If you were to build an entrepreneur in a lab, there’s a good chance they would come out looking like Rishi Khosla.
The cofounder and CEO of London-based B2B banking unicorn OakNorth, Khosla is — by his own admission — a man of extremes.
A borderline workaholic who discovered his entrepreneurial streak at an early age, Khosla is a serial founder and investor with experience on both sides of the table.
This September marks a decade since he and long-time business partner Joel Perlman launched OakNorth, which was last valued at $2.8bn in 2019, after raising a $440m megaround, led by Japanese tech giant SoftBank. In March, the company reported a pre-tax profit of £215m, up 15% on the previous year.
Arriving at Scarlett Green, an Australian restaurant (and Oaknorth client) in Soho, I find Khosla waiting for me at a small table by the window. He greets me enthusiastically, sporting a black Oaknorth-branded t-shirt.
After giving me a potted history of the company, I open with the (admittedly cliche) question: Is there any advice he’d give his younger self? “I’m not very good at looking backwards,” he says, pausing to consider his answer. “I’d say: ‘Go harder.’”
A multimillionaire with an estimated net worth of £650m, Khosla is unabashed about his success. It’s something he thinks other European founders (and the media) could learn from. “I do think there needs to be more celebration of entrepreneurship and entrepreneurs in this country. There’s a bit of ‘tall poppy syndrome’.”
It is a cultural tic, he says, that hinders entrepreneurs themselves while robbing the next generation of role models. “If you’re a successful entrepreneur in the UK, you generally hide your success. Rather than thinking, actually, if you’ve been successful, you can inspire others.”
He adds: “If you’re successful for any other reason in this country, it’s often held against you. Unless you’re a footballer.”
Young hustler
Khosla’s earliest memory, aged three, is of a tank rolling past the kitchen window.
His father — also a businessman — had relocated the family from London to Tehran for work, before the 1979 Iranian Revolution turned the country upside down. As clashes between protesters and security erupted in the street, Khosla’s family fled to India, staying with relatives while his father “salvaged what he could”.
Upon returning to London, his father earned a salary working as a mechanical engineer, while building a business with Khosla’s mother, selling air conditioning and ventilation systems, in his spare time. “My father worked every day until about 1am, then started again at 6am,” Khosla recalls. “That really shaped how I think.”
A waiter arrives to take our order. I enthusiastically request a “fancy” bacon roll with a latte to wash it down. Khosla opts for the smashed avocado with a poached egg with a “green detox juice”.
Inspired by his parents’ work ethic, Khosla was a hustler from a young age.
He got a taste for moneymaking at the age of nine, when he started tutoring other kids in computer programming. By 12, he was earning extra cash buying VHS tapes and renting them to his schoolteachers. (He charged late fees.)
“It was always incredibly clear to me that I wanted to build businesses,” he says. “I had the bug.”
Rising star
Before launching his own company, Khosla spent almost a decade rising through the ranks while working for other people. After a stint at Dutch bank ABN AMRO, he joined the financial services division of US manufacturing giant General Electric, where he oversaw the launch of an in-house early-stage VC unit.
From there, he landed a job managing working for Indian steel magnate Lakshmi Mittal, a billionaire once ranked the sixth richest person in the world, managing a portfolio of fintech companies. Khosla got used to travelling constantly: “I was on this continuous loop between here, India and Silicon Valley.”
It was during this period Khosla himself invested in the up-and-coming fintech startup PayPal, following a meeting with Musk.
“Elon had this immense focus and drive. You could see this was someone on a mission,” Khosla says. “The decision was made based on a relatively short meeting with him. When you’re making early-stage investments, a lot of it ultimately rests on the entrepreneur.”
Not long after, Khosla drew up plans for his first company with Perlman, his business partner of 23 years now
Khosla and Perlman moved in together, along with their partners, spending 20-hour days building Copal Partners, a data analytics company. After successfully scaling the business to more than 3,000 employees, internationally revered credit rating agency Moody’s bought a majority stake in the business in 2011, taking full ownership a few years later.
After using all the cash he had to help bootstrap Copal, Khosla was suddenly a multi-millionaire. “We built that company with blood, sweat and tears,” he says. “It taught us a lot about the ups and downs of entrepreneurship.”
Move fast, don’t break things
Within a few years, Khosla and Perlman were building their second company, OakNorth.
The company launched in 2015, promising to utilise emerging technology to better determine clients’ creditworthiness, allowing them to target the “missing middle”, an underserved segment of SMEs who struggled to take out loans with other banks.
“We tapped into a space where, fundamentally, there was real demand,” Khosla says. “And because of that, we’ve been able to scale without having to take either crazy risks or massively diverge.”
Unlike some fintech peers who chopped and changed strategies over the years, Khosla says OakNorth has stuck close to its original aims. “If you look at our business plan from over 10 years ago, and what we said we wanted to do, that stayed totally on mission. If you look at our metrics, plot them out all the way from 2015, they’ve been pretty stable,” he says.
The founders were under no illusions about the challenge they faced. Banking was not a space where two first-timers could rely on hustle alone. “We’d gone through the scaling journey once before. You learn some stuff,” he says. “The second thing was, when we started this business, we played no regulatory arbitrage. From day one, we had a banking licence.”
The decision to start life as a fully regulated bank, rather than circling around the edges, set OakNorth apart from much of the fintech sector. Fintech giant Revolut has spent years doggedly pursuing a UK banking licence, a process with no clear end in sight. It was, in Khosla’s words, about getting their “shit in order.”
He and Perlman had little experience running a business in such a highly-regulated industry, so they sought recruits who knew about tech, alongside others with experience navigating complex legislation. “Having that combination just gives you a better lens under which to build a business like ours,” Khosla says.
The balance became an organising principle of OakNorth’s culture. On one side, the speed and experimentation of a tech startup. On the other, a rigid commitment to playing by the rules.
“You can ‘move fast and break things’ within one area. But in another, you have this bipolar attitude, where you just do not take risks,” Khosla says. “If you’re not moving fast and breaking things in some ways, you can’t be a dynamic organisation. But you have to know where not to do that.”
Asked how many customers OakNorth currently has, the company said “several hundred thousand”, including vegan food business Deliciously Ella and leading accountancy firm Cottons. OakNorth employs around 700 people globally.
There have been some bumps in the road. In the early days, OakNorth boasted of its superior lending record, claiming to have recorded “zero” defaults in January 2019, an impressive feat for a bank handing £50m loans to clients perceived as relatively risky.
By 2021, in the wake of the Covid-19 pandemic, the company was hit by 10 defaults, totalling almost £100m. Khosla defended this at the time as “not bad going”, given the company had given out close to £5bn in loans at that time.
Khosla acknowledges there have been headaches. “Building a business is never easy, right? Ever. There’s a hell of a lot of stuff which goes on underneath,” he says. “Sort of like a duck.”
Always the underdog
For Khosla, the path to entrepreneurship in Britain should be made clear far earlier. “Fundamentally, I think entrepreneurship isn’t something that appears on most people’s radar when they’re at school or even university,” he says.
The entrepreneurial bug bit Khosla as a child, thanks to the influence of his parents. “That was seeded incredibly early in my journey, right? I think we can do more to open people’s aperture, to help them realise there’s this thing called ‘entrepreneurship’, and it is a respectable way to lead life — that it’s a good thing.”
He sees this cultural blind spot as part of a bigger challenge: the scarcity of company-building talent in the UK. The country has produced few tech companies with the potential to become a global player in recent years. Some of the most promising have ended up either selling to a foreign tech giant — DeepMind to Google; Arm to SoftBank — or floated on the New York Stock Exchange.
“The fundamental issue here is really talent density,” he explains. “If you look at the fact that you haven’t had a lot of companies grow significantly over the last decade or two — maybe a dozen — how much talent is there that actually understands how to scale businesses?”
Khosla is putting his ability to scale to the test, with an ongoing expansion to the US in the works. The company recently bought Michigan-based Community Unity Bank, a move OakNorth’s chief risk officer Mark Steele told the Ft would give the company a “foothold” in the country.
Months after our meeting, reports emerge that Donald Trump’s son-in-law, Jared Kushner, has taken an 8% stake in OakNorth, via his investment firm Affinity Partners. (The company declined to comment.)
“I enjoyed making money — I still enjoy making money — but there comes a point where it’s just a line on a graph,” Khosla tells me when I ask what drove him to risk everything building his own businesses, having made a healthy living looking after other people’s money.
“There’s an extent to which you always have to view yourself as the underdog, which is how I think about myself even today,” he says. “That way, you’ve always got something to prove.”
Read the orginal article: https://sifted.eu/articles/oaknorth-ceo-rishi-khosla-brunch/
