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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In general, NPS leaders outperform on both winning new business and cross-selling to existing customers. OnDeck fulfills these needs, while continuing to enlarge its competitive advantages.

Inour Partnership returned 1. Small business owners can now complete an online application within an hour from the convenience of their offices and receive funding the same day. Send me ocassional third party offers Yes Khhrom. The first team to implement this change was the Oakland Athletics.

I look forward to writing to you again in the summer.

Khrom Capital 2015 Letter; Long OnDeck Thesis

One that is extraordinarily data-rich…With this information, we can conduct scientific tests; build actuarially-based models of consumer behavior…Using advanced information technology and sophisticated quantitative analysis, we mine the vast amounts of data we have collected on millions of actual and prospective customers… and tailor products, pricing, credit lines and account management to meet the individual needs and wants of each customer.

OnDeck is bringing its superior value proposition and competitive advantages to a very large market. Subscribe to ValueWalk Newsletter. 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.

As the largest online small business lender, it benefits from the positive feedback loop of its data gathering. These partners include the largest bank in the U.

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. OnDeck, on the other hand, receives data 52 or times per year.

Khrom Capital Letter – Ondeck Detailed Thesis

Comparatively, the average NPS score for a national bank is 9. Small businesses are an extraordinarily large part of the United States economy, accounting for about half its private GDP and workforce. We respect your privacy no spam ever. A decade from now, small business owners will continue to need capital, and they will prefer to access it in the most frictionless and cheapest manner possible, coupled with the best customer service.


There are many ways that the underwriting paradigm can evolve in what is now a Big Data world.

Moreover, having a wider lending spectrum than its competitors enables OnDeck to generate a relatively higher customer lifetime value. The antiquated process that banks still rely on created the opportunity for OnDeck to disrupt the small business loan market. The traditional method requires small business owners, who have khhrom time to step away from their businesses, to dedicate over 20 capitap to the loan application process. Using hindsight, what was the appropriate book value multiple to pay for Capital One in its first year as a public company?

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

Assume that Competitor A and OnDeck pay for ten sales leads. Unlike a typical lender, whose borrowers are required to send in monthly payments, OnDeck gets automated electronic repayments from its borrowers either kjrom a weekly or daily basis. On the other hand, it is valuable for Partners to understand the type of investments Khrom Ccapital makes.

He is highly ambitious and greatly believes in the future of OnDeck, with virtually all of his net worth invested in the company.

Hedgeable | Sophisticated Investing Made Simple

We are likely still in the early days of how technology can transform lending. 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.

OnDeck reminds us of Capital One in the khrpm. To invest in OnDeck, an investor must have confidence that its underwriting is prudent and that the business can withstand economic recessions. 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.

But as with almost any innovation, imitators vapital followed. It describes the transition that talent scouts made from recruiting players using their personal judgments—which were impaired khrpm cognitive biases and lacked regard for scientific data—to instead employing computer-generated statistical analyses.

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He sticks to a clearly defined goal: There are several important reasons that give us that conviction.

Khrom Capital Management

The company took the decisioning strength of its OnDeck Score and recently created a platform that allows other institutions to use its underwriting algorithms. Accounting rules require OnDeck to expense advertising and loan loss provisions up front, while its interest income is amortized over the life of its loans. 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.

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.

OnDeck has spent almost a decade building out its OnDeck Score—a credit score for the small business, not the business owner.

A current investment of ours is in a company called OnDeck, which operates an online platform for small business lending. And it has been a consistent track record: This problem exists partly because banks lack the incentive to make small business loans. Never Miss A Story! More importantly, among the competitor CEOs whom we spoke with, Noah stands out as the most capable. As a result, OnDeck can now underwrite the widest credit spectrum compared to its competitors, which gives it a cost advantage in acquiring customers.

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. As a result, a low FICO score is the top reason for a small business credit denial. Except for the most recent quarters inthe billions of dollars that OnDeck lent over the past eight years have completed their lifecycle.

As always, if there is anything you wish to discuss, please feel free to call me. OnDeck lends to small businesses across more than sectors. We see evidence of this in multiple areas, from customer service to innovation.