In a previous life, I had a comfortable, salaried job working for a big international bank. My generous expatriate package allowed my family to live in cities like Shanghai and Singapore, while my company paid for my children’s schooling and even sponsored me to go to business school. About four years ago, I gave it all up to co-found a startup.
That’s right: I left my safe, cushy job to embark on a risky and sometimes — OK, often — scary adventure, bringing my family along for the bumpy ride. It was a huge and difficult decision, but one I’m ultimately glad I made (and not just because SoFi, my company, has been doing so well).
Whether you want to launch your own business or help build someone else’s, the siren call of the startup is a powerful thing nowadays. I personally know a lot of people out there are struggling with the same decision I made several years ago. How do you know when (or even if) it’s time to leave the safety of secure employment for the uncertainty of something small and unproven?
Of course, everyone is different, and there’s no way to be certain you are making the right choice. In retrospect, however, I can point to a few signs that convinced me to take the leap.
1. I was drawn to entrepreneurship.
My former employer was sponsoring my time at business school, so I had every intention of going back to work for them after it was over. At the same time, I chose Stanford Business School because I was fascinated by the whole “entrepreneurship in Silicon Valley” scene. I had no particular expectations, but I knew I wanted to learn more about it.
During my time at Stanford, I got to know a few of my classmates, including Mike Cagney (CEO and Co-Founder of SoFi). In our conversations, one topic that kept coming to the surface was how financial services today are generally being delivered to consumers in the same way they always have been. As we brainstormed how to improve that experience, the seed for SoFi was planted.
2. I believed we could solve a big problem.
We knew financial services was, for a few reasons, ripe for improvement. For one thing, very few financial brands inspired the kind of customer adoration that tech companies like Apple and Google enjoyed. People’s relationships with their banks were, at best, born solely out of necessity and were often fraught with aggravation. And while the enormous size of these companies gave them benefits of scale, it also held them back from keeping nimble and innovative. Frankly, there was no reason for them to be innovative since no competitors posed a threat to the traditional model they provided — yet.
3. I was inspired by our mission.
As my colleagues and I dug deeper into the financial industry and its shortcomings, one topic arose again and again: student loans. At Stanford, we were surrounded by students who’d taken on five or six figures of debt, often at interest rates that were objectively quite high. For the most part, everyone pays the same rate for the same loan (e.g., Direct PLUS federal loans at 7.21 percent), regardless of the actual credit risk they pose.
We also learned that there was no way to refinance student loans at a lower rate after graduation. In a world where people with mortgages commonly refinance every few years to ensure they have the best possible rate, it seemed like student loan borrowers were at an unfair disadvantage. Your credit score, income, and other financial data tend to improve a lot after you leave school — shouldn’t that qualify you for a better interest rate?
As plans for our student loan refinancing product began to take shape, I was struck by the fact that we’d be making a meaningful difference in so many people’s lives. Today, the average SoFi refinance borrower saves about $11,000, and many save more than that. I think the knowledge that we’d really be helping people was as compelling as the business opportunity.
4. I struck a balance between preparation and taking the plunge.
Leaving a safe, salaried job for a startup is a difficult step for most people, so there’s a temptation to try and ask every single question, and picture every possible scenario, and be prepared for every potential outcome before you decide to take the leap. Going into a startup with eyes wide open is commendable, but if you take this step too far you run the risk of ultimately talking yourself out of it. The hard truth is that you’re taking a risk, and you’re not going to like the answers to some of these questions.
I think that, for some people, it helps to maintain a level of “optimal naivety” — prepare yourself wisely and ask yourself the hard questions, but know that you needn’t dwell on every possible outcome. None of your preparations can give you 100 percent certainty that what you’re doing is going to work, so at some point you just have to go with your gut. It sounds cliched, but it’s true.
After leaving my former company to co-found SoFi, there were many months in the beginning when I wasn’t sure I’d made the right decision. Luckily, as time went by and we began to gain some traction, it became pretty clear we were onto something big.
Almost four years later we’ve saved our customers nearly $300 million through student loan refinancing, and more recently, launched personal loan and mortgage products that leverage our same unique marketplace-lending model. Today, SoFi employs more than 200 people across multiple cities. All of this gives me a lot of pride.
Plus, despite all the uncertainty, it’s been a lot of fun along the way.
* Savings calculation is based on SoFi borrowers who refinanced between May 21, 2014 and Jul. 2, 2014. Prior to refinancing, these borrowers had an average $71,000 loan balance, an interest rate of 7.07 percent, and a lifetime payment of $99,239, assuming the standard Direct Loan term. After refinancing, these borrowers have an average lifetime payment of $87,456, based on a weighted average of new rates received across both types (fixed and variable) and all terms offered by SoFi with AutoPay. Savings calculation assumes borrowers make all payments in a timely manner and do not prepay.
This article is intended to provide useful information about personal finance, but it is not intended to provide legal, investment or tax advice.
Daniel Macklin is a member of the DailyWorth Connect program. Read more about the program here.