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on deck wall st

There has been lots of hype and media coverage lately about OnDeck and their expansion into Canada. OnDeck is a New York based company listed on the NYSE (ONDK) that some people have described as “totally disruptive to traditional banking – Silicon Valley meets Wall St.”

OnDeck provides small business loans through the use of proprietary software that analyzes 2,000 data points from various online sources including bank accounts, social media profiles, credit reports and accounting records. All of these data points are “scored” automatically and their system can make a lending decision in minutes according to their website. You don’t even need to talk to a real person. It’s very cool and should prove to be a really good option for many small businesses throughout North America (and Australia – OnDeck is expanding there too).

OnDeck is a big time Wall St Lending company – not that there’s anything wrong with that – or is there? They went public in December 2014 and raised $200 million. Two hundred million dollars! For the founder(s) and many of the Senior Managers, The American Dream has come true.

There is some very impressive stuff:

  • they did over $400 million in loans in the first qtr this year
  • they’ll loan out about $1.6 billion in 2015
  • over the last three years they’ve spent almost $40 million on technology and analytics.
  • They’ve spent almost $60 million on marketing in the last 3 years
  • They have cool TV ads and sponsor minor league baseball

In the alternative lending space, they are a marketing juggernaut in the US. We welcome them to Canada to spend a boatload of money here too because their marketing dollars will increase the overall awareness of the non-bank small business loan industry in Canada.

There is some not-so-impressive stuff too:

  • According to public records they have never been profitable
  • They have an accumulated loss of $132 million
  • They are $400 million in debt

This is where the air comes out of the balloon. As a public company, they have to answer to Wall St. There is undoubtedly immense pressure on the Senior Management team to turn this freighter around – and do it now. Typically, when a private company goes public, the business strategy and operational decisions shift from a customer focus to a shareholder focus.  It’s the reality of Wall St (particularly in financial services) and non-customer centric decisions can get out of control very fast. Lehman Bros, Freddie Mac, Fannie Mae, etc.

It’s clearly stated in the Annual Report that OnDeck wants to be the worlds’ largest online lender for small businesses. That is one Big Harry Audacious Goal (BHAG for those of you familiar with ridiculous buzzwords).

That will also probably make them the biggest on line small business lender in Canada eventually. And that’s fine with us – we don’t want to be the biggest small business lender in Canada, just the best. We know there is a certain niche of small businesses in Canada that prefers our “Main St” approach (friendly, personal, responsive service from a small company) over a Wall St approach (insert your own description of Wall St here).

We’re 100% Canadian and we know our Canadian customers. And we’re not $400 million in debt.

So, again, welcome to friendly Canada OnDeck – you might find it a little different up here.

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