Interview with Mike Cagney, CEO of SoFi from December 2014.
SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students who met at the Stanford Graduate School of Business. By leveraging the interest fellow alumni have in seeing graduates of their alma mater be successful, the founders hoped SoFi could provide more affordable options for those taking on debt to fund their education.
Steve: What are you most excited about this year in peer to peer?
Mike Cagney: I’m looking forward to seeing how the market reacts to our S&P rated securitization. That transaction demonstrated how participants can combine retail and institutional capital at a very low cost of funds. This should open up the $11.5 trillion US credit market beyond higher interest cards, business loans and student loans.
Steve: What part of p2p lending is most under developed and rip for innovation? and what companies do you see doing something innovative there? (Other than your own, of course)
Mike Cagney: I think there has been very little done in the residential mortgage space. Given the size of the market, it’s a huge opportunity. We’re seeing some limited innovation at the periphery – like National Family Mortgage – but nothing widespread yet. There is opportunity both to offer a new product (for example, giving up equity for a portion of your downpayment) and for the product experience (for example, using electronic appraisals, etc.)
Steve: Everyone is talking about the Lending Club IPO, how do you see it changing the industry for everyone?
Mike Cagney: It’s the most important event on the horizon for the marketplace lending space. Lending Club looks to have a phenomenal IPO, and it will help others follow in their path and bring more entrants, capital and innovation (and competition) to the space.
Steve: We love that SoFi has the “Startup Of The Year Entrepreneur Program.” How do you see startups and the “entrepreneurial spirit” Peter Renton talks about coming in and succeeding in peer to peer?
Mike Cagney: We started the entrepreneur program because when we were incubating SoFi at Stanford’s Graduate School of Business, the number one reason people cited for not starting a company was student loans. We’ve backed and supported startups in the financial services space as well as industries ranging from biomedical to mobile cleaning.
In terms of the marketplace lending space, there has been enough traction that the barriers to entry are lower than they ever have been. Improvements in cost of capital open up a greater market opportunity. We’ll continue to see new entrants and innovation here.
Steve: What’s next for SoFi?
The motivation of SoFi is to disrupt traditional financial services. The idea has always been to build a trusted relationship with a borrower who has a good financial future ahead of them and provide financial services to them throughout their lives. We’ve already moved into the mortgage space, starting in California, which will become a large portion of the business, and plan to extend into the personal loan space.