OakNorth CEO and co-founder Rishi Khosla speaks to bobsguide.
What drove you to create OakNorth?
Joel and I started our first business in our 20s in 2002 – it was called Copal and did financial research outsourcing for investment banks, asset managers, PE firms, etc. About four years into that business, we were looking for capital to grow. We had strong cash flow, a great client list and were profitable, but the best offer for debt finance that we could get from a UK high-street bank was £100k and only if we could secure it against a property. This was in 2006 so pre-financial crisis and before the days of crowdfunding or P2P lending.
We went to the US several times over the next 12 months and eventually decided to do a dividend recap with an institution there, providing us with the breathing room to continue scaling the business without having to dilute.
This negative experience of trying to secure debt finance as a scaling business is what first got us thinking about the OakNorth proposition.
What were the biggest hurdles you faced during your early growth spurt?
Hiring too quickly because you require someone in a seat as soon as possible. You therefore recruit a B or a C because you just need the horsepower. That is, without doubt, the biggest mistake we made in the beginning. We’ve learned from that, so now take the time to only recruit people who raise the average of the entire team.
How has the organization evolved since its foundation?
In the UK, we’ve continued growing OakNorth Bank’s loan book and have now lent circa £3.3bn to hundreds of businesses. We’ve had about £600m of repayments and a large proportion of our borrowers are now repeat customers. These loans have directly helped with the creation of 10,000 new homes and 13,000 new jobs across the UK.
On the retail side, we’ve expanded our product offering and now offer a range of savings products for both individuals and businesses, as well as mortgage products.
Outside of the UK, we have been licensing our platform (OakNorth) to other banks so they can replicate our success with business lending in their own markets. The technology is now being used by 11 institutions across Europe, Asia and the US.
As a group, OakNorth Holdings has attracted over $1bn in investment making it one of the most well-funded fintechs in the world. We’ve reached a $2.8bn valuation and are one of the few fintechs globally who is profitable.
Uncertainty is growing at an economic level in a number of countries. How is the organization changing to grow or protect against those uncertainties?
We do so much more work than traditional banks in terms of analysing a company before we lend to it, and we monitor our portfolio in a totally different way than larger commercial banks monitor their loan books. The combination of those two things makes us highly confident that we will come out of a downturn better than other players. Of course we will have defaults, we may have some losses, but they will be significantly lower than the market. That we’re confident on.
Technologically, what is next for OakNorth?
We will continue investing in our platform and licensing it to more and more lenders around the world, so that the data lake continues to grow and the platform continues to evolve and get smarter. Our mission is to ensure that every profitable small or medium sized business around the world that is looking for debt finance to grow, can secure that finance with a structure that is bespoke to their needs.