Online finance startup SoFi got its start refinancing student loans but gradually has been adding other services to members. To expand into new regions and move closer to becoming a full-service financial services company, SoFi has confirmed that it raised an additional $500 million in equity financing led by Silver Lake.
The new funding round, which previously had been reported by Bloomberg and the Wall Street Journal, brings total equity financing to $1.9 billion. Other investors in the round include SoftBank and GPI Capital.
SoFi is best known as an online lender targeting so-called HENRYs (high earners, not rich yet) with student loan refinancing and other financial services. Rather than look strictly at FICO scores as a measure of credit-worthiness, SoFi also takes into account factors like income and cash flows as it evaluates potential “members.”
Starting with student loan refinancing, SoFi quickly added personal loans and mortgage lending options for its members. But each of those products is limited by the lack of frequency with which users need them, which led SoFi to begin offering a wider suite of financial services.
Nowadays SoFi members can buy life insurance and use wealth management tools the company has added, and soon they will be able to get more traditional banking services from the company. SoFi acquired banking startup Zenbanx in a deal valued at around $100 million to round out its portfolio with banking, debit, payments and money transfer services.
Over time, SoFi has caught some flak for cherry-picking customers and not being more inclusive with who can take advantage of its services. That exclusivity has also meant a somewhat limited addressable market, which can be seen in its user numbers.
While SoFi more than doubled from 100,000 members in 2015 to 225,000 at the end of 2016, that’s still a very small number relative to the size of the U.S. financial services market.
With the acquisition of Zenbanx and the addition of SoFi-branded banking services later this year, the company should be able to capture more customers in the U.S. Who knows — maybe by giving them a bank account, SoFi will be able to identify customers who might not have applied for their loans.
In addition to offering more services, SoFi is also looking beyond U.S. borders. The company says it plans to expand service offerings to Australia and Canada by the end of the year.