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$IPOE/ @sofi -- the company helping you "get your money right" on the pursuit of financial independence w/a complete suite of tools to:
-- borrow
-- save
-- invest
-- spend
Why @sofi might just be so fine
... a thread 
-- borrow
-- save
-- invest
-- spend
Why @sofi might just be so fine
... a thread
Sofi's products:
a) For B2C:
-- home/personal/student loans & refi ( @NerdWallet's personal loan score below)
-- credit
-- banking
-- investing
Targets "high earners not well served" (HENWS)
b) For B2B:
-- API open to enterprise clients (more later) https://www.nerdwallet.com/reviews/loans/personal-loans/sofi-personal-loans
a) For B2C:
-- home/personal/student loans & refi ( @NerdWallet's personal loan score below)
-- credit
-- banking
-- investing
Targets "high earners not well served" (HENWS)
b) For B2B:
-- API open to enterprise clients (more later) https://www.nerdwallet.com/reviews/loans/personal-loans/sofi-personal-loans
Sofi aims to:
a) Be a consumer's "one-stop shop" for digital fin services
b) Be the $AMZN/ @awscloud of fintech (their comp not mine
)
-- AKA dominate both B2B & B2C fintech landscapes
c) Pass savings from digitization onto users to drive scale
d) Be the "winner take most"
a) Be a consumer's "one-stop shop" for digital fin services
b) Be the $AMZN/ @awscloud of fintech (their comp not mine
)-- AKA dominate both B2B & B2C fintech landscapes
c) Pass savings from digitization onto users to drive scale
d) Be the "winner take most"
Sofi's edge: (1/3)
a) “Fastest way to do everything"
-- borrow $
-- trade stock (others are as fast)
-- bank
-- bill/transact
b) Quality & quantity of selection -- offerings for all user types
-- unique terms (nothing cookie-cutter)
-- personalized benefits
--
GENEROUS rates
a) “Fastest way to do everything"
-- borrow $
-- trade stock (others are as fast)
-- bank
-- bill/transact
b) Quality & quantity of selection -- offerings for all user types
-- unique terms (nothing cookie-cutter)
-- personalized benefits
--
GENEROUS rates
Sofi's edge: (2/3)
c) Convenience
-- any time/platform/place
d) Social/financial integration w/Sofi's "home feed"
-- personal feed of fin news/advice
-- added 15% to sales
e) Content
-- education
-- credit score & budgeting
-- remote access to CFPs https://www.sofi.com/learn/content/strategies-lowering-student-loan-interest-rate/
c) Convenience
-- any time/platform/place
d) Social/financial integration w/Sofi's "home feed"
-- personal feed of fin news/advice
-- added 15% to sales
e) Content
-- education
-- credit score & budgeting
-- remote access to CFPs https://www.sofi.com/learn/content/strategies-lowering-student-loan-interest-rate/
Sofi's edge (3/3) -- summing it up
Full loan stack built w/innovation focus
-- enabled 5 product launches in 1 year
-- enables B2B expansion (more later)
Creates a feedback loop (sorry for the cliché)
-- more iterations
-- lower cost
-- actionable data to feed more improvement
Full loan stack built w/innovation focus
-- enabled 5 product launches in 1 year
-- enables B2B expansion (more later)
Creates a feedback loop (sorry for the cliché)
-- more iterations
-- lower cost
-- actionable data to feed more improvement
Sofi philosophy -- "Create the fin services productivity loop (FSPL)"
Meaning? It's a land & expand approach:
-- build loyalty w/1st product
-- build products so they're "better together"
-- leverage leading LTV/CAC to fuel growth
Similar to $LMND's insurance playbook.
Meaning? It's a land & expand approach:
-- build loyalty w/1st product
-- build products so they're "better together"
-- leverage leading LTV/CAC to fuel growth
Similar to $LMND's insurance playbook.
Cross-selling feeds this loop:
1 money product:
-- $250 revs
-- 34% profit margin
-- $40 CAC
Money + loan product w/cross-selling
-- $2311 revs
-- 80% profit margin
-- $40 CAC
24% of new sales to existing users.
Boosts LTV/CAC.
Justifies more investment in growth.
1 money product:
-- $250 revs
-- 34% profit margin
-- $40 CAC
Money + loan product w/cross-selling
-- $2311 revs
-- 80% profit margin
-- $40 CAC
24% of new sales to existing users.
Boosts LTV/CAC.
Justifies more investment in growth.
COVID-19's impact on fin services
a) Greatly accelerated fin-tech app usage (see chart below)
b) 87% of these evolving consumers say they'll stick w/digital banking due to
-- selection
-- service
-- convenience
-- flexibility
-- security
-- less fees
a) Greatly accelerated fin-tech app usage (see chart below)
b) 87% of these evolving consumers say they'll stick w/digital banking due to
-- selection
-- service
-- convenience
-- flexibility
-- security
-- less fees
Sofi's industry dynamics:
a) Top 15 banks = 52% legacy acct market share
-- fragmented
b) 50% of us use more than 1 bank
-- 80% of us do so because no 1 bank has everything
-- Sofi is "only one-stop shop for digital financial services" according to the company
a) Top 15 banks = 52% legacy acct market share
-- fragmented
b) 50% of us use more than 1 bank
-- 80% of us do so because no 1 bank has everything
-- Sofi is "only one-stop shop for digital financial services" according to the company
Demand looks good:
a) Users are growing -- that is expected
b) More importantly -- user growth has been & is continuing to accelerate
-- positive derivative points to strong momentum
c) Multi-product user base is growing rapidly too
a) Users are growing -- that is expected
b) More importantly -- user growth has been & is continuing to accelerate
-- positive derivative points to strong momentum
c) Multi-product user base is growing rapidly too
Secret sauce -- Galileo (1/3)
a) 2020 Sofi buys Galileo -- Sofi's B2B arm
-- $1.2B deal
b) Galileo
-- application programming interface (API) for payments & more fin services
-- "enables critical functionality w/an open API"
c) @RobinhoodApp @Chime @RevolutApp built using it
a) 2020 Sofi buys Galileo -- Sofi's B2B arm
-- $1.2B deal
b) Galileo
-- application programming interface (API) for payments & more fin services
-- "enables critical functionality w/an open API"
c) @RobinhoodApp @Chime @RevolutApp built using it
Secret sauce -- Galileo (2/3)
d) This B2B branch of Sofi offers:
-- account set-up/funding
-- direct deposit
-- bill pay
-- transaction notifications
-- point of sale authorization
& so much more
Sofi can also help legacy banks improve tech stacks w/Galileo -- win win
d) This B2B branch of Sofi offers:
-- account set-up/funding
-- direct deposit
-- bill pay
-- transaction notifications
-- point of sale authorization
& so much more
Sofi can also help legacy banks improve tech stacks w/Galileo -- win win
Secret sauce -- Galileo (3/3)
e) Galileo allows Sofi to
-- fuel direct deposit relationships
-- offer products to 50M new users
-- expand into new products & countries
f) Galileo owns 1/6 of Apex Clearing -- digital clearing house API
g) Galileo demand is accelerating
e) Galileo allows Sofi to
-- fuel direct deposit relationships
-- offer products to 50M new users
-- expand into new products & countries
f) Galileo owns 1/6 of Apex Clearing -- digital clearing house API
g) Galileo demand is accelerating
Financial forecasts -- NOT certain
2020:
-- revs up 38% to $621M
-- -11% adj EBITDA margin
-- -35.4% GAAP NI margin
2021:
-- revs up 57% to $980M
-- 2.7% adj EBITDA margin
-- -24.2% GAAP NI margin
2025:
-- 43% rev CAGR to $3.67B
-- 32% adj EBITDA margin
-- 17.3% GAAP NI margin
2020:
-- revs up 38% to $621M
-- -11% adj EBITDA margin
-- -35.4% GAAP NI margin
2021:
-- revs up 57% to $980M
-- 2.7% adj EBITDA margin
-- -24.2% GAAP NI margin
2025:
-- 43% rev CAGR to $3.67B
-- 32% adj EBITDA margin
-- 17.3% GAAP NI margin
SPAC deal:
a) Shares
-- 865.1M shares
-- 28.1M shares in warrants
-- 122.5M share PIPE
-- 80.5M IPOE shares
= ~1.1B shares
b) $
-- $1.9B on hand
c) valuation @ $19/share
= $20.9B cap - $1.9B in cash
= $19B fully diluted EV
d) 39X fully diluted EV/2023 EBITDA
a) Shares
-- 865.1M shares
-- 28.1M shares in warrants
-- 122.5M share PIPE
-- 80.5M IPOE shares
= ~1.1B shares
b) $
-- $1.9B on hand
c) valuation @ $19/share
= $20.9B cap - $1.9B in cash
= $19B fully diluted EV
d) 39X fully diluted EV/2023 EBITDA
A boost to operations:
In October 2020, Sofi was granted preliminary approval for a U.S. bank charter
This will enable:
-- a lower cost of capital
-- more net interest margin from longer loan holding periods
-- a boost to lending growth
In October 2020, Sofi was granted preliminary approval for a U.S. bank charter
This will enable:
-- a lower cost of capital
-- more net interest margin from longer loan holding periods
-- a boost to lending growth
Summarizing Sofi's 3 rev streams:
1) Fin Services (digital banking)
-- 153% CAGR to 2025
-- "on path to profitability"
2) Lending (most mature segment)
-- 25% CAGR to 2025
-- 58% contribution margin
3) Tech platform (B2B, Galileo)
-- 55% CAGR to 2025
-- 62% contribution margin
1) Fin Services (digital banking)
-- 153% CAGR to 2025
-- "on path to profitability"
2) Lending (most mature segment)
-- 25% CAGR to 2025
-- 58% contribution margin
3) Tech platform (B2B, Galileo)
-- 55% CAGR to 2025
-- 62% contribution margin
Management: (1/3)
a) CEO Anthony Noto (NOT a founder)
-- COO & CFO $TWTR
-- co-head of TMT $GS
-- CFO @NFL
-- West Point grad
b) CFO Chris Lapointe
-- head of corporate FP&A $UBER
-- VP of TMT $GS
c) Head of product Assaf Ronen
-- VP of Voice @ $AMZN
-- GM @ $MSFT
a) CEO Anthony Noto (NOT a founder)
-- COO & CFO $TWTR
-- co-head of TMT $GS
-- CFO @NFL
-- West Point grad
b) CFO Chris Lapointe
-- head of corporate FP&A $UBER
-- VP of TMT $GS
c) Head of product Assaf Ronen
-- VP of Voice @ $AMZN
-- GM @ $MSFT
Management: (2/3)
d) CMO Lauren Webb
-- marketing VP $INTU
-- brand manager $PG
e) Head of ops Micah Heavener
-- managing director $C
-- Infantry Captain in the US Army
f) Head of people Anna Avalos
-- Former HR leader $TSLA
-- Director of human resources $SYK
d) CMO Lauren Webb
-- marketing VP $INTU
-- brand manager $PG
e) Head of ops Micah Heavener
-- managing director $C
-- Infantry Captain in the US Army
f) Head of people Anna Avalos
-- Former HR leader $TSLA
-- Director of human resources $SYK
Management: (3/3)
g) CEO/co-founder Mike Cagney stepped down in 2017 amid sexual harassment allegations
-- obviously never good
-- why Noto & his team's sparkling resumes are vital
-- https://www.bloomberg.com/news/articles/2017-09-12/sofi-s-ceo-steps-down-as-sexual-harassment-claims-damage-morale
h) @Glassdoor ratings are pretty average
-- https://www.glassdoor.com/Reviews/SoFi-Reviews-E779979.htm
g) CEO/co-founder Mike Cagney stepped down in 2017 amid sexual harassment allegations
-- obviously never good
-- why Noto & his team's sparkling resumes are vital
-- https://www.bloomberg.com/news/articles/2017-09-12/sofi-s-ceo-steps-down-as-sexual-harassment-claims-damage-morale
h) @Glassdoor ratings are pretty average
-- https://www.glassdoor.com/Reviews/SoFi-Reviews-E779979.htm
Risks:
a) Crowded
-- fintech entrants abundant
b) Estimating a big growth boost -- not certain & needs to happen
c) $SQ $PYPL
-- could offer everything Sofi does
-- larger user bases
d) Rates
-- NIM compression if yield curve flattens
-- rate hikes = lower loan affordability
a) Crowded
-- fintech entrants abundant
b) Estimating a big growth boost -- not certain & needs to happen
c) $SQ $PYPL
-- could offer everything Sofi does
-- larger user bases
d) Rates
-- NIM compression if yield curve flattens
-- rate hikes = lower loan affordability
Chamath's Investor call notes:
-- "churn better than any other fintech we met"
-- 90% of new neobank accts run on Sofi tech
-- modern tech stack enables B2B expansion like $AMZN w/AWS -- that's his game changer
-- complete suite of products stands out among individual solutions
-- "churn better than any other fintech we met"
-- 90% of new neobank accts run on Sofi tech
-- modern tech stack enables B2B expansion like $AMZN w/AWS -- that's his game changer
-- complete suite of products stands out among individual solutions
Noto's Investor call notes:
-- "better economics than any other DTC tech company I have seen"
-- Galileo acquisition improves economics of Sofi's money product by 20%
-- will soon launch social portfolios so users can invest w/people on the platform they follow
-- "better economics than any other DTC tech company I have seen"
-- Galileo acquisition improves economics of Sofi's money product by 20%
-- will soon launch social portfolios so users can invest w/people on the platform they follow
Plan:
I love the products from experience & the path/mgmt from digging in.
Will start a SMALL position tomorrow.
The forecasted boost in growth MUST happen. If it doesn't occur I'll be out & posting a swing & miss gif.
Leash is shorter on this one.
Will be long @Sofi
I love the products from experience & the path/mgmt from digging in.
Will start a SMALL position tomorrow.
The forecasted boost in growth MUST happen. If it doesn't occur I'll be out & posting a swing & miss gif.
Leash is shorter on this one.
Will be long @Sofi
