates for students.
To date, SoFi’s lending program is available in 78 schools ranging from large universities such as Stanford and University of Michigan to smaller colleges such as Smith and Swarthmore. It will expand beyond 78 schools this fall. SoFi has generated more than $60 million in loan applications and is on a path to commit more than $200 million in student loans in 2012.
“When taking the current and foreseeable macro environment into account, there is a massive opportunity for SoFi to disrupt the entire finance market,” said Steve Anderson, founder of Baseline Ventures. “Alumni across the country want to be more involved with their universities and many have savings sitting on the sidelines earning no interest. At the same time students need lower loan rates to make college more affordable and need help with career decisions and mentoring. SoFi makes the economics work for everyone: students benefit from lower rates and alumni support, and alumni earn better returns and add value to their schools through SoFi’s community lending engagement model.”
In March, the Consumer Financial Protection Bureau announced that student debt had passed $1 trillion. In addition, a recent report from the Federal Reserve Bank of New York revealed that the delinquency rate for student loans, which is currently at 8.9 percent, increased during the second quarter of 2012. This compared to the delinquency rates for mortgages (6.3 percent), credit cards (10.9 percent) and auto loans (4.2 percent) which all decreased.
“There are very few companies that do social good while also leveraging next generation financial and social networking services,” said David Chao, co-founder and general partner, DCM. “Student loans are a major national issue that needs to be resolved. Through SoFi’s unique approach they are not only helping students through financial literacy and reducing their loan rates, but also enabling alumni to connect with their alma mater and truly give back to their community.”
“As a pioneering company pushing the potential of social infrastructure, we closely observe and participate in other online businesses that are leveraging ‘social’ to create, market and distribute products at scale,” said Joe Chen, CEO of Renren. “SoFi lies at the nexus of the social revolution, which began with social gaming and social ecommerce – and is now poised to transform finance and education.”
Located in the Presidio in San Francisco, SoFi was started by a team of Stanford Graduate School of Business (GSB) students in the fall of 2011. SoFi’s inaugural loan program was a $2 million pilot at the GSB that fall. Since then, SoFi has moved toward becoming a national lender via state registration, created a broker dealer, expanded its product set to include both in-school and consolidation loans, raised significant capital to fund loans and expanded its presence to more than 78 schools nationwide. SoFi is backed by a group of leading institutions including Baseline Ventures, DCM and Renren. The company encourages interested students, alumni and investors to visit www.sofi.com for more information.
About Baseline Ventures
Baseline Ventures is a seed-stage capital firm founded by Steve Anderson in late 2006. Bringing his diverse experience from eBay, Microsoft, Kleiner Perkins, Starbucks and Digital Equipment Corporation, Steve founded Baseline to in order to help entrepreneurs build and grow their ideas into companies.
Since inception Baseline has invested in more than 60 companies and helped more than 15 companies exit. Baseline is proud to be a seed investor associated with such promising companies as Instagram (acquired by Facebook), Twitter, Weebly, Formspring, Heroku (acquired by Saleforce.com), CoTweet (acquired by ExactTarget), GeoAPI (acquired by Twitter), IndexTank (acquired by LinkedIn), Rupture (acquired by EA), Sendori (acquired by Ask.com), Parakey (acquired by Facebook), Versely (acquired by Cisco), Aardvark and DocVerse (both acquired by Google) and Hunch (acquired by eBay).
DCM is an early stage venture capital firm based in Silicon Valley, Beijing and Tokyo with more than $2 billion under management. DCM has investments in more than 140 technology companies across the United States and Asia and provides hands-on operational guidance and a global network of business and financial resources. DCM has backed industry-leading companies such as 51job, About.com, Clearwire, eDreams, Foundry Networks, Kabu.com, Sling Media, SMIC and VanceInfo as well as upcoming startups such as Bill.com, Bridgelux, Happy Elements, PapayaMobile and Trion Worlds. Recent successes include China-based IPOs: Renren, BitAuto, DangDang, Luxin and VIPShop and US-based M&A and IPOs: Fortinet, PGP (Symantec) and Sandforce (LSI).
Renren Inc. (NYSE: RENN) operates the leading real name social networking internet platform in China. It enables users to connect and communicate with each other, share information and user-generated content, play online games, listen to music, shop for deals and enjoy a wide range of other features and services. Renren's platform includes the main social networking website Renren.com, the online games center game.Renren.com, the social commerce website Nuomi.com and the video-sharing website 56.com. Renren had approximately 162 million activated users as of June 30, 2012.