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The San Francisco-based fintech company has already raised, as recorded by Crunchbase, a touch over $2 billion from investors including SoftBank, Silver Lake Partners, and Third Point Ventures, among others. SoFi’s last known primary raise was its $500 million Series F announced a little over two years ago. In between that raise and the latest reports of it raising another significant round, the lending company ran into a series of problems.
A little over a month after SoFi’s Series F was raised on Feb. 24, 2017, TechCrunch reported that the startup was being sued by a former employee for wrongful termination after reporting sexual harassment. The employee also claimed, per TechCrunch, that SoFi’s managers “improperly recorded loans in order to goose their bonus pay.” The CEO of SoFi, Michael Cagney, announced he would step down on Sept. 15, 2017. Anthony Noto, formerly the COO of Twitter, was recruited to be SoFi’s CEO.
Executive turnover and sexual harassment claims are not the only problems SoFi has faced.
Amid reports that its loan business was suffering, SoFi announced layoffs throughout the first half of 2018. And just two months ago, TechCrunch reported that SoFi had settled with the FTC over claims it had misrepresented its student loan offerings. The startup, however, paid no monetary penalties.
It’s a lot of baggage for a startup to carry to the negotiating table when raising a new round of funding. So what’s attracting investors? It’s worth noting that the Qatar Investment Authority isn’t the world’s most prolific investor, according to Crunchbase. However, it has participated in other large unicorn financings, including Uber, Compass, and FlipKart, all of which have also seen investment from SoftBank.
While SoFi has had its troubles, fintech startups focusing on loans have been a popular investment category for venture capitalists. Earlier this month, Affirm, which aims to replace credit cards for consumers, raised $300 million at a $2.9 billion post-money valuation.
With $2 billion in total funds raised, plus another $500 million possibly topping up its coffers, SoFi is one of the best capitalized startups focusing on the consumer lending market. The company has also expanded its offerings to home loans, and it has recently announced zero-fee exchange-traded fund, which has pressured stalwarts like Vanguard to lower ETF fees.
The funding could also be a soft confirmation of Anthony Noto’s ability to turn SoFi’s culture around. At Twitter as COO, the New York Times reported Noto’s calm demeanor as a notable trait as the social media company “faced significant employee turnover and doubts about its ability to make money from its enormous audience.”
Illustration: Li-Anne Dias.