They didn’t crowdfund for capital, each crowd round was an already oversubscribed round - they reserved some capacity for the crowd (rather than them needing crowd $$).
Instead they crowdfunded for growth. It made up part of their wider community marketing strategy which was insanely successful.
I imagine crowdfunding did play a relatively significant part in the early growth explosion, because it creates incredibly loyal and devout customers that tell their friends. But I wouldn’t call it a necessity. They’d just focus on some other marketing strategy if not for crowdfunding (e.g give £5 get £5)
Edit: also just to clarify, by insignificant I meant relative to total shareholding. I believe the nominee’s total is ~1% or lower.
Let’s hope the change in share price doesn’t follow the recent Freetrade share price horror.
Freetrade: “Hey everyone, we’re making more money now than ever before, we’re a bigger more successful company and in fact we are now in profit, hurray!”
Also Freetrade: “By the way, your shares are now worth 25% of the value they were a year ago”
The share price was £13.01 at a £2bn valuation until the pandemic hit in early 2020 and the rumoured (by Tom) huge investor pulled out just before signing their term sheet which may have put Monzo’s valuation in Revolut’s orbit, leaving existing investors to somewhat unwillingly fill the funding gap and set the 40% discounted price of £7.71 or £1.25bn valuation.
This low valuation only held for around 7 months as in late 2021 the valuation almost tripled to £3.5bn or £14.41 per share with Monzo weathering the storms and the fintech and VC hype back in full swing. The fact that the valuation went from £2bn pre pandemic up to £3.5bn in late 2021 and yet the share price remained in a similar place is down to all the dilution that came from the big raise at the heavily discounted valuation and making good on Y Combinator’s terms (iirc they got loads more shares as a result of the down round).
This will be another 10% dilution to the share base, however they will gain £300m in cash. The share price will probably remain in the same ball park of £13-15 if my understanding of small dilutions is correct.
These Mark Kleinman stories are normally very close to the bull’s eye (he clearly has a source very close to the coal face) so I would not expect a valuation much higher than the £3.5bn suggested.
from memory all the big investors got the option of more shares as a result of the down round …section 9 of the articles of association - Anti Dilution
This is a very unfortunate and has happened to quite a few companies.
Startup valuations have been divorced from business performance for a long time. Instead, it’s the state of the venture capital markets that
mainly governs the valuation.
Monzo shouldn’t go down because it doesn’t need to raise in the same way at this point, it’s profitable and steady as we understand. So if they couldn’t raise at a decent price they just wouldn’t be raising. Doesn’t mean they are immune though - if they were in this business position in 2016 they’d probably be raising at a valuation of at least double I would think.
I reckon this raise is about getting investment that means they’ll be able to show more growth so they can hit IPO at a steeper upwards trajectory. Which will be vital to a successful IPO - they can’t hit that as a small U.K. retail bank because that wouldn’t be worth £3.5bn, they need to hit it as ‘emerging worldwide fintech giant’.
I’m hopeful for at least £10 / share at IPO, possibly higher, if it’s next year.
They could be taking the investment to boost their capital, meaning they can originate more loans etc? From their last annual report, they’re now profitable on a monthly basis, therefore there’s a good chance this cash injection is for a specific reason rather than just money to keep the lights on
- I sold half when we had the chance a couple of years ago though.