Oaknorth founder Rishi Khosla: Tall poppy syndrome, Tory rhetoric and why the UK is losing its lustre for fintech
Rishi Khosla is leaning off the side of a treadmill desk in an Oaknorth branded t-shirt, deep in conversation with co-founder Joel Perlman. He steps down and walks into a corner office at the firm’s glass-walled HQ, where an assistant brings in a stone bowl of frothy luminous green liquid. He pours it into a separate stone cup.
The scene, it’s fair to say, is straight straight out of tech founder central casting – one you might expect to see among the upper echelons of Silicon Valley rather than Soho.
But for the Oaknorth chief, that expectation is a large part of the problem. Khosla is among a class of founders at the vanguard of the UK fintech scene that, he feels, have failed to achieve celebration and recognition like their peers over the pond.
“If you ask the common person on the street today, who are the top British entrepreneurs, you’ll probably get Branson and Dyson – both guys who I admire,” he tells Morning Wire in an interview. “But what about all the guys who have been building businesses in the last 10, 20 years? Right? I mean, no one probably knows their names.”
For Khosla, that lack of entrepreneurial cut-through points to a faultline in the British business psyche, one which he has taken on as something of a cause celebre.
Speaking at London Tech Week this week he railed against the cultural challenges choking off growth in the UK’s entrepreneurial landscape. Dominating them were access to talent and a British aversion to success.
“Success is not celebrated in the business world here. If you’re successful, what people do is hide away,” he says.
Slow burn
This annoyance has been slow-burning for Khosla. Business lender Oaknorth is the second venture of he and Perlman after they set up analytics firm Copal Partners in 2002, growing the firm to 3,000 people before selling up to US credit rating agency Moody’s in 2014.
The pair landed upon the idea for Oaknorth after being “kicked out” of two commercial banks while on the hunt for a line of credit at their previous firm. That experience underscored what Khosla calls a “missing middle” in banking, one where companies at the so-called scale-up stage are poorly served by the offer from both the big commercial banks and the smaller specialised new crop of lenders.
The approach has clearly tapped into a need. Founded in 2015, Oaknorth has dished out £8.5bn loans since its inception, and by its own analysis helped create some 38,000 jobs in the process.
In its latest funding round in 2019 it fetched a valuation $2.8bn and managed to shrug off turbulence last year to post pre-tax profits of £152.3m last year.
Tectonic shifts
But that growth, in Khosla’s view, has come largely in spite of the landscape around him rather than because of it. Khosla has led Oaknorth through a period of change in which its target small business market has been shaken by the tectonic shifts of a pandemic and particularly Brexit.
The latter he says caused the firm to shut out swathes of its potential market.
“If I think about a lot of the turbulence that the “missing middle” has experienced, it has been around those [EU] trading relationships,” he says. “By design, we just didn’t build a [loan] book which had that exposure.”
Political tumult and the rhetoric of the Tory party have similarly damaged the once shiny appeal of the UK for fintech firms and talent, he argues, and Oaknorth is struggling to attract the staff to grow the company.
“We need to make this place attractive” in order for it to succeed in attracting the right staff,” he adds. “We can’t say ‘Hey, you can come but you can’t bring your family.”
Political push
The comments may strike a worrying blow as both political parties mount efforts to reinvigorate the appeal of the country’s tech sector. Rishi Sunak, Jeremy Hunt and Keir Starmer have all taken to the stage at London Tech Week this week to mount their pitch to revive some of its lustre.
Khosla reckons the pitch from both sides is promising. The polarisation has largely disappeared, he says, and when “you speak to Keir and you speak to current government” and you can’t work out “which way around” they are.
“As someone who’s just interested in building a business and supporting entrepreneurs in this country, I no longer have to think about politics,” he adds.
Khosla, it’s important to note, has not always been so impartial. He rarely appears in certain sections of the press without the prefix ‘Tory donor’. Donating is something he says he won’t be considering again.
“Do you know why? Because the media keep on putting the fact that I gave some money to a political party. Like it’s a tagline!”
Banking crisis
Despite his new-found impartiality, Oaknorth has found itself in close proximity to the big political machinations of UK tech this year. Khosla launched a bid to buy the collapsed UK arm of Silicon Valley Bank in March as the government negotiated a shotgun sale of the firm, which ultimately went to HSBC.
HSBC this week rebranded the firm as ‘HSBC Innovation Banking’ to much political fanfare and a personal celebration from the prime minster and chancellor.
But while HSBC provided “full stability” to the market and he “fully understands” why they were the ultimate buyer, Khosla still maintains it was a mistake.
“When I look at it from the […] perspective of fueling the entrepreneurial environment in the UK, supporting growth companies, making the UK an innovation economy, supporting the financing of those companies, I think it is absolutely the wrong decision,” he says.
In Khosla’s view, the move is the latest in a number of policy missteps and failed manoeuvres which are struggling to revive the UK’s appeal.
Ministers and stock exchange officials have been on a multi-year charm offensive to woo tech firms to the market, with a slew of reviews launched to try and make it a more welcoming home for growth firms. Oaknorth’s listing would be a prized fruit of that labour, but he is blunt in his assessment of the progress made.
“Would we be open to listing in London? Of course, but show me a market which works, right? We need growth investors in this market to support growth companies.”
Growth mindset
Khosla’s complaint points to the wider efforts to reset the cultural narrative and appeal of the UK. The issue for Khosla, is one of trying to knock down success. Fix that, and the rest will come.
“If [someone] creates a few £100m of value, and they get paid £10m a year, let’s celebrate it,” he says. “Let’s make another 100 people think that they can be one of those people who gets paid £10m a year and strive for that.
“That’s how we’ll drive innovation. That’s how we’ll drive hunger in people.”