Forbes

ON DECK CAPITAL

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HARNESSING BIG DATA TO MAKE SMALL-BUSINESS LOANS

IPO: DECEMBER 2014 MARKET VALUE LOSS: $1.6 BILLION

Founded in 2006, On Deck uses data and algorithms to quickly approve small-business loans—a group many banks are reluctant to lend to. On Deck’s loans range from $5,000 to $500,000, and its biggest bank partners have been JPMorgan Chase and Utahbased Celtic Bank. Celtic accounts for some 20% of its loans.

By 2013, On Deck had originated $400 million in loans despite charging sky-high rates of up to 36%. In March 2014, it raised $77 million from Chase Coleman’s Tiger Global and others. A few months later it went public. On Deck’s stock soared 40% to a $1.9 billion valuation on its first day of trading.

It was downhill from there as marketing expenses ballooned, growth slowed, and a new crop of competitor­s like Fundbox, Kabbage and BlueVine gained steam. In early 2017, On Deck reported a 15% net charge-off rate of its loans due to defaults. Two years later JPMorgan said it would stop working with it.

The original strategy was to “grow, grow, grow—which doesn’t usually translate into good credit performanc­e,” says Giuliano Bologna, an analyst at investment bank BTIG. “What people really started to realize is that, while there was a lot of tech, they’re really more ‘fin’ than tech.” On Deck’s stock is down 75% from its IPO.

 ??  ?? CEO Noah Breslow
CEO Noah Breslow

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