My Startup: OakNorth

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OakNorth

OakNorth prides itself on being Europe's fastest-growing and most valuable FinTech. Worldwide, it works to match entrepreneurs and founders with customised loan solutions.

Its founders were entrepreneurs themselves, who spotted the need for a company like OakNorth after struggles to raise the necessary funds. Since being launched, OakNorth managed to achieve a billion-pound valuation and create a loan book of more than £2 billion in just three years.

In the UK alone, they have helped more than 350 businesses reach their growth goals and successfully establish themselves in the market.

Founders: Joel Perlman and Rishi Khosla

Founded: 2015

Website: oaknorth.com

Rishi Khosla

We spoke to Rishi Khosla to learn the secrets behind the stunning growth.

Why did you start OakNorth?

Joel and I founded OakNorth because, as entrepreneurs, we know from personal experience how painful it can be to apply for finance from a bank. In 2002, when we set up our first business - a research company called Copal - we were both in our twenties, and had just £40,000 of startup cash, so we had to bootstrap and build from the ground up.

We faced an uphill struggle while trying to secure working capital to support our rapidly growing business, as none of the banks were willing to lend to us because we didn’t have any property to act as security. As our business kept growing, we realised that there are millions of other businesses around the world facing the same struggles in securing growth finance.

The idea for OakNorth began to form from here.

Tell us more about the tech behind the product.

Through our technology platform, OakNorth Analytical Intelligence, we have essentially found a way to leverage technology to overcome a challenge that has been facing the SME lending industry for decades - finding a way to perfectly marry big data with human decisionmaking. The platform works by collecting millions of data items on SMEs across various parameters, sectors, and markets, and uses machine learning algorithms to identify data that lenders need to make more informed credit decisions.

The platform therefore provides us and our global partners with significant efficiency gains, data-driven decisionmaking, and smarter credit analysis and capabilities.

Where are you at right now?

At a time when many of our larger competitors are retrenching from the market due to ongoing Brexit uncertainty, we have continued supporting SMEs, as well as property developers and investors. In fact, 2018 was our busiest year yet - our total loan book across business and property grew from £852 million at the end of 2017, to £2.2 billion by the end of 2018, and we had over £400m of repayments. To date, we’ve still not had a single default.

Our recent $440 million funding round from SoftBank Vision Fund and the Clermont Group, which values us at $2.8 billion, also makes us Europe's most valuable private FinTech group.

We’ll use the finance to expand our SME loan origination and credit capabilities to North American banks and lending institutions, helping them build the scale and quality of their SME loan books, and continue driving the growth of the OakNorth Analytical Intelligence (ON AI) platform, already being used by banks across the US, Europe and Asia with combined assets of over $800 billion.”

What are your aims for the next year?

We have a relentless focus on helping small and medium-sized businesses across the world in growth mode, access better financing to fund their development - and we'll ensure this continues. These businesses are the backbone of economies and communities, as evidenced by the thousands of new homes and jobs created from the loans we’ve done so far.

Our latest fundraising will also help us to launch our lending operations in the US, providing North American lenders with the capability to greatly expand business lending opportunities and accelerate their business lending, while creating efficiencies and improving credit quality.

Moreover, it'll also help open doors to market-leading institutions, with the goal of enabling OakNorth to deploy the OakNorth Analytical Intelligence platform to more banks and lenders around the world.

What's been the hardest thing about getting OakNorth off the ground?

Acquiring our UK banking licence in March 2015 was obviously quite challenging - and rightly so! Had it not been for that, none of the other achievements we’ve had to date would have been possible.

Why should more people be using OakNorth?

Scale-up or growth businesses, and established property developers, should consider us because we differ from other lenders in three key ways: transparency - giving every prospective borrower the opportunity to meet Credit Committee (i.e. the decision makers) and discuss their lending needs with them directly; flexibility – looking beyond real estate assets (e.g. stock, debtors, plant and machinery, intellectual property and alternative assets such as art) to deepen the collateral pool; and speed - as our entire process is designed to transact loans as quickly and efficiently as possible (weeks compared to the months it takes traditional lenders), so that our entrepreneur clients can get back to running their business. 

And savers should consider us because we offer the same level of protection as traditional high-street banks via the FSCS, but with typically much more competitive rates. Opening an account with us is also very simple - accounts can be opened online via our website, and the application typically takes only a few minutes to complete.

How much will it cost users?

It doesn’t cost our savings customers anything to deposit their money with us - we pay them, and give them interest on their savings. Their deposits then help fund our lending to businesses.