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What can we learn from Monzo's £85M raise? More than you think.

Tom Bloomfield. You know, the guy that heads up Monzo - that bank that now has more than one million accounts in the UK. We never worked together, but I kind of wish we would at some point. I wish Monzo could keep its independency and continue to develop great banking products.

It will be a challenge. While the number of users has trebled over the last year at Monzo, it seems like costs are growing at a faster rate than the monetisation of these customers.

This would be enough to sound alarm bells at the plush offices of any VC firm. Failing at customer economics is normally the beginning of the end.

Tom knows he needs to fix it. He knows he needs to focus on instilling growth coupled with cost control at Monzo. He knows what could happen if he doesn't.

Monzo would need to borrow more money - ergo raising more capital in another round. Which would mean he would progressively lose control of the business. This would mean the business could be sold to entities that could try to address the cost issue through economies of scale. Therefore Monzo could be sold to another bank who wishes they had the guts to create coral colour cards; Monzo's uniqueness will be diluted, and they would become just a small part of "another bank".

He knows that raising capital is just borrowing money, and his focus needs to be on fixing the business fundamentals: develop great products that (at least some) that people love, and find a way to keep costs under the expected customer revenues.

That's why when closing a round of £85 million yesterday, Tom was refusing to celebrate. With his superior clarity of vision he knows that borrowing money should not be celebrated, rather focus needs to be on customer metrics.

And he voiced this when commenting on the round. This sends the right message to his investors, and more importantly, to his own people.

Guess that's one of the reasons why he is so successful doing what he does.

Kudos.
 

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