Dan Macklin is the co-founder and head of community and member success for a company called SoFi. In 2011, SoFi started out helping college students find their way out of debt through some new and exciting practices that involved the students or alumni getting loans based on their personal situation, instead of everyone paying the same rate right down the line. They ended up branching out and doing many other different things with their business such as helping customers with mortgages and personal loans.
I am with Dan Macklin, Dan how would you describe yourself?
I am one of the cofounders of SoFi and I just moved into a new role to look after our growing community of members. It has been a success so far!
Briefly tell us your story?
My story is I am from the UK, and lived and worked there for the first part of my career. I was in banking at Standard Chartered Bank in London, Singapore and Shanghai. In total I worked there for 12 years, then I decided I wanted to go to business school, as it was a dream of mine. I did the Masters in Management program at Stanford, which was a one year program for mid-career execs, or people with a few gray hairs as I like to call them! I was sponsored by my bank and I expected to go back when I graduated. But I fell in love with Silicon Valley, Stanford, and just everything that was going on. I was fortunate enough to be in class with Mike Cagney, who is another co-founder of SoFi and is our CEO. The idea for SoFi came from an entrepreneur class in Stanford. We took part in that class with the goal that we were going to start a business. We fleshed out ideas, did research, and spoke with as many of our professors, existing students, and alumni, at least as much as we could. By the time I graduated I was confident that this project had legs to stand on. So I resigned from my previous employer and just went full time into SoFi. We graduated on a Saturday four years ago, and we started the company the following Monday.
How did you start this and was the proposition initially?
The motivation for this was that we saw the banking industry operating in much the same way that it had for many years. We were looking around Silicon Valley and seeing all these businesses being disrupted and just the way that you did things was completely different, whether it was music, ordering online. Everything was very different. Finance, however, seemed like it was almost exactly the same. So we thought, with all of this technology why can’t we put potential borrowers and lenders closer together? The peer to peer world was at the beginning back then. We looked into student loans a bit because, well we were in Stanford. People were paying ridiculous rates, there was very little difference in the market and everyone was paying the same rates. Once you graduated there was no opportunity to refinance debt. So you could get the best job in the world but you would still be paying those high rates. We wanted to deliver a product that gave better value for money.
You started off raising money from alumni?
Yes, that is correct. The original concept was having alumni investing and then using that money to lend out. We found that it was not quite working well because finding people who want to invest 50 or 100 thousand dollars at a time is very time consuming, especially when you are trying to pitch a new concept such as this one. We had early interest from institutional investors who liked the loans we were making. They said, “we will write you a check for 50 or 100 million dollars” – with that kind of investment, we can fund many more loans. Now we have evolved to the point where the majority of the money comes from institutions. We are very comfortable with that because it has allowed us to scale to the point that we have, in fact, just recently hit 3 billion dollars in lending. That kind of growth is hard to achieve if you are just taking investments from individuals. That said, we still do have many individuals investing on a continued basis. Beyond the lending, the SoFi community is a big differentiator. For example, we like to hold get togethers for both lenders and borrowers. It’s been great to see the networking that takes place among our members and even business relationships that have grown out of our community.
Was it a hard decision to give up equity to help encourage those early investments in the loans?
Yes and no. Yes our early rounds meant we were giving away some of the company, but it was out of necessity. So no, it didn’t give me any heart burn because it was the only way we could do it. We did not just have 10 million dollars laying around to lend out. So we had to do this to prove out the model.
You were very successful with student loans, how many did you get to before you started changing the company, in terms of offering additional products?
We started in the summer of 2011. It was always our vision to become a lifetime financial services partner to our members, but for the first three years we did just student loans. About this time last year we asked existing customers what other things in your financial lives could we help with? The responses were wide and varied, but the common themes were mortgages, credit cards and personal loans. We listened, and we launched mortgages and personal loans at the end of last year.
Was that the plan from the beginning? What have you learned from the experience?
It was always our plan to be a financial services partner to our members, helping them reach their most important financial goals. We realized that with having a student loan product we were going to attract a certain demographic of people – many of whom are underserved by traditional banks. I think what we didn’t know is how quickly we would break into those other products. Overall though, SoFi isn’t just about products – it’s about a lifelong relationship.
So what growth have you seen in that?
Huge growth. We don’t break down numbers exactly but as of June, 40 percent of our loan volume was from outside of student lending.
Have you seen that as a catalyst for creating new student loan customers?
About 50 percent of our mortgage and personal loan borrowers are existing student loan refinancing members; the other 50 percent are brand new members. As we continue to build our product range, we expect that as time goes on we will continue to have a mix – though the commonality is that all of our members are high achieving professionals.
When you started out you were just student loans, now you have branched out. How have your partners and competitors received you moving into different products?
As the first mover, many people have seen our success and have come into the market. We like that because it keeps us on our toes. Any exposure or media coverage for any company in the market benefits everybody, because many people did not know that this industry even existed.
What advice would you share with others about splitting products?
I think we branched into new products at the right time. It is different for every company and industry though. You should never be completely comfortable when starting a company; you should always push forward and slowly start getting a little more comfortable as you get bigger. But once you get too comfortable you should start working on a new product to help your customers in other ways
