Fast-growing UK startup bank Monzo is now worth £1bn ($1.2bn), just three years after launching, making it a “unicorn.”
A unicorn is a term used in the venture capital industry to refer to any tech startup that reaches a $1bn market value, which is determined by private or public investment.
The app-only bank announced on Wednesday that it has raised £85m ($108m) in a ‘Series E’ fundraising — its fifth injection of institutional money since its founding in 2015. The funding round values the company at £1bn.
Monzo, known for its hot coral-coloured debit cards, raised the sum from US venture capital firms General Catalyst and Accel. Existing investors Passion Capital, Goodwater, Thrive Capital, Orange Digital Ventures, and Stripe also contributed money in the round.
‘There’s a huge opportunity ahead’
CEO Tom Blomfield told Yahoo Finance UK that the cash will go towards “UK growth and product development, particularly driven by hiring.” The bank currently employs 450 people but plans to double that to 900 in next 12 months.
“I think there’s a huge opportunity ahead of us and I think capturing as much of it as possible is key,” Blomfield said.
Monzo currently has just over 1m customers and Blomfield said the bank is signing up 100,000 new customers a month. 30% of new sign-ups are in London and 55% of new customers are aged 20-29, Blomfield said. Another quarter are 30-39.
Adam Valkin, a managing director at General Catalyst, praised Monzo as “one of the fastest growing consumer financial applications in history” in a statement announcing the raise.
Customers have spent more than £4bn on Monzo’s hot coral debit cards in the three years since its launch, the company said.
“We’re really focused on getting into the top 5 or 6 banks [in the UK],” Blomfield said, adding that he expected to reach that goal “probably within the next two or three years.”
He added that Monzo will likely start to look at international expansion next year and said: “I think the US makes a lot of sense but it’s not something we’re planning imminently.”
At the same time as announcing the fresh capital injection, Monzo said it plans to hold a “large” crowdfunding round later this year. Blomfield said the bank aims to do the round before Christmas but it is subject to regulatory approval. CityAM previously reported Monzo will seek to raise £20m, which Blomfield said was “ballpark right,” adding he could not give the exact figure.
The company has held three crowdfunding campaigns on the platform Crowdcube over the last 2 years.
Monzo began life as a prepaid card linked to an app that helped you track your spending. It is now a fully-fledged bank and Blomfield said it would continue to build out its stack of services, with a high-interest savings account, cash deposit facilities, and more lending operations all on the agenda.
‘The platform is coming to banking’
Blomfield said that Monzo has gone from losing £35 per new account at the start of the year to making £4 per new account today, but the company remains loss making overall due to staffing and fixed costs.
“I think there’s a massive shift happening in retail banking at the moment and I think running the business for profitability in the short term, there’s a danger that you don’t capitalise on that shift enough,” Blomfield said.
“The big high street banks have had this idea of full-service, cradle to grave banking. They sign people up and they try to offer every single product under one brand umbrella — the Barclays mortgage or the HSBC credit card. I don’t think it’s a good model because it ends up with customers getting a lousy set of options. It’s much better if you go and shop around and go and get the best provider for each product you want.
“I think what we’re moving from is that universal full-service bank to a hub and spoke model, to an internet platform. Platforms have taken over a bunch of other industries, I think the platform is coming to banking, where you get a single interface but then you plug in all these different providers.”
Blomfield said Monzo will work to build out its internal marketplace using the new cash injection.
‘I don’t think banks can replicate the speed’
The big UK banks have taken notice of Monzo’s fast growth and some are trying to emulate its success. Sky News recently reported that Royal Bank of Scotland plans to build it’s own mobile bank, Bo, and seed it with 1m Natwest customers.
Blomfield said he was not worried about big banks taking on Monzo at its own game.
“I just don’t think these banks can really replicate the speed and particularly this hub and spoke model, I think it just undermines their business model,” he said. “Barclays isn’t going to recommend an HSBC mortgage because it wants to sell a Barclays mortgage.”
Blomfield said Monzo has no immediate IPO plans, saying: “At some point we’ll look at it but all of our investors are pretty happy for the long run. There’s a lot of private capital at the moment and so we don’t have a tonne of pressure to go public.
“I think we’re also looking at the other IPOs recently — things like Farfetch, Adyen, Funding Circle — some of them have been a little rocky, so, it’s certainly not a priority.”