Paul Rippon, the cofounder of Monzo and Starling launches a $300m fund

0:01Paul Rippon:Hello and welcome back to Scaling Europe show. I'm Seb Johnson. I'm here with Paul Rippon, who is a fintech, OG, seven-time entrepreneur, super interesting character, one of the co-founders of both Monzo and Starling and an alpaca farm. And he's now doing his next thing, which is super exciting. Paul, can you just touch on what it is that you're working on now? Hey, Seb. Thanks very much for having me. Yes, so the next thing is a launch of a fund. It's called Rippon Capital, and we're about to go live right now. Amazing. Why this fund? Tell me all the details. You know, you've had a super interesting journey working in fintech, but also investing your own, building a range of businesses.

0:43Paul Rippon:Tell me a bit about what this fund is and why you've decided that this is going to be your next thing. yeah thanks so the fund is a really a culmination of my life experiences and I used to say that I was a late to life entrepreneur and you know when we started Monza I was nearly 40 years old and that's why that kind of ingrained in my mind I then started to remember those hazy early school day memories and I recall that I actually outsourced one of my paper rounds to a friend and so not only did I earn the pound for my paper round I also got 50p off his and he did the work as well so so I guess I wasn't that late to life.

1:28Now the other notable thing that I remember was when I went to Wolverhampton Polytechnic first person in my family ever to stay on past secondary school and I took out a 0 % overdraft back in the day at 1992 and you know what I got called in to NatWest by this rather stern lady who asked me to explain how I'd had the audacity to take out a 0 % overdraft and withdraw all thousand pounds in one go and that she'd also been in touch with HSBC and known that I'd done the same there and she asked me where is the money and I said well I've put it in a national savings capital bond that's earning 13 % interest per year and she just like looked at me horrified so anyway where am I heading with this maybe I wasn't so late to life as a entrepreneur to spot opportunities I had a pretty successful executive career across a range of banks everything from NatWest to Northern Rock through to Lloyds.

2:35And I'm sure many of the audience will be familiar that I'm a co-founder of both Starling and Monzo Bank, which are themselves fabulous rides. For the last few years, I've been very much enjoying doing investing. And I've built up quite a portfolio of around 30 companies, some with minority stakes, some with quite major stakes. and I find myself just a couple of three months ago finding myself asking the question that I was actually really enjoying the intersection of people and investing. I was enjoying it so much and I started asking myself, do I want to keep doing that on my own or is there a way I could amplify it?

3:18Because I've frankly got so many requests from entrepreneurs and businesses to help and we're talking here about a billion pounds of funding that I personally have got outstanding that I feel I owe entrepreneurs in the UK and beyond. And I thought, I'm going to do something about that. And so I wrote down the list of 12 people who, in my opinion, I've met over my life. And I thought, if I want 12 people by my side to set up a fund, who are they? Some of the names might be familiar to you. Tom Blomfield, baroness kingsmill gary dolman rob fellows stephen black annabelle tar these are magical people in their in their space and i messaged each one of them in turn and every single one of them said yes whatever you want uh we're here for you and that said is how we've got to this point and why we're

4:16Paul Rippon:launching ripon capital that's amazing it's amazing validation of the relationships that you must have built over the course of your career that all of those people immediately jumped in it's a great honor and very humbling actually that i was able to contact each one of them i did write down some names and and i tell you what what i did in the end there's a great uh great youtube video and it's about the navy seals approach to recruitment and navy seals have a dual index and it's high performance and high trust and i thought about the team that i wanted to assemble and i thought that is exactly what i want high performance and high trust so in my opinion these people are world-class operators founders investors they are also each one of them somebody that I would be happy to entrust every single decision and every single communication from the fund and I would be delighted that they would give a wonderful answer and get a wonderful response and I'm not sure you can do that too many times there were a few people and I have to say and I'm not going to be drawn on names so don't look at me like that that I put them in the high performance box unfortunately they didn't quite get into the high trust box and um at my particular stage of life yeah hopefully there's a few more years left in me yet but at my stage in life frankly I don't want to work with somebody and do something like this that I don't trust and so the people that made the cut and to my good fortune all said yes are high performers and absolutely high trust.

6:03Paul Rippon:Amazing. And what role will they be playing in the fund? Yeah, so there's a mix there. I mentioned a dozen names. I've got a group of them. So the likes of Tom Blomfield and Gary Dolman, as well as other names like John Penny and Baroness Kingsmill, they are going to be advisors. So as part of my investment approach with companies and entrepreneurs that I look after. You don't get hold of me to do the middle 90 % of your stuff. You contact Paul Rippon for your outstandingly good opportunities and your huge problems. And in the same way, I value the support and the advice of my advisors in exactly the same way.

6:49And I've been using it already and I'm very grateful for their help. The other members of the team so the likes of annabelle tarb rod fellows steven steven black they are characters who are sleeves rolled up partners executive whatever you want to call them deal makers doers to make the fund happen and and that balance is is quite wonderful there are some more people on the periphery they know who they are they know that their skills and services are needed but at this particular stage of the fund we've got the right people and there are more coming on stream and more very exciting names that i hopefully i get to share with you before long

7:29Paul Rippon:and let's talk about the fund then can you touch a bit on you know how big is it hoping to be and where are you going to be investing it yeah thanks uh i'm not doing this to create a small private office. The team that I've assembled is an incredible world-class team. And so if I give you our strapline, connecting world-class entrepreneurs to growth capital, hopefully that gives some of it away. So the intention here is to create a multi-billion pound platform. A multi-billion pound platform that, you know, Seb, I've heard a number of your interviews and comments. We talk about people and skills leaving the country, leaving Europe, whatever.

8:21Some people blame them, some people blame the system. I can assure you, my team, Ripon Capital, and the difference that we're going to be making to entrepreneurs and their families is going to make a difference right here in the UK, Europe, and beyond. And I can absolutely assure you of that. You have my commitment on that.

8:41Paul Rippon:I love it. And I absolutely love to hear it. You know, I think it's dreadful, not just what's happening, but the real narrative and the negativity and the pessimism that we have in society at the moment about the state of affairs and the state of entrepreneurship. Why growth, particularly? You know, why is that the area that you really wanted to focus on? yeah good question so the the fund again right the the key thing connecting world-class entrepreneurs to growth capital so what what i have come to discover throughout my investment approach over the last few years which has refined by the way is that early stage is quite hard you know you're spotting potential in individuals and their approaches.

9:26And the traditional venture capital model approach is like you take many bets and hope that a small number of them will come good. At the other extreme, you've got, shall we say, conventional debt providers. Their risk appetite invariably is quite low. Their structures are quite rigid. And so what you've got in the middle is let's call it series A-ish at or near profitability growth that is going to be the workhorse of this fund so approximately 80 % of our fund will be invested in those types of individuals and businesses at or near profitability growing and they want some kind of in fact they want all three of debt equity and a seasoned operator and hand to help them and not only the team that I've put together including myself but I have a whole list of standby powerful and incredible non-executive directors that will represent the fund and also help the entrepreneurs as well so so the reason is one because I incredibly enjoy that space right I've had my time of managing businesses going down and starting from scratch.

10:40There is something quite magical about that middle bit of on the up and needing some help and some direction and some guidance and some rocket fuel to really make a difference. If you don't mind, if I can pull back out from that because this fund is a head and heart fund. And if you want to invest in companies in general and get a good return, then don't come to Rippon capital, get yourself a FTSE tracker. Get yourself a 7.5 % long term and go with that. The head and the heart approach for us about connecting world class entrepreneurs to growth capital is this, Seb. 80 % of the fund goes in the workhorse.

11:23Two thirds fintech, one third other. Two thirds debt, one third equity, with the addition of very impactful people that can help. The heart of the fund is about 20 % which rolls over to entrepreneurs early stage. I'm not talking about early stage necessarily in their life. I'm talking here about early stage in their business. So we are not going to make lots of money and then work out at the end how bad we made people's lives and how we can give that money away tax efficiently. What we are going to do is make lots of money because I think profit is good. But 20 % of the fund is going to be rolled over to support entrepreneurs, the next generation of entrepreneurs in the UK, Europe and beyond.

12:125 % of that is going to go to very, very early stage entrepreneurs and will be tying up with Epic, based in Birmingham, a wonderful venture that supports early stage entrepreneurs in need. and 15 % of the fund is going towards kind of friends and family plus stage and we're going to be tying up with the founders faculty also in Birmingham but they are our starting locations as you might expect Newcastle is going to be number two on the list and thereafter we're going to go so yeah, growth capital just to summarise it's kind of a reflection of my story my investment approach what I enjoy and the areas where I think we can make a massive difference to the economy and people's lives.

12:59Paul Rippon:Amazing. So 80 % is for the kind of growth stage, Series A-ish around profitability. 20 % is for that early stage and you split that between those kind of, yeah, the friends and family and Epic. Super interesting. Yeah, it seems like a really robust fund and thesis that you've got. I also want to touch on your investment journey. So you've had an amazing operating experience co-founding some amazing companies. You also mentioned that you've been investing more recently. Can you talk about your experience, maybe a success metric, some companies that you're really proud of, and talk about just your experience as an investor and how that's led to the fund?

13:43Yeah, sure. Thanks for that. So we've already touched on my very early stages of investment, which was get a 0 % overdraft from the banks and roll it over into something, which they weren't very happy about. I did say at the time, maybe you should be offering me a job instead of giving me a bit of a telling off here. But more latterly, and certainly post Monzo, my investment approach has changed, matured. I've made mistakes and I've been getting better and I've kind of found out the bit that I enjoy and the bit that I'm good at, which has then rolled over into the fund I've already explained. So I think in the early stage, I probably indexed, and as you might expect, having gone through the starting of Monzo and indeed setting up the alpaca farm with my wife, I kind of more indexed towards very, very early stage, looking at intelligent people who I thought could apply themselves to problems and solve them.

14:43And I guess it was understandable that I might go towards that. I then kind of spun right the other way and headed out into debt. A lot of my banking career is being spent in and around credit, unsecured, secured. And I kind of indexed the other way. And then I started coming across companies like the Money Platform, Plend, Sappy, Money Money. These are platforms and they're providing credit facilities to their customers. And what I started to discover there, a bit like the investment thesis and approach for the fund, is that these people and these companies, number one, wanted cash. But number two, they quite often wanted a bit of support and help.

15:33And so over time, I've changed from backing individuals. And by the way, I still do that because I can't help myself. If you meet a brilliant person, and I don't mean brilliant, necessarily logical, intellectual, I mean a thoughtful, caring, adaptable, passionate, hardworking person that is doing something good. So wonderful people doing wonderful things. I can't help myself. And I can't help myself but support them and place a little bit of an investment in them and their future. however the workhorse of my fund largely replicates what I've just described is what will be the workhorse the workhorse of my personal investments represent what the fund will be and that is some combination of debt and it could be senior debt it could be junior which is higher risk it could be some contribution of equity and then I help them out as I've already described right you don't get poor rippon for the middle 90 right you should be competent and skilled to do your own 90 of the work and if not i can help you find people that can help you do that you you involve me in the outlying event so when it goes really really good or really really bad and and at that point and a number of my uh companies have had calls to call on me at both ends of of that scale and look when you join Northern Rock as credit director six months before the credit crunch and then end up looking after a third of the the company's employees within a few months I guess you've got to be quite good in a crisis and and so whether it's a crisis or a brilliant opportunity you can be forgiven for thinking that I don't care because it like I soak it all in ask you loads of questions and then help to come up with a constructive and pragmatic answer but i do i do care it's just that sometimes i find it hard to display that emotion if you like maybe it's a british thing i i i don't know but um so so the investment approach and thesis to to summarize has gone from backing individuals which i still can't help myself doing but i look for a different type of individual now.

17:50And then it's about where can I connect and resonate with two things? Wonderful people doing wonderful things, because that I think is the essence of businesses, in my opinion, wonderful people doing wonderful things. And if they are doing wonderful things and can't explain to me or describe what those are, or they don't resonate with me, I find that really difficult to connect with and invest. Equally, if they are doing wonderful things and they're people that I wouldn't trust to shuffle a pack of cards, for example, then I kind of go, this is going to be hard. And so for me, it's got to be that joining together of the magic of a wonderful person doing wonderful things, ideally with that three-way debt equity help.

18:40And that I feel is where the magic happens. And that is where my personal portfolio has really started performing. And, you know, let me give you a number because I'm sure people will be wondering kind of what's the typical returns of my portfolio at the moment, which is a fairly sizable portfolio. We're talking about 35 % a year, of which circa 15 % of that comes from interest payments on debt and circa 20 % comes from equity uplift. That's if you exclude Monzo. If you want to stick Monzo in, then we go from 35 % to 535 % a year. But some people say that outliers don't count, but I think that's rather harsh, really.

19:21It's like, surely they must count because they're there.

19:24Paul Rippon:Oh, this is the business of outliers is, you know, venture investing and, yeah, those are amazing metrics. I want to ask, you know, you talked about how people don't come to you with the 90 % of problems. They come with the 10%. What are those typical 10 % problems that you really like to get stuck into? Yeah, so those range from, on the good side, we have found a customer or a relationship that love us and we want to do more business, but we don't have the funding or the people to do it. Should we take the risk and go with that? And how do we fill the gap? And at that point, I think I've made it my business throughout my career to have a great and varied network of people.

20:18I will quite happily go into a room and what I do, I deliberately walk up to somebody who I don't know and just to say hello. Equally, I'm very happy to go in and chat to people I do know, but I find those random moments wonderful. And I reckon some of my closest connections and people and confidants are people that I just randomly walk up to or randomly message on LinkedIn or randomly message on Insta or whatever it's just like hello and you know what as part of the fund I did that so there's a there's a chap in the fund called Daniel Reynolds and despite my thinning hair and and therefore apparent age I can actually use ChatGP to hear modern tools and and so me and ChatGP had a little bit of a chat that if I was going to set up a fund and need a little bit of help from somebody who is the best person in the world to talk through.

21:10And through a series of questions, including my communication style, ChatGP helped me pick two individuals, one of which was Daniel. I messaged him on LinkedIn. I went, hello, you don't know me, but this is what I'm going to do. And I need some help. And within about three minutes, he responded.

21:27Paul Rippon:That's amazing. So I've drifted off a little bit there. Apologies on that. But the extremes are we've got this wonderful group of customers. We need to serve them. We need some facilities. I will help you find the facilities, the debt, the equity and the team. I'll just introduce you to those people because I can and I'm lucky enough to do that. At the other end of the scale, some of my investments and my entrepreneurs have come to me and said, we can't produce revenue. We've tried. We can't do it. We've tried to get this regulatory authorisation. We can't. we have just been hit by a fraud and it's wiped out all of our runway what do we do now those extremes and certainly those bad extremes would I have liked to have known earlier maybe but sometimes we get a bit carried away or excited or competent and think we can solve those problems and sometimes it is handy to know earlier but then there's also the kind of the boy that cried wolf right if someone keeps coming to you all that time you go look your job really as an entrepreneur is to kind of work out and solve these solve these problems as well and and with my personal portfolio of circa 30 customers that i manage that's 30 clients that i manage on about a day a week outside the farm i i frankly haven't got the the time and my brain doesn't work on the middle bit my my brain and my passion and my interest is on the the big problems and the big opportunities.

22:59So that's a flavor of the sort of reasons why my portfolio of companies currently come to me and the sort of problems and opportunities and the way I might approach it.

23:10Paul Rippon:Amazing. And let's just talk about what stage are you at in the fund? So I think you're kind of just announcing the fund now, you're looking to raise some money for it. And then when are you going to be, when are you going to kind of aim to deploy some capital? Yeah, thanks. So we are launching like now you you are the first person to ask me these wonderful questions and share the news with everybody which is which is fantastic and i couldn't ask for anybody better to to do that because you know the word is getting out there i was kind of on stealth mode until a little story broke and I had to come clean as to what I was up to.

23:55We have a few tens of millions of pounds pledged by investors already before we actually kind of gone out in a meaningful way to investors, which is incredible. It's a huge vote of confidence in the team, hopefully in my track record as well. And also, as you've alluded to, the story. This is not another fund. And if it is, if that's all you want, get a tracker. Right. Don't come here. If your head and heart, if you really want them, if you've ever built something and proud of it, if you've ever needed some help and want to help somebody back. That's what Rippin Capital is about. It's about producing fantastic returns and giving back while you're making money, helping others.

24:36That's what it's about. And that's what we stand for. So we're launching now. We've got tens of millions of pounds of investors already in place. The fund structure is identified. The team is in place. We've got a£1 billion backlog of outstanding companies and individuals and entrepreneurs that need growth capital to make a wonderful difference. I think Rippon Capital and all the help that we can give it can do more for levelling up than some have claimed to do for many years and that would be that would warm my heart Seb right if we if we could light the fire and help people around the UK and beyond to find out how to become entrepreneurs better entrepreneurs then then I will be a very very happy man as will the rest of the team that's what it's about so this is a head and heart story and i hope it appeals to people accordingly so we got investors we got the pipeline we got the team the fund mechanics are sorted uh we we're probably going to go for about 250 million ish on fund one but again the plan here is to create a multi-billion pound platform and to be a creator of multi-billion pound companies right this although as we've touched on this is to help a whole range of people so at one level the early stage stuff maybe you want to be a car valer maybe you want to be a market gardener maybe the only difference that you will make is to you personally and your family right and if you do that and we can help you wonderful and we'll do that through epic and founders if you're going to create yourself the next starling if you're going to create yourself the next monzo or revolute or lendable or wise, then even better.

26:32And I hope and expect us to create several multi-billion pound companies through the work that we're going to do with the fund.

26:39Paul Rippon:Amazing. Look, it's been an absolute joy speaking to you. I love the mission and the passion comes through. And I think you're such an amazing operator that I think this is going to be a really valuable and meaningful endeavor. And yeah, I'm super supportive. I think this is fantastic. To finish up, I'd like to ask three quick fire questions, if that's right. Go on, Em. So the first two around your career, you've had a super varied, interesting career, Northern Rock, FinTech, alpaca farming. What has been the biggest highlight of your career to date? Maybe it was a launch or a raise or an amazing investment, or it was something where you thought, wow, this is it.

27:19Paul Rippon:This is exactly what I wanted from this thing. And I love this. What was that number one moment across your career?

27:29getting the banking license at Monzo. We had gone through, some of the viewers all know, and the story's been told on this, there were some challenges at Starling and there were some challenges at Monzo and people had worked for years, getting this right and working hard, working hard and everyone was getting a bit stressed and a bit down and a bit hassled and run down and upset and then the news came through and I took the phone I still remember we were in this dingy office I don't think the toilet worked as usual at Monzo all things Monzo people were down and working hard and furious and kind of doing their doing their thing and I took the call from the regulators and they said you've got the license and I looked around and and like nobody nobody was looking and i went on i went on slack and i typed i typed we have a banking license and then around the office you started seeing

28:40people's people's emotions uh just just kind of explode and it was such a an incredible time and a release and a moment that is just like well ingrained on me as you can't imagine that must

28:52Paul Rippon:have been the atmosphere in the office that day must have been unbelievable party time yeah i can imagine um and on the flip side what has been the lowest point where things have you know felt like nothing was going right up against the wall and you just felt like you know everything was going wrong gosh so 2006 ish I had left Norwich and Peterborough Building Society and I joined this organization called Northern Rock and I decided to join as credit director and it was very exciting and I thought I'd done wonderful due diligence and asked lots of questions and read their accounts and spoke to lots of people and thought, wow, these people are growing at 20 % a year.

29:40They seem lovely people. They're from the North East. They seem really, really nice and kind of really energetic and really positive and good. And then, and people have kind of told different stories about this, and I have my own view. I think for a bit of bad luck and big timing, Northern Rock, of course, became the epicentre of the financial crisis. my boss went off poorly and I suddenly found myself the new boy on the block credit director at the epicenter of the global financial crisis in the credit crunch and I found myself in the Bank of England with the regulators in the boardroom explaining and helping everybody to understand what was happening and then the team people had questions and said it was the best of times and the worst of times I learned so much and before your eyes like you you saw people the northeast people are wonderful people they're very very humble very hard working and you saw people that had spent their lives working at an organization put their heart and soul into it built up their salaries built up their pensions thought their families were set and looked after for life.

30:57And then they started seeing their jobs, their bonuses, their pensions, their shares, their security crumble away, nationalisation. And it was really, really hard. The impact on the staff, on the customers who were scared, on shareholders, on regulators that I don't think were quite sure entirely what to do at that point. It was a really tough time. It was the best of times. I learned so much about people and about crisis management and about rebuilding. And it was the worst of times. It was tough, but it was also a huge learning time as well. So, yeah, credit director just in time for the credit crunch.

31:42Paul Rippon:I mean, amazing. I mean, it must have been, yeah, very few people would have had the insight that you have had of the credit crunch, the financial crisis. and yeah, the resilience that you must have had to kind of get through that, especially a brand new job. As far as like brand new jobs go, that is got to be up there with one of the most unfortunate in terms of timings. Yeah. Crazy, amazing. And the final question, you know, what advice would you give to maybe, you know, a very early entrepreneur so someone just started on the entrepreneurial journey or someone who is like eager to get going but doesn't quite know how to start?

32:20Yeah, that's a good one. And I think my comment here will be particularly indexed towards Brits, not exclusively so, because I was asked a similar question the other day. And the Brits seem to like going into their garden sheds and coming up with the best answer ever, and it takes them forever to come up with it. And so to answer your question, I would say, if you want to be an entrepreneur, if you want to do your business, then today, in the next hour, do that thing to make somebody smile.