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Reviewing SoFI's investor deck; select commentary here - a thread.
Identifies its core segment as "High Earner Not Well Served" (basically, a nicer version of "HENRY", high earner not rich yet)
#fintech #finserv
Identifies its core segment as "High Earner Not Well Served" (basically, a nicer version of "HENRY", high earner not rich yet)
#fintech #finserv
2/
Don't see anything inherently different about SoFI's positioning on "differentiation" - though they are farther along than other challengers in developing a full product stack + pursuing a bank charter.
Don't see anything inherently different about SoFI's positioning on "differentiation" - though they are farther along than other challengers in developing a full product stack + pursuing a bank charter.
3/
Obligatory 'fly wheel' slide
"Financial services productivity loop" is cringe-inducing; think most just call this a cross-sell strategy (see: Wells Fargo).
If well-executed, true it should drive superior LTV, lower CAC --> better unit economics
Obligatory 'fly wheel' slide
"Financial services productivity loop" is cringe-inducing; think most just call this a cross-sell strategy (see: Wells Fargo).
If well-executed, true it should drive superior LTV, lower CAC --> better unit economics
4/
What are these logos? Examples of other 'winner takes most' companies I guess?
Disagree w/premise that SoFI (or similar companies) are winner take all. Not an order of magnitude better than legacy (like Uber), new product/model (Airbnb), nor network effects (Venmo/Cash App).
What are these logos? Examples of other 'winner takes most' companies I guess?
Disagree w/premise that SoFI (or similar companies) are winner take all. Not an order of magnitude better than legacy (like Uber), new product/model (Airbnb), nor network effects (Venmo/Cash App).
5/
This headline seems to suggest SoFI views its best opportunity as targeting users/accounts currently at regional/local banks & credit unions.
This doesn't immediately make sense to me (why would they be more/less winnable than users at JPMC, BAML, WF, etc.)?
This headline seems to suggest SoFI views its best opportunity as targeting users/accounts currently at regional/local banks & credit unions.
This doesn't immediately make sense to me (why would they be more/less winnable than users at JPMC, BAML, WF, etc.)?
6/
Consistent w/my research of why users hold multiple accounts/apps across providers, which becomes a pain point (optimizing finances across providers).
But:
(1) Does SoFI actually solve this problem?
(2) Is there a strong enough defensive moat around this value prop?
Consistent w/my research of why users hold multiple accounts/apps across providers, which becomes a pain point (optimizing finances across providers).
But:
(1) Does SoFI actually solve this problem?
(2) Is there a strong enough defensive moat around this value prop?
7/
Yep, the success depends on cross-selling.
SoFI's cust entry point is/was cheap student loan refi.
The question is, does that provide a strong enough toe hold to get into users' wallets (checking account / credit card)? To win investments from Fidelity or Robinhood (or GS)?
Yep, the success depends on cross-selling.
SoFI's cust entry point is/was cheap student loan refi.
The question is, does that provide a strong enough toe hold to get into users' wallets (checking account / credit card)? To win investments from Fidelity or Robinhood (or GS)?
8/
Member growth is good, but obviously doesn't tell the whole story.
What products are they using?
What was the CAC?
What's the NPV (LTV)?
Avg # products/member?
Retention/churn?
Member growth is good, but obviously doesn't tell the whole story.
What products are they using?
What was the CAC?
What's the NPV (LTV)?
Avg # products/member?
Retention/churn?
9/
Hm, ok, currently 398k 'multiproduct' users / 1718k = 23% users with >1 product.
Looking for a benchmark from JPMC, BAML etc. but not finding one quickly; guessing it's quite a bit higher than 23%
Also important what the product mix & balance (if applicable) is.
Hm, ok, currently 398k 'multiproduct' users / 1718k = 23% users with >1 product.
Looking for a benchmark from JPMC, BAML etc. but not finding one quickly; guessing it's quite a bit higher than 23%
Also important what the product mix & balance (if applicable) is.
10/
Illustrates the unit economic benefits of cross-selling a "Money" (cash mgmt account) customer into a personal loan -- yes, multi-product usage boosts LTV.
But doesn't show actual product entry points (assume mostly student loan refi) & what (if any) users cross-sell into.
Illustrates the unit economic benefits of cross-selling a "Money" (cash mgmt account) customer into a personal loan -- yes, multi-product usage boosts LTV.
But doesn't show actual product entry points (assume mostly student loan refi) & what (if any) users cross-sell into.
11/
Ok, this shows % of product acq coming from user cross-sell.
So, most mortgage & invest are coming from existing users. (Relay is a free PFM tool.)
This info - by itself - doesn't mean much.
Eg, might not be doing paid acq for mortgage/invest, but is for personal loans.
Ok, this shows % of product acq coming from user cross-sell.
So, most mortgage & invest are coming from existing users. (Relay is a free PFM tool.)
This info - by itself - doesn't mean much.
Eg, might not be doing paid acq for mortgage/invest, but is for personal loans.
12/
This gets closest to answering my q's so far.
Q3 '20, SoFI is primarily an unsecured lending biz - mostly personal loan + student loan refi.
Account numbers for Money & invest are meaningless w/o transaction volume for Money & AUM for investment.
This gets closest to answering my q's so far.
Q3 '20, SoFI is primarily an unsecured lending biz - mostly personal loan + student loan refi.
Account numbers for Money & invest are meaningless w/o transaction volume for Money & AUM for investment.
13/
The "proprietary tech" slide.
Believe this is true vs incumbents (JPMC, BAML etc) but not necessarily other startups or GS.
Also, with the slew of BaaS & infrastructure layers out these days, this is becoming less of a competitive moat.
The "proprietary tech" slide.
Believe this is true vs incumbents (JPMC, BAML etc) but not necessarily other startups or GS.
Also, with the slew of BaaS & infrastructure layers out these days, this is becoming less of a competitive moat.
14/
The "acquisition synergy" slide (Galileo)
Notable comment is about geographic expansion - interestingly, into LatAm - not Canada, UK, Australia etc.
I'm bullish on Mexico/LatAm fintech, but it is a significantly different operating environment.
(Emphasis on slide added)
The "acquisition synergy" slide (Galileo)
Notable comment is about geographic expansion - interestingly, into LatAm - not Canada, UK, Australia etc.
I'm bullish on Mexico/LatAm fintech, but it is a significantly different operating environment.
(Emphasis on slide added)
15/
Financials. Increasing rev, decreasing EBITDA loss LOOK good, but hard to eval w/o more context.
Assumed jump in rev growth rate & EBITDA margin notable - curious what the assumptions here are (emphasis on slide added).
Financials. Increasing rev, decreasing EBITDA loss LOOK good, but hard to eval w/o more context.
Assumed jump in rev growth rate & EBITDA margin notable - curious what the assumptions here are (emphasis on slide added).
16/
SoFI is currently a lending biz, but with growth potential in tech (Galileo acq) and 'financial services' (checking/savings, investing, etc.)
Curious to see how public markets treat it, 6, 12 months out & at what kind of multiple it's valued.
SoFI is currently a lending biz, but with growth potential in tech (Galileo acq) and 'financial services' (checking/savings, investing, etc.)
Curious to see how public markets treat it, 6, 12 months out & at what kind of multiple it's valued.
17/
Assumes +$299MM EBITDA 5 years out from securing a bank charter, based on:
-decrease cost of captial
-improved net interest margin
-lending growth (unclear what this has to do w/charter?)
Assumes +$299MM EBITDA 5 years out from securing a bank charter, based on:
-decrease cost of captial
-improved net interest margin
-lending growth (unclear what this has to do w/charter?)
18/
Financial projections
1. Pretty optimistic growth in Financial Services unit (Money, Investing, maybe new products?)
2. Interesting that margin on 'Technology Platform' (Galileo) hovers around 30% (vs Lending at ~45% - would like to better understand why.
(Emphasis added)
Financial projections
1. Pretty optimistic growth in Financial Services unit (Money, Investing, maybe new products?)
2. Interesting that margin on 'Technology Platform' (Galileo) hovers around 30% (vs Lending at ~45% - would like to better understand why.
(Emphasis added)
19/
Fin.
Time to take the dog for a walk while it's sunny
Back to top: https://twitter.com/mikulaja/status/1347537043476385792
#fintech #finserv #spac #ipo
Fin.
Time to take the dog for a walk while it's sunny
Back to top: https://twitter.com/mikulaja/status/1347537043476385792
#fintech #finserv #spac #ipo
/Appendix
1. Most high income Gen X, millennial, Gen Z bank w/mega bank or large regional.
SoFI can't rely only on picking off cust from small banks w/bad UX.
2. Cross-sell is hard. Most cust DO have more than 1 prod w/primary bank, but not typically 2+
[data/chart from 2012]
![/Appendix1. Most high income Gen X, millennial, Gen Z bank w/mega bank or large regional.SoFI can't rely only on picking off cust from small banks w/bad UX.2. Cross-sell is hard. Most cust DO have more than 1 prod w/primary bank, but not typically 2+[data/chart from 2012]](https://pbs.twimg.com/media/ErOPd9bXEAQN6zt.png "/Appendix1. Most high income Gen X, millennial, Gen Z bank w/mega bank or large regional.SoFI can't rely only on picking off cust from small banks w/bad UX.2. Cross-sell is hard. Most cust DO have more than 1 prod w/primary bank, but not typically 2+[data/chart from 2012]")
1. Most high income Gen X, millennial, Gen Z bank w/mega bank or large regional.
SoFI can't rely only on picking off cust from small banks w/bad UX.
2. Cross-sell is hard. Most cust DO have more than 1 prod w/primary bank, but not typically 2+
[data/chart from 2012]
