Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Google Ventures Leads $17 Million Round in On Deck Capital

all hands on deckA couple months ago, On Deck, the company that uses big data to evaluate whether or not a small business is worth lending money to, landed a healthy $42 million Series D investment of its own. Today, that same round got bigger.

On Deck announced this morning that Google Ventures has led an additional $17 million investment with participation from PayPal co-founder Peter Thiel and Industry Ventures. Other investors in the round include Institutional Venture Partners, RRE Ventures and First Round Capital.

That round comes on top of a $100 million round of debt financing raised last year from Goldman Sachs and Fortress Credit Corp., and a $15 million Series C led by SAP Ventures in 2011.

So far, On Deck has funded more than $450 million in loans to small businesses. Its borrowers, CEO Noah Breslow told me yesterday, tend to be small: Restaurants, auto body shops, doctor’s and dentist’s offices, construction contractors. Most of them have 200 employees or less. “Our customers tend to be businesses that do a large number of small-ticket transactions,” he said.

Launched in 2006, On Deck has turned out to be sort of a right-time, right-place story. Commercial banks were being tightfisted with loans, even to healthy businesses. But they also tend to be challenged by the time and effort that goes into underwriting a smallish loan that the borrower only needs for a short period of time.

Where banks tend to focus more on the personal credit rating, the On Deck software gathers live digital data from a business’s operations in order to help evaluate the business’s health. The point is to use that data that banks and other potential investors usually don’t see, as a tool to realistically evaluate the risk of making a loan that goes beyond the simple credit rating of the business owner. On Deck then takes it a step further and actually makes the loan.

Breslow said loan volume is up 100 percent over last year, and is on track to grow again by 140 percent this year. By the end of the year, it will have loaned more than $1 billion to small businesses.

As the business grows, On Deck has gathered a lot of data on its applicants. And as so many companies are starting to realize, that aggregated data is yielding some interesting insights. Stay tuned for more on that later this year.


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