This I can see
Same reasons they bothered for every round barring (maybe) the first. The amount they have raised from crowd investors is miniscule compared to institutional investors, and they clearly have no difficulty attracting them. The most recent round could have gone from £85mn VC and £20mn crowd to £105mn VC and £0 crowd, and Monzo would have been financially better off (no crowdfunding overheard). They continue to crowdfunding to engender a sense of ownership from their customers, and that seems likely to continue as long as customer growth continues to increase. Expect crowdfunding timetables to align to ‘number of users who have not had the opportunity to invest’ more than it does to institutional funding needs.
Interesting Forbes article from October, Tom said if they IPO at £2billion they’d be sad
I reckon they need to IPO ASAP for creditability both for USA and to convince people they are a serious and stable bank, then more people would pay in their salaries.
So I reckon
- Crowdfund Dec
- IPO in March 2019 ???
IPO in 2024-25 is my guess.
The main reason is they don’t want to allow unknown entities buying a stake in the company and/or acquiring them, which an IPO would enable. Also pretty sure all their VCs have been signed up for the long haul and I’m pretty sure I read somewhere the major shareholder (Passion) is signed up/locked in for 10 years from 2015.
They’re not even profitable yet - I know a company doesn’t have to be profitable to float but a Bank? I just don’t see Monzo IPO’ing until they are at least profitable.
I’m not sure I follow the logic that if they are public they are credible/stable? Companies that are public crash all the time. They know they can secure funding at the drop of a hat so I see no rush to IPO.
Fair points, It’s just my preference that Monzo should float, I think it would raise their profile and people would take them more seriously
Remember people are mostly using Monzo for coffee and spending money they are failing to pay their salaries in.
I work in the square mile and have introduced 10 work colleague to Monzo they love the app but don’t trust it enough yet to get their salaries paid in - they always ask are they on the stock market ?
Appreciate any business can go bust floated or not, but it does prove that a higher level of governance is in place (ignoring patisserie Valerie for moment as that was the auditor and a employee issue)
Ocado is not profitable yet and they are doing ok, they floated in 2010
I think the numbers for this are rising and I don’t think them not being Public is the issue - its that its a “Challenger” and not a “Legacy” Bank. I think even if they floated it wouldn’t sway people to switch.
I appreciate companies can do well floating but not profitbale, but this is a bank, their job is to literally hold money - there will be minimal interest on IPO if they’re not making money. Also IPO’ing so soon after a large funding round will likely not mean the share price will have gone up. I just think we might be a ways off yet.
Ocado were founded in 2000. So that’s ten years before they floated.
Monzo were founded in, I think it was 2015. To use Ocado as a baseline, then, that would suggest 2025 for floating.
Which, as it happens, it’s pretty much in line with what @rarther has been saying all along!
My own view is that I don’t think it makes any sense for Monzo to IPO early. Every time they’ve crowdfunded, they’ve stressed that it is a long-term investment. Floating in 2019 would be the very opposite of long-term. My own gut feeling last year when I was considering investing was that they won’t IPO until 2023 at the earliest.
Haha good points, but I am not saying float in 2019 I think some time in 2020 would be ideal
After the December 2019 crowd fund which would be their last hopefully.
I think this post on the blog (literally just posted) backs up what I was trying to say and why I think an IPO would reassure more people.
I have reposted my post below it
Personally I think staying away from IPO is a good idea. I personally don’t think an IPO inspires assurance. Look at all the big banks that had a public traded stock and crashed out.(RBS, Lehman brothers etc). IPOs are notoriously difficult to predict as there are so many external forces that can trash the stock price. In all honesty Monzo needs to work on its branding to get away from the idea that it is a bank that focuses on millennials. The way it does that is by hiring a good quality board, but also good quality staff with experience and developing its USP of caring for its customers.
I would love to see accounts developed for vulnerable adults e.g accounts for young people with disabilities(both physical and mental) but also elderly people with cognitive problems such as dementia and require a member of the family to manage their finances.
Reputation is another factor that is probably the hardest thing to build as a company especially as it can be tarnished so easily(COps debacle and most recently the savings issue((neither of these affected me so I don’t know how quite to name them)). This then combined with the trustpilot reviews that can influence people.
A persons capacity for risk and ease is the final reason why Monzo probably has issues with having salaries paid in. How easy/how many emails would you need to send in order to get your HR department to change the account your salary is paid in and how much time would that take? (Probably the most important factor, you can have the best designed APP/product ever but if its difficult to implement no one will care)The other side is risk how much would you risk your salary in a New bank account in a young bank.
The risk factor is the personal bit, as all sorts of factors go into it(there’s a whole host of psychology experiments that would be fun to run on the subject )
Don’t get me wrong I am a firm supporter of Monzo invested in 2016 but then wobbled after Brexit.
Am I wobbling again - maybe ?
But the fact remains if people don’t use Monzo as their main account they won’t survive
If they IPO my whole office would see that as a sign of reassurance and they would move over to them.
Without something like an IPO they won’t budge they all earn large salaries and don’t care about the FSA guarantees because it’s more about the hassle and inconvenience of claiming it back - if Monzo are listed they feel more reassured
I think its an interesting case of risk and risk taking. I am always wary of IPOs as they have to very well timed and hyped correctly otherwise they tank.
I find it interesting the idea that IPO confers confidence/ credibility.
I wonder what they also think of crowdfunding whether its a positive or negative thing?
General question does anyone know whether VCs typically bail if an investment starts to fail or do they aim to inject more money to protect their initial investment?
As far as i know VCs don’t really care and just burn money as it suits them… in search of a profit. A lot of VCs are rich enough that a loss of 80million is not really a big issue.
How long is a piece of string?
Which is to say, there’s no one answer.
The simplest answer regardless of any other factors is that they won’t “bail”. They can’t. It’s not like they can say “I’d like my investment money back” and go home. If for no other reason than if the investment is starting to fail then their money isn’t there to take back.
If you rewind right back to when they first make their investment - at that point, they are well aware that they may lose all their investment. This is why VCs will invest in lots of different companies and not just one. They’re spreading the risk, and the investments which succeed have to return enough to cover the others that have failed also (which is why there will be times when a VC will choose not to invest in a business that looks sound or that they believe in - it’s not that they think it will fail, it’s that the margin isn’t there for it to be worth them having a punt).
You may well get VCs who will look at a failing investment and think that it’s only a short-term blip - perhaps something as simple as a minor cash-flow issue - and that putting further investment to cover things in the meantime will be a good deal (particularly if they can leverage a better position through this - more equity for less money).
Most though will probably not want to throw good money after bad and will write off the failing investment and concentrate on maximising the successful ones instead.
tl;dr, a VC is effectively a gambler who bets on lots of companies to succeed and expects the ones who do to cover all their losses and more. They generally won’t throw good money after bad.
I can see why a publicly listed company affords some assurance as to the ‘safety’ of its brand and their products. But in all honesty I think its an education thing - if anything the listed banks have more chance of completely dropping off the map the next day as Monzo does. In effect IPO doesn’t equal safety. If you look into what makes a bank ‘safe’ Monzo has everything the big banks have.
I think IPO’ing just puts forward a perceived idea of safety. I don’t think Monzo should IPO for the sake of trying to assure people they are ‘legit’.
Recent stats show 30% of Monzo account holders put their salary into it - and as we have seen from many on the forum they may not have it paid directly in but move it over from the Legacy account that it does.
But I can totally see why a challenger scares people, swings and roundabouts I suppose.
Just look at most of the rubbish on AIM, they’re all listed but I wouldn’t touch most of them with a 10 mile pole! People pump life savings into these companies hoping to get rich and get taken for a ride - yes ftse 350 has stricter rules, but what hoops need jumping through to get listed on that index?
Also once listed you become a victim of sentiment, short trading, and all kinds of wonderful market manipulations not to mention your focus moves away from growth of the company and realistically growth of the share price - just read any share dealing board to see most share holders say they care about growth but what they really care about is seeing their share price grow, and that atttirude can drag on a company.