SoFi’s numbers are soaring. The student loan lending platform, which uses social finance to lower interest rates, has attracted $77.2 million in investment and lends some $140 million to more than 1,700 students across 100 schools. Not too shabby, considering that just two years ago it was still a school project in a Stanford classroom.
Co-founder James Finnigan, 29, entered Stanford University’s Graduate School of Business with an engineering background, a career in consulting and the startup “bug.” He connected with Mike Cagney, Daniel Macklin, and Ian Brady, who were all enrolled in the school’s prestigious one-year Sloan Fellows program for experienced professionals. The four joined forces to gain entry to Stanford’s selective Exploring Entrepreneurial Opportunities course, an academic incubator of sorts that takes enrollees from plan to pitch.
As students, they didn’t have to look far for their business idea – school loans. “We realized that it was a huge market, a huge problem, and ripe for change,” Finnigan says. Despite juggling a full academic load, the four fleshed out a plan, got investors on board, and confirmed that borrowers were interested.” Being a student opens so many doors,” Finnigan says. He called up nearly two dozen financial aid directors during the research phase. “If we weren’t in school and said we’re calling from XYZ loan company, they’d be like, ‘Hold on,'” he says. Instead, they were happy to help out.
Outside the entrepreneurship class, the founders split up and took courses in operations, service marketing–anything that could inform their business. “People in the school started to get sick of us because every presentation we’d do would be some aspect about SoFi,” James Finnigan laughingly recalls. They even piloted their business by tapping the B-school’s network. Forty MBA alumni pitched in an average of $50,000 each, lending a combined $2 million to 100 graduate students at a rate of 6.24%. The project proved successful–alumni lenders trusted students from their alma mater to repay the loans, and borrowers enjoyed discounted interest rates in return.
Just two days after graduation in the summer of 2011, the founders holed themselves up in a conference room in San Francisco’s Presidio park. By September, SoFi was live. James Finnigan says they could have started the business outside of Stanford but concedes it would have been a lot harder. “The support ecosystem is amazing across all levels,” he says. “You have this feeling of camaraderie–that other people aren’t going into typical MBA jobs, they’re taking risks, it’s very pervasive.”