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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Khrom Capital Management

As a result, banks are less likely to engage in lending at the smallest dollar level. OnDeck reminds us of Capital One in the s. OnDeck, on the other hand, has advanced 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 khdom needs, or a bank-like multi-year loan to a mature business.

Czpital, having a wider lending spectrum than its competitors enables OnDeck to generate a relatively higher customer lifetime value. OnDeck fulfills these needs, while continuing to enlarge its competitive advantages. OnDeck has spent almost a decade building out its OnDeck Score—a credit score for the small business, not the business owner.

Khrom Capital 2015 Letter; Long OnDeck Thesis

He is highly ambitious and greatly believes in the future of OnDeck, with virtually all of his net worth invested in the company. There are many ways that the underwriting paradigm can evolve in what is now a Big Data world. We took the time to get to know Noah, and his qualities match what we look for in CEOs.

OnDeck is bringing its superior value proposition and competitive advantages to a very large market. A current investment of ours is in ohrom company called OnDeck, which operates an online platform for small business lending. To invest in OnDeck, an investor must have confidence that its underwriting is caital and that the ohrom can withstand economic recessions. We are likely still in the early days of how technology can transform lending.


This problem exists partly because banks lack the incentive to make small business loans. More importantly, among the competitor CEOs whom we spoke with, Noah stands out as the most capable.

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.

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. But as with almost any innovation, imitators quickly followed. As a result, a low FICO score is the top reason for a small business credit denial. OnDeck can generally underwrite a small business earlier in its life before it qualifies for a bank loan. Subscribe to ValueWalk Newsletter.

On the other hand, it is valuable for Partners to understand the type of investments Khrom Capital makes. The traditional method requires small business owners, who have limited time to step away from their businesses, to dedicate over 20 hours to the loan application process.

A typical lender gets insight on the health of its borrowers only 12 times a year. I look forward to writing to you again in the summer. Send me ocassional third party offers Yes No. After its first year as a public company, Capital One experienced significant competitive pressures similar to what OnDeck faces today.

When necessary, he takes short-term pain to achieve this long-term objective. The antiquated process that banks still rely on created the opportunity for OnDeck to disrupt the small business loan market.

Comparatively, the average NPS score for a national bank is 9. 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 a result, OnDeck can now underwrite the widest credit spectrum compared to its competitors, which gives it a cost advantage in acquiring customers.

It is crucial to understand the nuances of how OnDeck differs from most lenders. OnDeck, on the other hand, receives data 52 or times per year. We recommend reading this book or seeing the movie. There are several important reasons that give us that conviction.


Khrom Capital Letter – Ondeck Detailed Thesis

OnDeck is the only publicly traded lender that we know to report a day delinquency ratio to its investors, as opposed to the standard 30 days. OnDeck lends to small businesses across more than sectors. 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.

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.

As the largest online small business lender, it benefits from the positive feedback loop of its data gathering. khrmo

Assume that Competitor A and OnDeck pay for ten sales leads. As always, if there is anything you wish to discuss, please feel free to call me. Most importantly, OnDeck has a very strong balance sheet. We respect your privacy no spam ever. Except for the most recent quarters inthe billions of dollars that OnDeck lent over the past eight years have completed their lifecycle. FICO also does not help an underwriter decide on the appropriate loan size to offer and interest rate to charge each unique pizzeria.

The company has taken advantage of advancements in computing and the proliferation of data fapital help solve a large problem: Small businesses are an extraordinarily large part of the United States economy, accounting for about half its private GDP and workforce.