Monzo: investment, profit, VCs and crowdfunding

Thread to talk about investment, profit, VCs and crowdfunding in Monzo. Spun off from the Monzo Plus thread!


Breaking even still isn’t good revenue, it won’t help the £100’s millions black hole monzo is in. I can’t see scale affecting this pricing much. Insurance is already scaled.
If it helps people to start actually using their accounts then there’s merit in that.


Breaking even is good revenue. It’s impossible to profitable without revenue. Cash in the door is always good. Particularly at a bank and at this stage in the venture where cash flow and capital are paramount


Can you explain that point further please?

Monzo do not owe me or other investors our money back as a debt, so are you saying they have other debts to service? Maybe I missed that amongst the fun, but I thought they were (mainly) running on VC money


They are losing money every year, eventually they need to pay that back. That doesn’t just cease to exist

This is a myth. The only good revenue is profitable revenue if your running a business
Monzo are trying to make a profit

But the money is from Investors, who have “bought” part of the company - it isn’t a loan - they don’t need to pay the institutional or crowdfunding investors back? If they have taken out mortgages or loans to set up infrastructure then those will obviously need to be paid back.

But their “losses” are mostly from money received from investors - so whilst they are losing money they don’t “owe” that money to anyone.


Did you not hope to make a profit when you invested?

No. That’s not how the crowdfunding works.


But that isn’t a requirement for Monzo to pay that/us back - that is a risk all the investors made. Technically we are part of the company - if it goes bust we lose that money.


VC and crowdfunding works on the hope that the company will be floated and purchased by others at an exaggerated price creating a hollow balloon of debt.
Read up on how VC killed Maplin and many other companies.

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At some point, yes, but startups don’t tend to pay dividends (even when profitable, they’ll want to reinvest the money). So we’ll probably get our money back if the company goes public, if it succeeds.

But Monzo doesn’t owe anyone that money? It is theirs to spend - that’s the risk of Investing?


Completly disagree. There are three main financial statements to assess business performance. One is the PNL (profit and loss)/income statement, another is the Balance Sheet/Statement of Finanacial Position and Cash Flow Statement. PNL is obviously important but it’s not the only one to look at.

Let me ask you which if these business you’d rather own:

Option A
Revenue: 50bn
Margin on Product 1: 10%
Margin on Product 2: 1%
Margin on Product 3: -1%
Profit/Loss: Zero

Option B
Revenue: 10bn
Margin on Product 1: 10%
Margin in Product 2: 1%
Profit: 1m

You’d rather have Option A because it’s likely that Product 3 has a good market share and that the -1% margin can be turned around with a bit of tweaking. So if you could turn the margin on Product 3 into +1% then you have a significant profit (hundreds of millions) on your hands.

Revenue and cash flow are important in any debt aquistion - the question the lender asks is ‘can this entity service the debt for the defined period’ - a borrow could service the debt but not be profitable. Take a man-in-the-street example: you get paid 2k per month, your rent, bills, expenses are 2.1k per month. That’s your PNL position and, in isolation you wouldnt probably be leant to. But if you mention that you actually have 1m in capital in a share account then you would get leant to - capital matters as much as PNL.

Ive defo rambled on here and probably gone off topic bjt hopefully demonstrates that PNL is not the be-all and end-all. Just look at Spotify, Amazon, Facebook and Uber - they weren’t profitable for a long time but the strong revenues served their growth well.

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While I have mixed feelings about VC, I am more of the view that people not shopping at Maplin finished off Maplin


In order for someone to want to buy them, they need to look like someone will be able to make some money

Because they were charging too much because of servicing all the VC debt. Read up on it. I had no idea. It came down to them trying to expand to fast

But that doesn’t mean Monzo owe the £100millions in investor money - yes they ideally need to look profitable for people to want to buy the shares once they IPO - but they don’t owe the money back to investors - im confused as to how, going back to your original comment:

I don’t quite understand what you mean here?

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I’d rather neither. But 0 profit on 50bn revenue, is definitely worse that 1 profit on 10bn.

So a VC that would only benefit from Maplin doing well purposefully killed it?

Suggest we are now off topic to this thread so lets agree to disagree.

Remember there were profitable on paper businesses that died in the credit crunch due to lack of cash flow. That’s why a subscription model is so attractive. Known future cash flow is good