Working Capital (Debt) Financing For Entrepreneurs: Mitch Jacobs, Founder And CEO, On Deck Capital (Part 2)

By guest authors Irina Patterson and Candice Arnold

Mitch: In general, business owners don’t do a good job of helping a bank to very quickly and readily understand the excellent performance of their businesses. It’s very hard for a bank to assess the performance of a small business. Given the economics of small loans, it ends up with the bank using the credit score as a substitute for any real analysis of business performance.

So, our view was, what the United States needs is a system that enables capital to flow to Main Street; a system that makes it much easier to be able to, at the same speed and scale as credit score, assess the creditworthiness of a small business based upon the business’s performance, as opposed to the business owner’s personal credit score.

Irina: So, what did you do?

Mitch: In 2006, I launched the company primarily by raising venture capital from four VCs at the time: First Round, Khosla, Village Ventures, and Contour Venture Partners, and then built the technology platform.

The technology platform has two main components to it. One is a big data aggregation platform that combines accounting and online banking, payment processing, tax, and a whole host of other data sources to create a complete performance profile of a business.

The second part of the system enables us to compensate for the weak cash management practices of a small business by collecting from the business – every day – in an automated micropayment.

As a result, we have the world’s first real-time data lending platform and real-time servicing platform. So you’re able to evaluate businesses based upon real data in real time, both in underwriting and in monitoring the portfolio. And you’re able to collect from businesses every single day in micropayments to make sure that the loan repayment is happening as cash flow is coming in to the business.

Irina: Where do small businesses have to do their banking to be able to plug into your system?.

Mitch: Any bank in the United States.

Irina: But not internationally?

Mitch: Not internationally, yet.

Irina: You’ve been in business since 2006; do you have stories about businesses that succeed because of you?

Mitch: We’ve now over 2,600 businesses in the United States that did not fit the traditional criteria that a bank would apply to a business that have been funded through our technology platform for over $75 million.

Irina: How do businesses find out about you?

Mitch: A lot learn about us online or stories that have been written about On Deck. We have about 500 different distribution points that are a combination of everything from local brokers to community banks to corporate partners. You can find On Deck on the Sam’s Club website. There are different places where people can find us, and that’s how they end up coming to us.

Irina: What should businesses do when they decide to approach you? What is the process?

Mitch: It’s fairly simple. They provide a few fields of information as part of a very quick application that can be done online. Then our system goes to work compiling information on their behalf.

In almost every case, there’s a concierge involved in the process, where if there’s something that we’re unable to collect electronically, we’ll contact the business owners and help them get that information to us.

What we typically find is that small business owners have a range of tools that they use. Some are very automated and sophisticated in their use of electronic tools and many are not.

But usually by the end of setting up their first transaction with On Deck, they’ve activated the services that are necessary to be able to then, on an ongoing basis, have our system keep an updated profile on their business so that in the future, as they look to access new capital, they can do that with a click of a button.

This segment is part 2 in the series : Working Capital (Debt) Financing For Entrepreneurs: Mitch Jacobs, Founder And CEO, On Deck Capital
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