Noah Breslow, CEO of online lender On Deck Capital, has watched the company’s market value shrink from $230 million in February to $53 million in May.
The last decade has produced a vast number of budding companies and promising technologies. Many are now ripe for the picking.
The coronavirus pandemic couldn’t have come at a worse time for New York City’s On Deck Capital. The once-promising fintech unicorn, known for massaging big data with algorithms to make loans for small businesses, started life with such promise. It had blue chip backers like Peter Thiel, Khosla Ventures and Tiger Global. It went public in December 2014, and almost immediately its stock soared 40% to a peak market value of $1.9 billion. But long before COVID began making headlines, On Deck hit a rough patch. As competitors flooded its small business niche, customer acquisition expenses ballooned, and margins plummeted. By the end of 2019, more than $1.6 billion of its market value was gone, and On Deck was attempting a turnaround strategy.
What had been a challenging future for On Deck has turned into a desperate one. In the first quarter of 2020, the company reported a $59 million loss on flat revenues of $111 million, mostly because an alarming COVID-19-related spike in loan delinquencies forced it to boost its reserve for credit losses. It has also tapped $987 million of its $1.1 billion credit facility in an effort to stave off a liquidity crisis. Employees have had their hours cut, and with On Deck’s shares now trading below a dollar, one activist investor is demanding that CEO Noah Breslow and two other board members be fired.
The company isn’t commenting, but a person familiar with the situation says Evercore has been hired to shop On Deck in what amounts to a fire sale.
On Deck Capital is just one of many finance startups in the throes of an existential crisis. The fintech boom of the last decade has produced a vast landscape of new companies and novel technologies. Many may soon need to find merger partners.
A surge in deals began just as the contagion was spreading. In January Visa announced it would pay $5.3 billion to purchase San Francisco’s Plaid, a tech platform connecting bank accounts to apps, and in February Intuit said it would pay $7.1 billion for Credit Karma. The coronavirus pandemic—and the business disruptions it is causing—will quicken the pace of transactions over the next year. Already, Motif, a 10-year old stock investing fintech backed by Goldman Sachs and JPMorgan that was once valued at $440 million, announced that it would shutter and sell its tech and intellectual property to Charles Schwab. Some like Motif and On Deck will end up in shotgun weddings, but others will find happy marriages of convenience.
Salt Lake City-based Galileo is a fintech that powers payments for trading app Robinhood, money-transfer company…