The Entrepreneur: Rhydian Lewis, RateSetter

With plans to reach £30m turnover next year, Lewis shares why he doesn't dwell on volumes of business and his ambitions to take RateSetter public...

Co-founders: Rhydian Lewis and Peter Behrens
Company: RateSetter
Description in one line: RateSetter matches investors looking for better returns with creditworthy borrowers looking for attractive loans.
Turnover: £18.5m (2015-16)
12 month target: £30m

Business growth

Describe your business model and what makes your business unique:

  • People with money to invest want access to risk and reward. Households and businesses want attractive loans. We match them up and help everyone get what they are looking for.
  • Uniquely at RateSetter, investors can set their own interest rate.
  • Our Provision Fund has ensured that to date, no individual investor has ever lost a penny on our platform – a unique record amongst the major UK peer-to-peer platforms.

What is your greatest business achievement to date?

We’ve passed a few milestones since we wrote our first loan in 2010: we launched in Australia in 2014, passed £1bn in total lending in 2015 and we now have more than 300,000 customers. We’ve also lent more than £250m to business borrowers, which has made a real difference at a time when banks are reluctant to lend to small businesses.

However, the thing I’m proudest of is that to date, every individual RateSetter investor has received the returns they expected without losing a penny. Of course, we can’t provide a guarantee for the future, but it’s a record that we’re incredibly driven to maintain!

What numbers do you look at every day in your business?

It’s easy to dwell on volumes of business, so I prefer for us to focus on how we are delivering for our customers. When we launched, that was something we were naturally very close to as we were on first name terms with some of our earliest customers, but as we grow it’s important to make a concerted effort to ensure that we keep the needs of our customers at the front of our minds and ensure that they can enjoy the best possible experience of using RateSetter.

To what extent does your business trade internationally and what are your overseas plans?

We launched in Australia in 2014, but RateSetter Australia has a separate management team and balance sheet. We didn’t set out to launch there, but we were presented with a particularly compelling opportunity. We’d consider similar opportunities in future, but it’s certainly not a proactive priority.

Describe your growth funding path:

RateSetter was self-funded when we launched, but we’ve since raised £30m from a range of investors including City heavyweights like Woodford and Artemis. Ultimately, the intention is for RateSetter to be a publicly owned business, but we know that this is a process that takes a few years to do it properly, so we’re in no rush.

What technology has made the biggest difference to your business?

We built the underlying technology for our platform from scratch ourselves. It’s bespoke, and quite simply, we couldn’t run without it.

Where would you like your business to be in three years?

Our intention is for RateSetter to ultimately be a publicly owned business. It’s difficult to draw a precise timeline for things like this, but it’s a process that will take at least a few years. In terms of the size of the RateSetter loan book, currently there are more than £600m of active loans – we’d like it to be several times that figure in three years’ time, which would bring us in line with a small bank in terms of scale.

Growth challenges

What is the hardest thing you have ever done in business?

A few years ago our industry found itself on the radar of institutional investors– that is, hedge funds and the like, rather than individual investors. A number of P2P platforms took on large amounts of money from institutions – which has the attraction of facilitating a growth in business volumes, but it often comes with conditions attached.

We’ve focused on retail investors throughout, and kept institutional investment to less than a tenth of the total. I have to say, holding our nerve and saying no to many institutions was tough. But, in the long term, having a diverse base of everyday investors who can directly benefit from the risk and reward of their investment has proved to be the right call.

What was your biggest business mistake?

I think that, generally, when we’ve erred, it’s because we haven’t communicated well enough or listened closely enough to our customers. We’re highly transparent (for example, we publish our entire loan book online) and we’re lucky in that our customers are very engaged, so this helps us to ensure that we don’t lose sight of that – our customers, rightly, hold us to very high standards.

Piece of Red Tape that hampers growth most:

This might surprise you, but I actually think that the UK has taken a positive approach to regulation – we and others in our sector successfully lobbied to be brought into regulation and it has so far proved to be a good thing. But if you want one area that could be improved, there’s a very specific rule relating to Self Invested Personal Pensions (SIPPs) which prevents lending from a pension pot to a “connected party” (e.g. your spouse or parent).

This rule predates the arrival of peer-to-peer investing and, practically, it's unfeasible to deliberately lend to a specific borrower on our platform. But without clarification to put it beyond doubt, this rule could hinder direct investor access to the returns from loans as part of a pension. Happily, a number of SIPP platforms with whom we work have taken the pragmatic view that, since it’s impossible to collude on our platform in a meaningful way, there is no issue, but it does put some other platforms off.

What is the most common serious mistake you see entrepreneurs make?

I think one of the biggest mistakes entrepreneurs make is not being committed to the long run and failing to see things through.

How will your market look in three years?

I think there will be a period of consolidation. There are a few peer-to-peer platforms out there which are struggling to grow and others which are finding that compliance with regulation is a big overhead. I think that the likelihood is that a sustainable market will consist of fewer platforms in the future – a combination of some large scale platforms and a few smaller specialist, niche ones.

What is the single most important piece of advice you would offer to a less experienced entrepreneur?

Surround yourself with the best people you can.

Personal growth

Biggest luxury:

I don't think I have one yet. Am I missing something?

Executive education or learn it on the job?

Ideally both. Theory and practice – helpful to understand the former but probably use more instinct for the latter!

What would make you a better leader?

More patience.

What one thing do you wish you’d known when you started?

There are plenty of things I would have liked to know but I suspect half of them would have put me off trying in the first place and so I have no regrets.

One business app and one personal app you can’t do without:

I could do without any apps!

Business book:

Gulliver’s Travels: not a business book in the purest sense but plenty of applicable lessons!


(will not be published)