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How I turned £35k into a £650m fortune: Britain's top tech entrepreneur Rishi Khosla

Rishi Khosla, chief executive of OakNorth - © Alex Rumford
Rishi Khosla, chief executive of OakNorth - © Alex Rumford

Rishi Khosla’s future at the top of one of Britain’s fastest-growing start-ups was never assured. Back in 2002, after dozens of calls to international investment banks that had given him the cold shoulder, the then 27-year-old entrepreneur was anxious about his first big break.

Eventually, he managed to elbow his way into a meeting with the head of a big City firm where he was determined to sell himself as a financially savvy businessman who could navigate the tricky world of derivatives – a subject about which, he now confesses, he knew very little.

His pitch was based on three books he bought the weekend before the meeting, which he read and desperately memorised, served up with plenty of panache.

“I did a pitch pretending I knew something,” he chuckles, talking from the Park Avenue apartment where he is staying in New York. “We walked out with a project. We had full belief we knew what we were talking about – we were still trying to figure it out.”

These were the humble beginnings of Britain’s most successful technology entrepreneur, now worth £650m according to The Telegraph’s Tech Hot 100 list. Khosla’s wealth was built on his challenger bank OakNorth, with a mammoth $440m (£338m) funding round that shook up the UK start-up scene.

OakNorth is by no means a household name. It lacks the millions of ordinary customers touted by Monzo or Revolut. Instead OakNorth operates strictly in the B2B market as a supplier of loans to small-to-medium sized businesses. The company has lent almost £3bn in the four years since it was founded.

It is now one of the most valuable UK technology “unicorns”, the term that commonly refers to companies valued at over $1bn. The company has won the support of blue-chip backers, including SoftBank, which invested $440m as part of a push into Europe last year.

Since those early days, the British-Indian entrepreneur, 43, whose father worked two jobs and gave him his “good work ethic”, has managed to grow his fortune from just £35,000 with a mixture of charm, good business sense and savvy investments. After a career in the City working for ABN Amro and GE Capital, which he joined after graduating from the LSE, he was eager to strike out on his own.

“We were trying to sell to these big investment guys when effectively we had nothing and we were nobody,” says Khosla, who grew up in London, reminiscing about OakNorth’s initial years. “It was like a game of winning, when you risk everything. I walked away from a good salary and risked everything. There was no plan B, no going back.”

As an early investor in PayPal, Khosla had enjoyed some early success in the booming world of financial technology. But he was itching to launch a business of his own.

He and business partner Joel Perlman (also on The Telegraph’s Tech Hot 100 list and worth £200m) were best friends when they were at the London School of Economics (LSE) as postgraduate students, and founded their first venture Copal Partners as a research business in 2002.

“We put in £70,000 between us, which was all the money in the world for me,” he explains. At the time, both entrepreneurs and their partners were living in a flat together and working 20-hour days. “It was intense,” Khosla admits. Khosla had family support, they were his first investors in the business. He relied heavily on his wife Milan, who was the sole breadwinner for three years until he made his first paycheck: £20,000.

“We slept an average of three to four hours a night, and every other waking hour we were in the office,” he explains. Just as the business was picking up pace, Khosla realised he could lose it all. The year was 2007 and his clients were shuddering in the initial shock of the financial crash.

So he went into overdrive, having “30 to 40 client meetings a week across continents” and living on planes. “It was like drinking from a fire hydrant. There was so much coming at me.”

In dark moments, he would joke that his schedule had no bathroom breaks. His family, including his four children, kept him grounded. “Irrespective of where I was, I would fly back,” he says. Somehow the business grew by 20pc, he said.

Despite claiming that he built the business to “own it for life”, Khosla and Perlman found themselves courted by keen investors looking to buy them out. After a couple of false starts, they decided to stop entertaining offers. That is, until American financial services giant Moody’s came knocking, asking to “get to know them”. They sold them Copal Partners for a nine-figure sum in 2011, having grown the financial research firm to thousands of staff. Khosla was suddenly a multi-millionaire.

“Our greatest challenge was finding the hunger again,” Khosla explained at the time. “We no longer needed to make it, so to speak.” A consummate networker, Khosla’s contacts include Indian steel billionaire Lakshmi Mittal and Adair Turner, former chairman of the UK’s financial watchdog, who he roped in to serve on the board of OakNorth.

His ties with Mittal stretch further than his career as an entrepreneur – he left GE Capital, where he had been “noticed” by Jack Welch, after he was introduced to Mittal’s son by another LSE friend, and took a job advising the family company, Mittal Steel, before he launched Copal Partners.

Now, he dismisses the idea of ever wanting to take things easy. “Absolutely not. If anything, the day I felt poorest was the day that all of the acquisition funds had cleared.”

So he put in a call to Perlman, and they both rolled the dice again – this time with an eight-figure sum – to launch OakNorth.

“The most difficult thing in getting the business set up was getting the first borrowers,” he explains. He and former Santander executive Ben Barbanel, OakNorth’s first hire, would go out and try to get business.

“Initially it was really tough. No one had heard about us and the concept of a new bank was hard to understand. Some of the people who took us seriously, you probably didn’t want to lend to them,” says Khosla.

OakNorth has capitalised from a gap in lending that traditional banks ignored, says Alastair Newton, research vice president of banking and financial services at Gartner. In its latest accounts, OakNorth said it contributes £4bn to the UK economy through its lending activity.

“There are probably a lot of folks kicking themselves that they didn’t think about it before,” he says. But if anything, this wake-up call in the sector is bad news for OakNorth as banks are now looking to target the bank’s sweet spot, Newton says.

“The big challenge is when other entities enter the market. Can they maintain the forward momentum when there is a pack of bigger banks chasing them down?”

A possible next step for OakNorth could be a public listing, but Khosla is quick to rule that move out for now.

“Theoretically we could IPO today, but we have no need to IPO,” Khosla argues. “Getting metrics in the business is more important.”

The latest investment has given him the first major step towards internationalisation – which Khosla says is key to the business. Once again, though, he finds himself spending more time in airports.

“Being an entrepreneur is a lonely experience,” he says. “You need to have absolute self-belief even though everything around you is telling you that you are wrong. You need to persevere and carry the rest of the team with you.”

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