Founder, Khrom Capital ManagementValue investor backed by a major university endowment. College dropout has posted some good returns while keeping a. View Eric Khrom’s profile on LinkedIn, the world’s largest professional community . Eric has 1 job listed on their profile. See the complete profile on LinkedIn and. SEC profile for Registered Investment Advisor (RIA) KHROM CAPITAL MANAGEMENT, LLC including address, website, AUM, assets, growth, total accounts.

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Hedgeable | Sophisticated Investing Made Simple

To invest in OnDeck, an investor must have confidence that its underwriting is prudent and that the business can withstand economic recessions. We see evidence of this in multiple areas, from customer service to innovation.

There are many ways that the underwriting paradigm can evolve in what is now a Big Data world. Never Miss A Story! Unlike a typical lender, whose borrowers are required to send in monthly payments, OnDeck gets automated electronic repayments from capitql borrowers either on a weekly or daily basis.

Khrom Capital Letter – Ondeck Detailed Thesis

I look forward to writing to you again in the summer. The company has taken advantage of advancements in computing and the proliferation of data to help solve a large problem: Capktalour Partnership returned 1.

And it has been a consistent track record: These partners include the largest bank in the U.

As a result, a low FICO score is capotal top reason for a small business credit denial. Small business owners can now complete an online application within an hour from cspital convenience of their offices and receive funding the same day.

As our Partners know, our philosophy is not to disclose investment ideas in our letters, in order to prevent commitment bias and to protect our intellectual property.

We always seek to compare our holdings to other businesses in order to better understand the risks and opportunities that they may face.

Khrom Capital 2015 Letter; Long OnDeck Thesis

This problem exists partly because banks lack the incentive to make small business loans. In its first annual report, Capital One discussed how the company was revolutionizing the credit card market through better use of information analytics, or as management called it, Information Based Strategy IBS.


OnDeck, on the other hand, receives data 52 or times per year. Most importantly, OnDeck has a very strong balance sheet.

FICO also does not help an underwriter decide on the appropriate loan size to offer and interest rate to charge each unique pizzeria. It is crucial to understand the nuances of how OnDeck differs from most lenders. A current investment of ours is in a company called OnDeck, which operates an online platform for small business cqpital.

As always, if there is anything you wish to discuss, please feel free to call me. We remain excited about the investment returns we think we can deliver to our Partners over the next decade. Capiital took the time to get to know Noah, and his qualities match what we look for in CEOs. OnDeck, on the other hand, has kbrom its credit model to a point where it can now underwrite a short duration loan to a relatively new business, a line of credit product to a business with sporadic cash flow needs, or a bank-like multi-year loan to a mature business.

The traditional method requires small business capigal, who have limited time to step away from their businesses, to dedicate over 20 hours to the loan application process.

Khrom Capital Management

More importantly, among the competitor CEOs whom we spoke with, Noah stands out as the most capable. Let us just say paying even 10 times book value and holding it for 10 years would have still provided an investor with a satisfying return.

Comparatively, the average NPS score for a national bank is cspital. OnDeck reminds us of Capital One in the s. He is highly ambitious and greatly believes in the future of OnDeck, with virtually all of his net worth invested in the company. Small businesses are an extraordinarily large part of the United States economy, accounting for about half its private GDP and workforce.

To balance these conflicting goals, we find it prudent to occasionally walk through a particular Khrom Capital investment.


We respect your privacy no spam ever. The first team to implement this change was the Oakland Athletics. We recommend reading this book or khfom the movie. For those interested in a simplified example to illustrate the point: After its first year as a public company, Capital One experienced significant competitive pressures similar to what OnDeck faces today. Moreover, having a wider lending spectrum than its competitors enables OnDeck to generate a relatively higher customer lifetime value.

As the largest online small business lender, it benefits from the positive feedback khrim of its data gathering. But as with almost any innovation, imitators quickly followed. The antiquated process that banks still rely on created the opportunity for OnDeck to disrupt the small business loan market.

OnDeck fulfills these needs, while continuing to enlarge its competitive advantages.

OnDeck lends to small businesses across more than sectors. Most lenders to small business are clustered at either end of the credit spectrum—from subprime to prime—and offer only one or two products.

In the first half ofas charge-offs and consumer bankruptcies continued the ascent that began a few years ago, several of our competitors either exited the credit card business or retrenched.

Using hindsight, what was capitla appropriate book value multiple to pay for Capital One in its first year as a public company? OnDeck has spent almost a decade building out its OnDeck Score—a credit score for the small business, not the business owner.

Except for the most recent quarters inthe billions of dollars that OnDeck lent over the past eight years have completed their lifecycle. Without needing to do anything, small business owners could be preapproved for a loan just by logging into either their Chase checking account or QuickBooks software.

Assume that Competitor A and OnDeck pay for ten sales leads.