IPO May Be Around the Corner for On Deck Capital

NEW YORK ( TheStreet) -- Does On Deck Capital's announcement Wednesday that it secured equity financing from a new investor -- technology venture-capital firm Institutional Venture Partners (IVP) -- mean it's thinking of an initial public offering?

"We're not talking about an IPO soon," On Deck CEO Noah Breslow told TheStreet on Thursday. However, over the past 12 months, "it's becoming increasingly convincing that On Deck can be a publicly scaled company."

While there isn't pressure to go public this year, "it's definitely an option for us in the two- to three-year timeframe," Breslow says.

The $42 million Series D growth financing, led by newcomer IVP and including a few of On Deck's existing investors like RRE Ventures, SAP Ventures and First Round Capital, was oversubscribed.

The financing will enable On Deck Capital to "further accelerate growth through: continued technology innovation; breakthrough new product development; increased marketing to reach more small-business owners; and expanded access to wholesale funding sources," the company said in the press release.

IVP has $4 billion of committed capital designated for later-stage VC and growth equity firms, it says. Since 1980, the firm has invested in more than 300 companies, 93 of which have gone public, including HomeAway ( AWAY), ComScore ( SCOR), Vonage ( VG) and Zynga ( ZNGA).

Other notable invested companies include Twitter, Shazam and DropBox.

On Deck also announced that IVP General Partner Sandy Miller was appointed to the company's board of directors.

"We were attracted to IVP's 33-year track record of collaborating with pioneering technology companies, as well as Sandy's personal involvement with over 100 technology IPOs. We are thrilled to have Sandy and the entire IVP team supporting our next phase of growth, Breslow said in a press release.

"Led by an experienced and cohesive management team, On Deck has developed a unique and differentiated technology platform to streamline the borrowing process so that small and medium-sized business owners can get approved for the capital they need in a matter of minutes. We are very excited that our investment in On Deck is the first from our new fund, IVP XIV," Miller said in the release.

The investment by IVP is an encouraging sign. Small businesses looking for financing have not had an easy time of it. And while the credit markets seem to be easing, industry players say that's only for the most lendable companies.

Numerous so-called alternative lenders like On Deck Capital have seized upon an opportunity to provide financing -- through a more streamlined, tech-savvy process -- to Main Street businesses that might not be approved by more traditional institutions.

On Deck Capital has deployed $400 million directly to thousands of small- and medium-sized businesses in the U.S., the six-year-old company says.

There's no doubt that businesses are cautious, Breslow says. "At the same time where they have opportunity to invest in their business and get a return, they're taking advantage of it," he says.

Banks are still very conservative when it comes to small-business lending, approving loans to only the top 5% to 10% of businesses.

"Clearly, there's a lot more fundable small businesses out there besides that," Breslow says.

The latest funding round follows a busy year of record performance for On Deck Capital.

In 2012, the lender doubled its business, raised nearly $100 million in credit facility commitments jointly led by Goldman Sachs ( GS) and Fortress Investment Group ( FIG), tripled the number of distribution partners to 1,500 nationwide, expanded its bank partnerships and increased its industry coverage to over 700 vertical markets, serving essentially all types of Main Street businesses, it noted.

On Deck also recently opened regional offices in Atlanta, Sarasota, Chicago and Los Angeles. This year it will open an office in Denver, and move into larger office spaces for its New York City headquarters and office in Arlington, Va.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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