Coronavirus & valuation

Monzo Chat Crowdfunding & Investors
#1

Hi All,

I’m curious to get people’s thoughts on the impact coronavirus will have on the valuation of Monzo.

My broad view is this will have a very negative impact on the valuation & any future funding rounds will likely value Monzo at less (maybe much less) than the ~£2 billion it was valued at after the latest funding round.

Couple this with the impact of WeWorks collapse & the resulting expectation that investors are about to revalue pre-profit companies to be more in line with their multiple’s of revenue. Monzo’s revenue vs. valuation is approx. x133 which I think we can agree seems ludicrous now.

#2

I don’t think there are any parallels between WeWork and Monzo, tbh. WeWork was clearly a scam for anyone that looked at it with a critical mind, and the various ‘valuations’ were essentially made up numbers. Monzo’s future isn’t assured, but it’s a genuine business, and its valuation has been based on that.

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#3

It’s very hard to say, and without knowing any numbers off recent raises. Personally, I don’t see the current situation affecting massively on Monzo’s valuation as it still has a hugely recognisable brand, and has over 4 million users, which is considerably more than the previous raise in 2019 when it was valued at £2b.

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#5

From a business model perspective, I agree, there’s no parallel between Monzo & WeWork. Monzo is in a far better position, no question.

Where I do think there’s a parallel is around valuation sentiment, too much cheap money looking for a home & investors pumping money into anything with the word ‘tech’ or ‘AI’ attached to it.

WeWork was revealed as a fraud & subsequently revalued as a office space leasing company. Monzo isn’t a fraud by any means but I do think it will be revalued more in line with a banks valuation.

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#6

My opinion would be that the very logic of x million customers = £2 billion valuation will be questioned & that 4/5/6 million customers going forward won’t move the dial that much, if at all

#7

Anyone who thought it was anything else as an absolute fool, and the market readjusted itself accordingle.

Potentially, it might not double let’s say, but I don’t think it’ll decrease.

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#8

I would agree to an extent. If Monzo were to go public today (even taking coronavirus out of the equation) it would not achieve a £2 billion valuation.

However, I would see a high street bank paying at least £2 billion for it. The long term savings they could make by removing legacy software & subsequent costs would pay for itself in about 10 years.

But Monzo leadership say they will never sell to a big bank so we may never know

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#10

I suspect that might change in the future.

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#11

Fair, but these “fools” are SoftBank. Their vision fund has turned out to be a laughing stock but I wouldn’t be that confident that similar mistakes haven’t been made across the industry. Maybe not the the extent of SoftBank but mistakes nonetheless

#13

Me too, in fact I’m praying for it.

We could be in for an interesting fight between investors & the board. The board would essentially have to way up their fiduciary responsibility to their shareholders with their more idealistic goals.

They may live to regret taking investment from thousands of noisy crowdfunders who will be looking for a pay day.

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#14

Barclays is valued at 15 Billion
RBS is valued at 12 Billion
Revolut is valued at 6 Billion
Lloyds is valued at 20 Billion
HSBC is valued at 83 Billion

Metro Bank (arguably a less known Bank) is valued at 200 million after a severe drop in its value based on poor previous performance.

I think Monzo’s valuation of ~2 Billion (if not more) is correct based on its perceived value in the market at this point in time.

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#15

Sorry to throw my CV around here but I work in tech for a large bank. They are nowhere near having a modern stack. All these new features only give a veneer of modernity, it’s lipstick on a pig. Buying something modern & clean would be hugely appealing. Migrating over & all that would be cumbersome & time consuming but it would be worth it, no question.

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#17

to be honest the stake that crowdfunders hold is not going to have much, if any influence on the board however loud they shout , the board are some of the main shareholders and will be making decisions on their investment in Monzo

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#18

Suspect we’ll see some extra cash into the business from existing funders before there is a sale to a big bank.

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#19

fair point

#20

.A lot of people seem to look at it as “they were worth £2bn before the pandemic/VC crunch so now they should be worth a bit (or a lot) less than that”, however that valuation was a relative ice age ago and if you were to draw a graph of their valuation vs user numbers or their valuation vs Revolut (who they have loosely tracked since 2016) you might conclude that Monzo was worth around £4-5bn shortly before the pandemic, and that is what they would probably have been aiming towards in negotiations for the last 6 months.

This was only two months ago and very little has changed in their market landscape. They are still the fastest growing bank and will likely have market dominance just by doing the same thing for 5-10 years. If anything this pandemic will cause everyone to ditch cash altogether and speed up the digital revolution which plays into their hands.

I think they are worth £3-4bn right now and there will be VCs who are not afraid to invest at that level when it comes to the cream of the crop.

As always though, this is all speculation and there is only one way to find out how much they are worth.

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#21

Monzo in the media suggests Monzo may need to borrow money from the govt under unfavorable conditions which says worrying things for the level of working capital it has and would not be not good for existing shareholders

#22

@gt94sss2 - it doesn’t suggest that though :slight_smile: …maybe Im mistaken , where do you think it shows that Monzo need to borrow money from the Government ?

what do you think Monzo has as working capital ?

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#23

Why would Monzo and those other firms be given as examples otherwise to promote the scheme?

#24

I have no idea , it says you can pay with Monzo , or Go cardless or Metro thats it , nowhere does it suggest Monzo are "going for it ", again I ask you where you got your information that Monzo were applying for it ?

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