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SoftBank passed on OakNorth two years before huge $440m investment

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
SoftBank Group Corp Chairman and CEO Masayoshi Son gestures as he delivers a speech during a press briefing to announce the company’s financial results in Tokyo on February 7, 2018. Photo: KAZUHIRO NOGI/AFP/Getty Images

Startup bank OakNorth held its first meeting with billionaire investment fund SoftBank (9984.Taround two years before the Japanese investor eventually pumped $440m (£331m) into the business.

OakNorth’s CFO Cristina Alba Ochoa told the AltFi Summit in London on Monday: “The very first meeting with SoftBank I had I think three months after I joined OakNorth and that was two years ago.

“It was because at that time we were doing our first funding round. They decided it was too early, the concept was not proven, we were not what they wanted. We said, fine. We saw many people in that funding round.”

SoftBank’s $100bn vision fund ended up investing $440m into OakNorth at the start of this year. The investment valued the entrepreneur-focused business bank at $2.3bn.

“A year later they approached us saying I think we missed a good opportunity, can we come in at that valuation?” Alba Ochoa said. “We said, well, no we’ve been successful, and we can talk, but we’ll be doing a review of the valuation. We’ve been spending the last seven months doing that with them, very frequently.”

OakNorth was founded in 2015 as an entrepreneur focused-bank. It makes loans of at least £500,000 to growing businesses, such as healthy fast-food chain Leon.

Part of the appeal for SoftBank is OakNorth’s white label lending technology. The bank has developed a division, OakNorth Artificial Intelligence, that help it quickly and accurately price bespoke loans for companies in various sectors. It licenses this technology to multiple banks around the world and has plans to roll it out further globally.

SoftBank was originally a Japanese telecoms business but is now focused on investing in next-generation technology companies. It raised its huge $100bn Vision Fund in 2016 to invest in accelerating “the Information Revolution.” Its minimum deal ticket size is $100m.

Alba Ochoa said the SoftBank money would be spent equally across investment in OakNorth’s UK bank, OakNorth Artificial Intelligence, and growing OakNorth’s non-balance sheet lending operations in the US.

We’re going to have debt finance directors, originate, do the underwriting, do the legals, but then we have funding partners that will be putting in their balance sheet,” she said.

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Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.

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