The competition between lending startups is heating up with both Lending Club (NYSE:LC) and OnDeck (NYSE:ONDK) completing IPOs last December. Peer-to-peer lender SoFi is also in the pipeline, with CEO Mike Cagney confirming to FOXBusiness.com that the company looks to IPO in the near future.
“It would be likely that we would be one of the next ones to come out there,” Cagney said in a web exclusive interview with FOXBusiness.com. “The next stage for us is going to be a public event.”
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The company recently revealed that it had raised a $235 million funding round, valuing SoFi at $1.3 billion. The startup has raised about $800 million since it was formed in 2011 and has originated over $1.75 billion in loans.
While some of the lending groups are focused on business loans, SoFi aims to differentiate itself by specializing in student loans, mortgage loans, and now, personal loans.
“They are folks who are coming out of school, they are moving, going into a new situations where they can use some money to pay for furniture or get a car,” Cagney said. “We don’t overlap with the Lending Clubs and the OnDecks of the world, we’re in a very different market.”
Startups like Lending Club view themselves as a platform, where lenders and borrowers can convene, whereas OnDeck facilitates the loans themselves. SoFi has more of a hybrid model, where they originate the loans, but only keep them on their books for a short period of time.
"We do originate our own loans... but then they go into the marketplace,” Cagney explained. “They’re purchased by banks, they’re purchased by asset management firms, they’re purchased by retail and we don’t retain any residual off of that.” The transaction business is a “much more efficient use of capital,” according to Cagney.
Building upon the demand for consumer and small business loans, other lending startups include Prosper, Funding Circle, Kabbage and Upstart. With dozens of entrants in the space, some experts are predicting that we will see consolidation in the industry.
Lending Club shares have risen 50% since the company’s December IPO. On Deck, which also went public in December, has seen its shares fall about 10%.