'This is war time, I'm leading from the front': The cofounder of profitable SoftBank unicorn OakNorth is drawing on his 2008 crisis experience to deal with the coronavirus
- British fintech unicorn OakNorth has adjusted its services to adapt to the worldwide coronavirus pandemic.
- The startup's cofounder, Rishi Khosla, was an entrepreneur during the 2008 global financial crisis and says the lessons learned from that downturn are informing his leadership decisions now.
- "This is war time, you have to change everything," Khosla told Business Insider in an interview. "Now as in 2008 our prioritization completely changes into an immense focus on protecting the downside and looking after the upside."
- Click here for more BI Prime stories.
Serial entrepreneurship and experience weathering the 2008 downturn have been invaluable to OakNorth cofounder Rishi Khosla.
OakNorth loans money to small- and medium-size businesses. It raised $390 million from SoftBank's Vision Fund as part of a wider $440 million round in 2018, one of the biggest funding rounds historically for a UK startup. It has quietly disrupted the $7.9 trillion mid-market lending space.
The firm, founded in 2015, is valued at $2.8 billion as a result. It is also profitable, making it a rarity both in the Vision Fund's portfolio and on the wider unicorn scene.
As startups struggle for business and funding amid an inevitable, pandemic-related crunch, Khosla says the lessons he learned from during the 2008 global financial crisis are informing leadership decisions now.
"This is war time, you have to change everything," Khosla said. "Now, as in 2008, our prioritization completely changes into an immense focus on protecting the downside and looking after the upside."
In 2002, Khosla founded financial research company, Copal Amba, alongside Joel Perlman, his cofounder of OakNorth. Copal Amba was sold to Moody's in 2014.
Now Khosla says providing radical transparency to teams and using data to inform decisions are now paying dividends at OakNorth.
He cites the company's activity in the US in recent weeks as a key example of its swift adaptation to the current crisis.
OakNorth has signed up two new US clients, Customers Bank and Modern Bank, to help expand access to the federal government's Paycheck Protection Programme (PPP). PPP is a new form of financial support from the US federal government which provides funding up to $10 million to businesses with fewer than 500 employees to meet payroll needs.
"In a 12 day period we went from first hearing about the US government's plans, to working what a tech solution could look like, to winning our first client and then going live with that first client," Khosla said.
He added: "I believe the strongest entrepreneurs are proven in periods of downturn, you have to see the opportunity and adapt the organization."
It has followed a similar blueprint in the UK.
The British Business Bank added OakNorth, alongside challenger bank Starling Bank, to its new Coronavirus Business Interruption Loan Scheme (CBIL) as an accredited lender this week.
CBILs are emergency loans of up to £5 million made in the form of term loans, overdrafts, or invoice and asset finance to small businesses, with lenders receiving government guarantees.
OakNorth saw a 95% uptick in its pre-tax profits for 2019, to £65.9 million ($82 million), making it one of the few profitable businesses in SoftBank's portfolio. SoftBank CEO Masayoshi Son recently announced that around 15 of the Vision Fund's 88 portfolio companies would go bust due to coronavirus.
Several of the SoftBank-backed businesses in trouble, including hotel chain Oyo, count the Japanese firm as a majority investor, making the pandemic a mutual problem for the companies, but Khosla says that isn't the case at OakNorth.
"SoftBank is a very valuable investor, but we're not a SoftBank-owned company," he added. "We make our own decisions."