This is 20VC with me, Harry Stebbings, and today we feature what I believe is one of the greatest turnarounds in modern tech.
When TS and IL took over Monzo, they had very little runway.
They had a 40 down round, mega layoffs and very poor NPS for employees with just 40 million in revenues.
Today they are the leading UK digital bank.
They have 10 million customers, they have a billion in revenue and they are profitable.
What an insane journey with TS at the helm, and today he joins us in the hot seat to unpack it.
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You have now arrived at your destination.
T.S., I'm so excited for this.
Listen, I've spoken to most of your cap table in preparation for the show, so thank you so much for joining me.
Just waiting to be asked.
Excited to be here.
Listen, we've had it in the calendar for a while.
Now, I want to start with when you took over, it was a tough time.
There was 40% down round.
There was little runway.
There was high engineering attrition.
There was low employee MPS.
It was tough.
And also, you're in the U.S.
Why did you decide to take on the challenge?
You know, to answer that, I'm going to have to back up a little bit, Harry.
Back up because, as you know, I've spent many years in different sorts of financial services companies and banks around the world.
Through it all, I had this big unscratched itch of really thinking that someone needed to reinvent the sector.
Someone needed to reinvent how customers and money worked with each other.
And in the bigger places I had worked, I tried to do it.
Right.
But it was clear that the legacy players were never going to fix it.
With the best of intent and the best of wanting to do it.
It was never going to get fixed by incumbents, right.
And the history of incumbents transforming their industries is anyways very, very sketchy.
And for all of the obvious reasons of legacy tech and legacy mindset and business models to protect and this and that and the other.
So it had been a thing for me for the longest time.
So it wasn't an accident that I ended up in the conversation with Monzo in the first place, because I'd been seeking to do that thing be a part of a team that was going to change the sector forever and ever.
So that commitment and belief in the mission was very real for me.
So encountering what Monzo was when I started.
Of course, you've talked about all of the you know all of the things that were wrong or broken or difficult.
But if I looked at the hand I had to play, there were some good cards in that hand.
We had found a magical product market fit with our initial current account product.
We'd found a brand and a tone of voice that had really resonated across the country.
So in addition to that, all of those problems you talked about were real, right?
We were running out of capital and there was COVID on our revenues that had fallen off of a cliff.
Monetization was lagging the user growth.
So every version of problem that you can think of, we certainly had that as well.
But if I looked at the full hand, this is what I wanted to play.
And I guess at a deeper level.
I've never been shy to run towards a fire, never been one to sort of balk because it feels difficult.
If anything, it feels more like, yeah, I'm going to give this a swing.
I'm going to give it everything I've got and it won't fail because of something I did not do.
There's a deep sense of like, I'm going to try and make this work.
What was the single hardest thing that you had to embrace in terms of those challenges?
There's some situations where you have to sharpen focus and just do the one thing.
This was not one of them.
I wish it was like this was the one thing we did that sort of unlocked everything else.
And sadly, it was not.
Because it was a set of interlocking problems, that we needed to raise capital, because we had limited runway and we wanted to fund the ambition.
But to raise capital, investors needed to have conviction.
To give investors conviction, we needed to ship product and drive some momentum.
To drive momentum and ship products, I needed the regulators to trust us.
To drive that trust, we needed to fix a set of controls to keep them commensurate with the size of company.
We'd already become the size of bank we'd already become.
And then to do all of those things, you needed the right people.
Every one of these things was like an interlocking problem, in a way that it wasn't about doing the one thing.
So now you look at this whole landscape of things that needed to dig in and, like you know, get right.
A lot of people and teams freeze in the space of that kind of overwhelm.
We chose not to freeze.
We said, we're going to dig in, look at everything that needs to happen, build a plan.
We started with like a hundred day plan.
Just go after each one of those things, like chip away at each of those things.
There isn't an answer other than to say we dug in on the whole damn thing, right?
We say we're going to put our arms around this whole thing, dig and grind away at each of these problems, and then you start to unlock things.
So in being interlocking, the good news is that if you get a couple of things right, you start to create positive and virtuous cycles as well.
On the product momentum element, Revolut have an insane product velocity.
And I always attributed that to them not having a banking license and so not needing to be quite so constrained.
And you obviously have that.
Is it the banking license that prevents the speed?
Is it management?
Is it team?
In the arc of time you have to get all of these things right.
So sequencing it uh, you know, should we have gotten a license later in a life cycle versus earlier?
Here's the thing in the early days of a company, when you're building the foundations of the company, you build a great tech stack, you figure out the product, market fit and the brand and how you want to go to market and all of those things.
But in a regulated business, you also put in place the muscles to operate this at scale in a regulated context.
Getting that right early on has meant a few things.
It's meant that we've earned real trust from our customers.
It's meant that we know how to do that and continue to scale.
We know that getting it right actually creates a moat around our business in a very, very important way.
Hindsight is a lovely thing and we could debate what sequencing is better or worse, but here we are.
The largest UK digital bank and so much more.
It's interesting to your point on the timing.
Nick said he regrets doing it so late.
He wishes he had done it earlier like you had done.
Which I thought was interesting.
I did not expect that.
Mission is so cool to Monzo in many ways.
Did that ever prevent product build out?
I got suggestions before the show and people said that actually there were products that would have been profitable for the business that we deliberately chose not to do because they were against our mission.
Sure, let's talk about cryptocurrency trading.
That's a good one, where we chose to not do it.
Because letting the average customer buy 100 cryptocurrencies because we could make a buck off of it just felt not on mission at all.
And it was clear to us that if we wanted customers to trust us and do what's right for them and their long-term financial interests, we were going to have to take them on a journey.
The goal was, of course, we will offer all sorts of asset classes in time, but really build it around helping customers understand what they're doing.
And so we chose to walk away from that.
Is that not assuming that consumers don't understand crypto well enough to trade it which, when you tell me Harry, of of the millions of customers investing in cryptocurrency, ranked number 75 because they saw a tweet?
Does that sound to you like a customer that understands that currency and the reasons why that that particular currency has got tailwind of growth?
No, but i'm as far right free market as you can come, and so i think that you can't be the arbiter of consumer knowledge and saying you are smart enough versus you're not smart enough and so i'm not going to.
I don't disagree for a minute, right?
Because this is not about us being paternalistic, right?
This is about us presenting to the customer the information to help them make a good decision right.
So if I want to have them invest, I think we should give them the tools to make good investing decisions.
Do you think it was the right decision on crypto?
If it wasn't, if we had relitigated that, we would have launched it in the time since, right?
So it wasn't a one-off decision.
It wasn't a point-in-time decision.
We've chosen not to do it yet.
How do you think about stocks with that in mind?
Sure.
As I said, ultimately in my mind, we want to give customers a full range of asset classes to invest in.
I think it's just about sequencing.
As part of a broader investment proposition.
I think we should make all of the choices available to the customer.
But how do you think about the right sequencing then, given the many options you have in front of you?
Sure.
So, with investing, like we've done with every other product that we've built, we built it with really going deep and understanding what our customers wanted.
What we learned from customers was that the two reasons Most British customers, most customers in the UK, stay out of investing and keep their money in cash.
By the way, it's one of the largest savings versus investments markets in the world is because of two things.
One, they think it's only for rich people and two, they don't understand it.
Now, if you take those two insights, what we did with the product and the reason we're on the journey is we said okay, let's start, let's solve those two problems.
Let's make education available to customers in the app.
So we demystified and it's not terms and conditions or disclosures.
It's like let me tell you what you need to do to make a good decision here.
And we said we can start investing with as little as one pound.
The idea was to solve for getting this vast majority of people we have north of 10 million customers now harry to get started on the idea of making long-term decisions with their money.
So we started.
We've started with mutual funds and in time we will do etfs and all sorts of other asset classes.
And so to your point about sequencing along that journey the other asset classes will come and they'll be right time to do it.
In the meantime, we're not choosing just a fast buck.
How do you think about that trade-off?
Because everything's a game of trade-offs, which is what's so hard in managing businesses and product strategy.
But that trade-off between new product innovation, like investing in different stocks, and then crypto versus mortgages, student loans.
How do you think about that trade-off?
Sure.
Yeah, so the quick backdrop though, of this is that we intend to meet all of these needs of a customer.
Budget, borrow, spend, save, insure, invest, all of that in a single place.
That's what we're building.
The sequencing is driven by many things, right?
It's driven by when we feel ready in terms of everything that we need to do to launch that product.
Where does it fit into our journey of sort of building out the economics of the business?
What are customers saying they want right this second?
So a bunch of different things end up informing that particular sequencing.
Mortgages as an example.
I don't think we will ever do it on our own balance sheet, but we already are making mortgages visible to our customers.
Even if it's not a Monzo mortgage, they've taken it from somewhere else.
In the app, leveraging our technology, a customer can actually track their mortgage.
Our mortgage is good business.
Let me reframe that question.
What part of mortgages is great business?
The problem to be solved is at the front end of the customer journey.
And we will solve that problem and we will originate for other balance sheets.
And there's enough large balance sheets in the country with lots of lazy capital and liquidity that will happily distribute mortgages through us to our customers.
So I want to play in the front end portion of that.
I would rather not deploy our capital and our balance sheet to funding the mortgage asset itself.
Mortgage origination for you will be like a 90 margin, 100 margin business versus the balance sheet, which is bleh.
It's the front end where we can differentiate, where the customer sees pain.
Let's solve that problem.
Make the capital free, high margin fees off of that and give the asset to someone else.
Is there a loss leader product in this product suite?
One which you need to have, but it's not a great business, but it's important for the rest.
The challenge is going to be defining what's a product versus what's a feature and stuff like that.
But we don't seek to monetize every product and feature.
As an example, the gambling block.
I don't know if you know about this feature that we built a few years ago three, four years ago coming out of a customer feedback about someone who had spent too much money online gambling the night before because they kept topping up their account.
A customer service agent that was talking to them had this idea that maybe we should just give them the ability to block those transactions.
So customers can set up a gambling block on their account, which says that don't let me top it up.
And if I choose to unblock it, I have a 24 hour cooling off period.
The staggering numbers, Harry, more than 600,000 customers have turned that on.
And it's not something we seek to monetize.
In fact we actually went and lobbied with the government saying every bank should make it available.
So that's an example of a product feature that we're not doing it for the sake of monetization, but it's good for the customer and we will do it.
A whole bunch of budgeting tools are free.
We don't price that.
The thing over here to get right, which is the heart of.
I can see that skeptic.
Look on your face.
We have to dig into this one.
At the heart of this is rejecting this false binary that is your mission-oriented or you're a great commercial business.
I think of that as a false binary because I think done right, both of these things reinforce each other.
Talking to you about our mission and what Monzo really is good at, what we stand for and what we invest in every day, what we have built on the back of that is a business where the largest UK digital bank, but not just in terms of numbers of customers or revenues, but in the quality of those customers,
The engagement that we get from those customers, tracked in weekly active users or daily active users, is off the charts and leagues ahead of our competitors.
The commerciality of it is, as an example, we add over 200,000 new users a month.
The vast majority of those are word of mouth in an industry where people spend 100 quid to acquire an account or more.
The engagement levels that I said mean that the propensity to buy every new product from Monzo is off the charts.
Do you care about it being the primary account?
Of course we do not for its own.
It's interesting i had um antoine lennel, who's the head of growth, at revolut on 20 grocery and he was like no, we're like a snackables, you know, try it, try it and then over time, but we don't care necessarily at first bite.
Different question then do i care at first bite?
No, i'd like to get that at first bite.
I'd like people to come and bring their whole relationship to monza in the first instance, and many and like large segments of customers do, people that are new to banking, coming of age, new to the country I don't have another bank account in this country, by the way bring their entire relationship to us.
And that's amazing.
But I'm also fine if someone wants to try us out and use us for more and more, because the unit economics of that make commercial sense.
And it's a great way to make sure more people touch and feel Monzo.
The reason main bank matters is not just because of the fact that you get more share of wallet and higher ARPUs, because you can get that same ARPU.
Even if someone's not using you as the main bank but takes out another bigger product from you.
You can get similar ARPUs.
But because when more of the relationship comes into Monzo, the ability for that customer to actually manage their money better, for us to add value by actually connecting the dots for them inside of the product, is massive.
And most customers' anxiety is also driven by the fact that their freaking wallet is fragmented.
That I borrow here, I save there, I invest here, I insure there.
That is high anxiety for most people.
And it doesn't let them optimize and make good decisions.
But when you sort of consolidate that, when you bring it into a single context, there's so much you do on the back of that.
Can I ask, what's the ARPU today?
145 pounds.
145 pounds.
On the retail side.
On the retail side.
And 550 on the small business side.
I want you to pause there for a second because those numbers are part of the proof point about this idea of mission and business.
Can I just ask, sorry, how does that compare to a traditional high street bank?
A high street bank which has disproportionate revenue.
Contribution from mortgages will probably be 300 400.
On the retail side?
On the retail side.
Wow.
But that's mortgages.
If you capital adjust, if you risk adjust, if you expense adjust, it obviously thins out very quickly.
So when we break down your 145 on the retail side, what does that look like in terms of how Monzo fundamentally makes money?
Two answers for that maybe.
The first is just what that revenue mix looks like.
Right, so we're targeting and very close to these numbers.
We're about a third, a third.
A third a third is transaction based revenues interchange, fx and so on.
A third is on balance sheet lending, when customers take out an unsecured borrowing product from us a loan or an overdraft, hormones or flex.
And then the last one third is what i describe as good fees, and i say good fees because this is not stuff where we make a.
We make money when customers make mistakes.
It's not gotcha fees.
These are fees like subscriptions when someone takes out a subscription product from us or on the marketplace of the original mortgage in the future, the interest margin that we make on the savings product.
So that's the last one third.
I'm always interested in things that you've learned from things maybe that didn't go right.
What did you build that you maybe reflect on and think we shouldn't have built that?
So one of the products that we were really interested in building out was energy switching.
And we shut that down almost a year or two years ago now almost, because a few things happened right.
We thought it was a logical extension of the financial control center, helping people sort of get good choices and make good decisions.
Also amazing business on the origination side, if you can be that switching provider.
Yeah.
So the market turned.
When caps on energy costs and so on came in, that market changed and we just prioritized it lower.
So we may get back to it if it becomes a thing again.
That never quite worked out.
What do you learn from that?
How do you reflect on that?
I mean, the big learning is to make sure that you stay close to customers always and are solving problems that they're seeing, versus something that you think is intuitively right.
Yeah.
So constantly learning, iterate fast.
And I guess lastly, just the recognition that we're operating in a very dynamic market.
So you have to roll with it.
You said about iterate fast.
You spoke earlier about product velocity.
I spoke to Anu before the show and she said that one of the many achievements you've had is like the unbelievable acceleration in product velocity that you've been at the center of.
How do you accelerate product velocity as you do as specifically as possible?
I mean, we can take this back to 2020, right?
The early weeks after I had started.
It was important to do two or three things.
The first was have high conviction in the two or three things that we were going to do.
So focus and then make sure you got those across the finish line.
Number one.
Number two, I think it was this thing about playing across different horizons.
The first horizon being stuff that you can ship in the next six to eight weeks.
And then stuff that you knew had longer lead times but you needed to get started now if you wanted to meet that thing that you wanted to launch in three quarters from now.
So building a clear view of how do you play across these horizons and get going.
So the subscriptions product that we launched in, when I say, early July of 2020.
We'd taken many runs at that product internally right.
And it was still spinning, but we hadn't brought it across the finish line.
So that was one where we said, okay, digging in, we're going to ship this in four weeks.
Let's figure out everything that we've learned, make the right decisions and just crack on.
And we did.
So that one was a, this is a four week horizon thing.
We're going to get it done.
The longer horizon, an example of one, are borrowing business.
We'd already launched loans and overdrafts, but it was clear as COVID kicked in we needed to hit the pause button and really build that for scale, which means invest in world-class underwriting tools, in understanding how the customer journey would work much better and all of the controls associated with building a borrowing business at scale.
So that one we said okay, get started at crazy intense pace, knowing that it was nine months away, even before we could ship it.
But you need to invest in those longer lead time things as well if you're going to get it done, because if you just prioritize the what can we get done quickly, you'll forever be in a tactical mood without actually building out the business that you're setting out to build strategically.
From a shipping perspective, that year was also about stuff that was not visible to customers.
Product debt and tech debt is well understood in the industry, but we defined this idea of controls debt.
So when a company is scaling as fast as we were, you need to make sure that again back to the point about a regulated industry that the controls scale alongside as well.
And you don't want to pick up debt on the control side.
Tom said on the control side, you know, I've known Tom for years.
And he said, I hated it at the end being CEO.
I just spent all of my time with regulators.
Is that the life of a CEO of a bank?
Well, it's one part of the life of a CEO of a bank.
Here's the way I think about it though, which is that and I say this inside the company a lot if we were running an e-commerce business that we wanted to run at scale, we wanted to build Amazon.
If we sat around whinging and wringing our hands and complaining about warehouse logistics and, oh my God, the supply chain is a bitch to handle.
I mean, you don't have a business then.
I can't believe returns.
Exactly that, right?
If it's the business you're in, own the whole damn value chain and get great at it.
I just did a show with Jason Citron from Discord and he said that empowerment and alignment are two of the biggest BS words of management.
Do you agree?
No, I don't agree at all.
They may be the hardest, they may be the most annoying and painful things, but sadly they're not.
How do you run a business and build it to scale if your team is not aligned with what you're trying to do?
How do you run a business where people that are closest to the decision, closest to the customer, are not freaking, empowered to do the right thing?
How do you build that?
I get it.
They're big words and they're annoying words and they're bandied around all the time in ways that like strategy and synergy.
Where was the team most misaligned in terms of product decisions, strategic decisions?
I'd say there was two things that we needed to build real alignment on early.
At the more senior levels, there was this false binary of, are we a tech company or are we a bank?
And I say that's a false binary, in the same way that I wouldn't expect the world's best e-commerce companies to say are we a retailer or are we a tech company?
You're both.
Straddle it all so you don't frame a false binary that results in saying i like this, i don't like that.
Right, so that's one.
So at the senior levels there was that misalignment.
I think at more junior levels there was a misalignment about this idea of a mission and a business plan, and i would say A mission without a business plan is a bumper sticker.
Anybody can write a strapline.
And our mission is going to be powerful because it's back to the business plan making money, work for everyone.
That standing alone without a business plan to make it happen is a strapline.
You and I could write like five more in the next two minutes.
But that with a business plan that reinforces it makes it incredibly powerful.
We were launching a new fee that we were going to charge customers for something.
And we were of course doing it the Monza way, which was like wickedly transparent to the customers.
They knew exactly how and when we were going to charge this thing.
But I remember someone asking me in one of the meetings when we were discussing it that yes, doesn't this seem like it's off mission?
Like we shouldn't be charging for this.
And, you know, charging a fee feels like it's not on mission.
And I remember saying then, if we choose to not charge for things where we transparently and with the customer and where we believe we're adding value to the customer, if we choose to not charge it and we see that as somehow being a mission thing to do, it's effectively saying I'm doing charity at the cost of the VC.
I shouldn't take any credit for it.
I'm taking the VC's money and scaling an unprofitable business to be even more unprofitable.
There's no good that comes out of that.
What do you not monetize today that will be the biggest monetization lever in the future?
I still think transaction-based fees will be the biggest thing we do, but it's already there.
So it's not as though it's a new thing we're building out.
I still think it's going to be a big thing as we expand the ways in which people pay and get paid.
That's probably still going to be the biggest thing we do.
The subtext in the question that you're asking me, right, which is like, is there the one thing?
And here's the deal.
When we're building a product that is about meeting all the needs that your wallet has, it's by definition going to be a diversified revenues, which, by the way, is a high quality business model because it isn't hostage to economic cycles and credit cycles or interest rate cycles or any of that.
You build it like a quality business.
You mentioned the fees and the transparency around them.
Do you think Revolut are transparent with their fees?
I'm not a customer.
Can't blame you for trying.
I can't blame you for trying.
10 million customers in the UK.
And a half a million small businesses, sir.
And half a small, very important addition.
How big can Monzo get in the UK?
And when does one think about, hey, we really have to internationalize now?
That was the biggest question segment that everyone had.
When do we go international?
I think the when do we go international is now.
We're public about the fact that we're investing in building out a strategy for Europe.
We're public about the fact that we have a small team in the US building product for the US, for the American customer.
We've had that for a while now.
Not really.
In the first iteration of the US, what we spent our time on was applying for the banking license.
And we pulled out of that process when it felt like regulation there was unlikely to grant any fintech players licenses.
So we pulled out of that process.
That was the sort of first version.
Was it the right decision to pull out?
Oh, totally.
Because I mean nothing has moved on the regulatory front on that in the couple of years, or three years even, since we pulled out.
So yeah, that was absolutely the right decision.
So why would going in now be different?
Because we're not looking to go in with a banking license.
The US fintech industry has this well-established model of a partner bank, a sponsor bank, and most of the US fintech industry operates with that model.
That's what we're doing.
So working with a partner bank and building out product for the customer, and focused on the things that we do really well, which is work close to the customer and nail what will help them make better decisions.
Why has no one won the US yet?
It's interesting, Harry.
So I've spent a lot of time looking at talking to different US fintech companies.
There's lots of hypotheses.
I have a couple.
One is too much cheap capital chasing US fintech.
Because what that, I think, ended up doing was create a context where most fintech entrepreneurs felt like they were being incented to grow users.
Right.
And the number of businesses that we look at in the market, which is a mediocre product, sort of fueled by CAC marketing dollars, but the actual business, the actual product doesn't resonate.
The actual product is not doing what they want it to do.
And the monetization is coming from early wage access or some like one piece of it as opposed to all of the other sort of talk about the business is staggering.
So I feel like money chased the wrong things and people sort of built businesses that were sort of CAC fueled businesses, in effect.
But there's another reason, right, which is U.S. fintech has been a developed industry for a while.
In being a developed industry for the last couple of decades.
What you have is really great fintech companies that have solved thin slivers of needs right.
So for P2P, there's a Venmo or there's a Cash App.
For point of sale lending, there's someone else.
For something else, there's someone else.
So it's a very fragmented fintech industry, but which is where we see the opportunity.
The idea of bringing it together in a single place for the American customer seems very attractive.
How do you think about the importance of the right anchor product or entry point?
You know, I know Vlad at Robinhood very well.
He came in here and a friend of mine for a long time.
I don't really get stock trade.
He's going to kill me for this.
It's such a bad friend.
Shit friend award.
Stock trading is the entry point for product expansion.
Seems difficult to get my head around.
How do you think about the right entry point?
Yeah, so the honest answer.
We're still in a bit of discovery mode on that.
Why will they come question?
Is it not the same as the UK?
Is it not current accounts?
No, I don't think so.
It's a very credit hungry market.
It's a market where a lot of people have been trained to apply for credit.
And that's the hook product.
I mean, ultimately, we think about it across, you know, why will they come?
Why will they stay?
And then how do we make money?
We're still early days in sort of pounding the table and saying this is a high conviction answer to that question.
So let's dig into that, like why they come in the US.
You said it's kind of still in the ideation phase or kind of we're figuring it out.
Where do you think it is and what is it?
I mean, credit is the obvious hypothesis, as I said, right?
Because, if you look across the fintech industry, both in terms of how people are monetizing it and what's driving user growth, credit and its adjacent products, like early wage access and so on, seem to be a big part of the industry.
So that's what we're sort of working on and getting our heads around like what that real thing there is and what's the best product for the customer in that context.
Is there not like 50 early wage products, like wage stream in the US?
Does that not just eat away at that value prop?
It does.
And that's why I said we're trying to figure out what's the differentiating thing that we can really uniquely bring.
How do you think about the US expansion trade-off between the European expansion?
So I think it's possible to be insanely ambitious and very disciplined at the same time.
So it sounds like a catch-all, but let me explain what not doing that would look like.
Not doing that would look like we look at the US and say, we have an okay product.
Now let's just go buy growth.
So that's being ambitious, but not being disciplined.
We're saying we're going to build a great product first, not burn a whole bunch of cash on the way to getting there, not painting buses and doing crazy things anytime soon.
Build a great product, see that customers are using it it's resonating with them and then, sure as hell, be incredibly ambitious about building scale in that market.
What does that mean, though, in terms of how you think about Europe versus the US?
So Europe is still building out the strategy, still working with the regulators, still sort of building out what we think the game looks like.
In the meantime, we have people building product for the US.
So in some sense, this is back to my sort of play across horizons point, right?
Because you're planting flowers and bushes and trees all the time.
What does that look like from a resource allocation perspective then?
If you think about 100 in the Monzo bank account, 15 go to the US, 20 go to Europe and 65 go to the UK.
On a snapshot basis, this year, it's more like 3 in 7 in 90.
Wow.
3 in U.S.?
?
Yeah, because I don't need to spend that just yet, right?
I could take the opposite approach that says, no, no, no, I want to show user growth.
I want to show numbers and I want to sort of manage this for a short term uptake.
When does it become like 20?
On the other side of feeling like we've got the high conviction product.
Absolutely.
Not shy to invest, not shy to aim for big numbers and build an extraordinary business in the US, just like we have over here.
But it's a little bit cart before the horse to say, why aren't we spending 20 today?
In terms of European expansion, what do we need to do to win that?
Here's the thing about Europe.
Obviously, it's easy to see it as a single market, and it is in some ways, and it's not in a whole bunch of others.
So when Europe is a different question than sort of which markets and so on, that's the work we're doing right now.
Which do you think is the most important in Europe to win for you?
I think in the long arc of time, everything, right?
We want to be big across Europe.
Sequencing it as a function of where do we think size and odds of success sort of match up better.
But the thing that we will do in the US, in Europe, just as we've done over here, like what won't change.
Build a single global tech stack on the back of which we can build amazing products and ship them.
Number two, build close to the customer, right?
Understand what the customer wants and build what's right in that context.
Size of market, odds of winning.
Where is the first one and two that we go to with Monzo in Europe?
Too early to answer that question, but let me also play public about the fact that we're choosing Ireland as our beachhead into Europe.
That's the regulatory regime we want to work with and that's where we want to domicile out of.
But when you look at size of market and RP potential, I wouldn't have put Ireland in the top five.
Yeah.
So when I was answering those two criteria, I was answering in the context of where do we want to enter and win?
Where do we want to domicile out of?
And Ireland is an attractive market.
It's not the biggest market.
And so, of course, we want to do more than that.
We'll start there.
What will be the biggest challenge in expanding across Europe?
It's different countries with different makeups of what attracts customers.
What is the real pain point they feel?
What segment is more attractive or more underserved?
Getting those nuances right is not trivial.
Here's an ultimate product strategy.
If we were planning to have a thin layer product that was thin ARPU, scaled to lots of customers but fundamentally met a very narrow need, you can do that a lot more easily.
But what we're looking to build is this idea of a business with high engagement with customers, extraordinary economics, up and down the PL And in sync with the mission that we have.
You end up at a different place in terms of how you think about the strategy.
You don't think about planting vanity flags, but you think about it in terms of how do I build businesses of scale everywhere?
Why is engagement a core metric for you?
If you think about your relationship with your money, sometimes people would say the less you think about it, the more frictionless it is.
The less you engage would be more success.
Sure.
How do you think about engagement as a metric of success?
So two things.
One is the way we define engagement is usage.
I'm not defining engagement as how much time do you spend thinking about your money, right?
I'm defining it as- How much time on app looking at balance.
Right, so that's not the thing.
Engagement is how much do you use Monzo, right?
We don't look at it, so we look at it in terms of weekly transacting usage, not just revenue active.
You could have a lazy balance with us and be making money for Monzo.
I don't think of you as an active customer.
Are you using the product?
So that's engagement.
Why is that important?
Well, because it's correlated with the high ARPUs that you see.
Those are average ARPUs.
You can imagine what the highly engaged customers, even within the base disaggregate that, what those outputs look like.
So engagement drives greater economics for the product itself, but also the ability to buy more product from Monzo.
An example.
We talked about investments a lot today, but when we launched our investments product, I literally did one press interview.
And by that evening we had 150000 customers add themselves to the waiting list for the Monzo investments product.
Distribution is the outcome of something.
And I'm saying that it's the outcome of engagement and trust with us.
This is why I love it when people say, oh, it doesn't get easier with time.
It freaking does.
It is so hard to get 100 people to give a shit about you in the early days.
You get 150,000 when you have an incredible customer base like you do.
But that incredible customer base is not an accident, right?
And that's the point.
It's come about...
Because we've built that love and trust.
It's because warm, fuzzy words like mission are not warm, fuzzy words for us.
It's about saying, how does it actually connect with the customer?
What's the real problem we're trying to solve?
And how do we stay maniacally obsessed with that?
Because it drives all those second order effects.
But back to your question about engagement and why is it important?
So that's one, right?
But greater engagement is greater economics ARPU, etc.
There's a second piece of this, because what we're effectively building out Harry, is a consumer platform where engagement is measured in the trust that customers place with Monzo, the love that they have for Monzo.
By the way, here's a trivia question.
Do you know how many times more likely it is that a customer uses the word love when they're writing a review about Monzo?
Seven times more likely than anybody else.
And this is in the context of an industry where love and banking, love and financial services just don't go in the same zip code.
But we're building this consumer platform where that engagement is measured in trust and love, and doing more with Monzo.
And on the back of that, we earn the right to do so much else for customers.
There's some tropes in startups which are commonly said.
I'm just intrigued how you feel about them.
You said there about the 150,000 people when I said about stock trading.
Build it and they will come.
Agree or disagree?
No, disagree.
It's a difficult industry.
If the only thing that mattered was the product, how do you reach customers?
So you have to create the virtuous cycle.
In our case, that virtuous cycle is the virality of it is the tools that make people want to talk about us.
So you have to build a great product so that you create the love, but then you need things to happen around that.
So it's not just about the great product.
Being first is everything.
It depends on the industry.
Sure, there's some sectors where that's probably true.
Do you think it's important that you're first to market in the markets?
We're 500 years late to banking.
There's nothing first about that.
And yet, here we are.
There are many areas I could go down.
Another one that was so important for everyone was bluntly IPOs.
How do you think about when you'd like to go public?
We have the luxury of time.
We have the gift of time because we have plenty of capital to build out our ambition.
And not only that, we have extraordinarily supportive investors patient but also supportive, as in would give us more capital if we needed it.
So it's not a thing for its own sake.
We know we'd make a great public company one day and we'll get there when we get there.
Why would you go public soon?
You have very supportive, very deep-pocketed investors.
That's an awful lot of scrutiny that you're bringing to your company when you don't need to.
So two things.
One is we already know how to operate in a highly regulated context.
So the gap between a tech company like us versus another tech company that just doesn't have to deal with scrutiny is pretty wide.
So the gap for us from here to becoming a public company is not insane.
Let's start there.
But why become a public company at all?
I mean you and I could come up.
We'd take some time to come up with five names of great brands, great companies that we respect, that are not public right.
So we feel like at some point it's good for the business, it's good for investors, it's good for the brand to eventually become public anyway.
So that's what...
I just think there's always like a why now?
And there is this extended window of privatization, with larger and larger funds moving earlier and earlier, meaning that you can be private for in perpetuity.
Sure.
Yeah.
So I guess it's just saying why ever, not why now.
So yeah, why ever, I think it's a good question.
And to the extent that that's not what we're obsessing right this second, there is a why ever?
Thing that we should answer as well.
Yeah. would you go public in London?
I knew you'd ask that.
Of course, it's the question you need to take a swing at.
Well, you know exactly what I'm going to say.
The London Stock Exchange asked me to come and do a show with them, because my question is who would go public in London?
You can't go public in London.
But it's too early for us to call it, Harry.
I mean, that's the honest answer.
I mean, I could say it lots of different ways, but that's the honest answer.
Could you paint a picture for me as to why you would go public in London?
I mean, this is a home market.
We're a huge brand in the UK.
So there's lots of reasons to think about the UK.
But there's no institutional support at scale that would provide the liquidity needed.
Both the last government and this government are doing a bunch of things to improve that.
There's been no dearth of policy changes that have come about and so on.
And we have the gift of, I said we have the gift of time, we have the gift of choice as well.
And we'll wait and watch.
There will be a time when we need to make that decision.
It's not now.
You asked me about tropes, by the way.
So we could go back.
That was a better one.
Get back, get back.
This one.
You know, I genuinely don't think I have a better answer than to say you know, we don't have to make a decision today and we'll make it when we need to make it.
That's the honest answer.
I could say it in longer ways, but that's the heart of that one.
But you know, to the tropes was this, you know, you asked me this thing earlier as well about Common misconceptions.
Founder mode.
How about that?
So, I mean, it's all the rage that debate about, you know, founder mode and so on.
And, you know, is there survivor bias in the analysis and how people talk about it and so on.
But here's how I think about it.
I think to build a great company at scale for the long term, a leader has to be good at a few different things.
Really good at setting the ambition for the company and a product vision to go there.
Be able to operate really close to the product and the user experience and the way value is created.
And then three be able to scale execution, which means build the right leadership and the team and the culture that allows you to continue to scale at bigger and bigger numbers.
So you have to be good at all three.
And some of these qualities get dubbed as one thing or the other.
I think a debate about it's this is the only thing feels to me like a trope, right?
I think of it like a triathlon, right?
You have to swim, bike and run if you want to win this at scale.
So any discussion that feels like oh, all you need to do is be great at swimming feels like kind of totally missing the point.
Is it difficult coming in as a CEO when there is such idolization of founders today?
I'm sure it was difficult in some ways early on, but it was difficult only in that I was an anomaly.
You know, most people, investors included were used to seeing a 20 30 year old in a founder pitch mode.
In that sense, hard, because there was an expectation of what they expected to see.
And then I rock up and it's different.
Earning credibility and trust takes a different path.
It was easy to see me as someone with lots of experience in big companies and a safe pair of hands.
But would I 10x the company?
And the team needs to believe that.
Investors need to believe that.
So hard in that sense, sure.
But what's life without taking challenges like that on?
How many rounds have you raised now as CEO?
Three rounds.
Three rounds.
And the last one was at 5.9.
Correct which was the hardest round and which was the easiest.
The first was easily the hardest really.
Why the first was the hardest?
Because you know, i mean you opened this.
How much did we raise that?
We raised 250 million pounds.
250 yeah, and that was pretty quick.
After coming in, i mean we did the down round within minutes after i started, like three weeks after i started, and then we topped up that down round over the next six months.
Is employee morale down when you have a down round?
Everyone you look like really proclaims the damages of down rounds.
Is that wrong?
It's not wrong.
Of course, it's a thing and you need to manage that.
You need to explain to people why.
But importantly, as the leader, you have to see through the storm to the business you're building on the other side of it.
And this was a storm and we needed to know that we will, you know, we will right the ship.
But really this is not about safe pairs of hands righting the ship, but it's about building that business that you're going to build on the other side of it.
So, of course, it's hard. to pretend otherwise would be silly.
But point is you have to play the long game and you have to have that conviction as the leader that you're going to get it done, because everybody's picking up on your energy.
Everybody's picking up on the cues of your conviction about it.
What was the easiest round?
This last one we did.
And how much was that?
$650 million.
$650.
Why do you think that was easier?
Because anybody looking at our story by then could see the fact that we would be on a doubling Kegut revenue trajectory for a while.
Anybody looking at the business could see everything that we talked about in terms of customer engagement and love wasn't warm fuzzy fluffy, but meant that our pool was significantly higher than any competitor.
The stickiness of revenues is higher than anybody else.
I could see the dynamic of that business, could see that we're growing users as aggressively as we are, but it's not because I'm burning cash.
It's because people are recommending us.
So the dynamics of the business were clear.
Things that we'd been saying for three or four years were not just narrative, but were visible in every way.
You cut and looked at the business.
And so our focus was really on getting quality investors.
It wasn't just about the color of money.
It was about who do we want on the journey with us.
Which investor do you not have that you'd most like to have?
So we're at the cusp of you know, in the next round, whenever we do it, we'll get the big institutional investors.
So right now we have a few.
We have GIC and others who are institutional investors.
But I think our journey looking ahead is not VC names.
This is like Ontario Teachers Fund.
CPPIB.
All of them.
So we have a very fun round, which is what?
Your face is like, oh, fuck.
Because you have this, let me rub my hands in glee and let's get into it.
So this is not from me.
This is purely from your friends.
Fire away.
Okay, so we're going to do this new round.
So I don't know the questions here, but I get given them in these cards.
Okay, you ready for this?
Which current product would you close down if you could and why?
We did an energy switching is probably the best example of it that we already closed down.
Nothing else today.
Who is your least favorite investor on the cap table?
You really want me to kill myself, right?
These are your friends.
This isn't me.
This is genuine.
This is your existing cap table who suggested this.
Well, let's have some fun at Anu's expense.
Okay.
She's never going to be true.
She's an old favorite.
She's the reason I'm here at Monzo, actually.
Really?
Yeah.
She was the one who actually first connected me with Tom and Jonas.
Wow.
What do you believe that most around you disbelieve?
So you know, when you're building a business with as much ambition as we are, there's always naysayers, right?
So the journey of people disbelieving in the early days of Monzo was oh, this company is never going to make it right.
We just have to look for an easy way to sell the company and get out.
Then there would be things like oh, it's going to be a great and cool app, but like, really be like a few million customers and that's it.
Then it was, oh, you have customers, but you'll never make money.
Or you have revenues, you'll never make profits and so on and so on and so forth.
And it's been fun proving each of those naysayers wrong.
So even now, when I say to you that we're, when I look ahead, I think globally there will be a handful of companies only in the next decade that will truly be doing this business at scale and managing people's money, transforming that relationship that customers and money have with each other.
And on the back of that, build businesses with extraordinary economics and growth.
And we're playing to be one of them.
Saying that out to you, there's going to be people that will naysay about you know lots of bits of that.
It's going to be fun to prove that set of them wrong as well.
No, I agree with you.
And I think the composition of global banking changes entirely from the regional players doing it to five global.
Yes.
What's the hardest element of being CEO of Monzo?
And you can't say time.
No, I could.
But I think that trope about it being a lonely job is real.
I'm surrounded by the best people, right?
I have an amazing village.
And yet I think any CEO role has an element of loneliness in it.
Well, I don't love nighttime, but that's also why I see a therapist.
What would you do if you knew you could not fail, T.S.?
?
I'd aim to build a global fintech company that would be extraordinarily mission oriented and a generational company that is not just amazing for customers amazing for the economics of it, but also amazing for its employees.
I actually heard this quote the other day and I thought it was amazing.
It was the heaviest things in life are not iron or gold, but unmade decisions.
What one would be yours?
So this is not one that weighs on me or anything, but it's obviously one that I think about and I'm learning about more and more.
Is this IPO decision?
It's an unmade decision, timing, location, all of it.
And so we know we have to make it at some point.
It's not one that weighs on me, but it does require that we think diligently about it in the coming months and years.
What's your favorite consumer brand and why?
Cliched but real, Apple.
Why?
Because its magical design meets magical functionality meets like extraordinary business at scale.
The most valuable company in the world and still a brand that inspires intimacy and trust with everyone.
You know, you asked me about Apple Watch coming in.
I'm in that ecosystem.
And I love being in that ecosystem.
It connects across my life to the whole point about an operating system.
It does in the background so much for me in terms of protecting my data and making me feel like I can trust them.
Yeah, all of that comes together there.
What concerns you most in the world today?
Judgment without kindness, opinions without curiosity.
Do you think we are too opinionated without curiosity?
As a world, I think we are.
It's become easier to shout out an opinion and harder to say, tell me more, learn more.
What do you know now that you wish you'd known when you joined Monzo?
That it would take us two years to get a really good coffee machine in the office.
I would have just brought my own early on.
Also, you were in SF.
You have a family, no?
I do.
Yeah, you were in SF with a family.
It's COVID when you take this job.
And I'm working with a set of... What did your wife say, respectfully?
She thought I was crazy.
You know, she wasn't sure which was the bigger question to ask me why I was doing it or how I was doing it.
Because I would start my day at two or three every morning, which is already 10 o'clock or 11 o'clock in the morning here in London.
Did it feel nuts?
Totally felt nuts.
And you kind of loved it at the same time?
You know, I had this thing that I would joke with the team and with everybody at the time, this idea of you know what type one fun and type two fun are.
So type one fun is when you're having fun in the moment, right?
Great concert, great party, good whatever.
Type two fun is like that camping trip gone bad, which you know is going to be an amazing story later.
And you know it's going to be fun when you look back at it and recount it to yourself and you remember that you lived through it and all of all of the crazy that happened.
So, yeah, every day was some combination of type 1 fun and type 2 fun.
Every single day, I'd keep score of how many face punches did we get today?
How many body blows did we get today?
Because when you're in an existential time for a company, there's all of that happening all the time.
How do you deal with the body blows or the face blows?
But like, just quite literally, the way i said, like this idea of type 1 fun, type 2 fun for me would be i joke about it and say oh, that's definitely going in the book, that's going to make a great story right, it feels like right now but, you know, you abstract yourself out of that moment and actually look at it with a hindsight.
What's the best story of type 2 fantasy?
Oh, dear god.
There's so many know an investor that i would have spent months working on in 2020 and they're that close and i know that it's going to be pivotal for us and it changes our story because on the back of that, i will be able to raise more capital and they don't pull the trigger and i would be just like And it always feels personal.
It is personal.
So yeah, no dearth of those in any capital raise, especially if it's- But that's not type two fun.
I mean that in a nice way.
There's no fun about that.
I've been rejected many times too for funs.
But yeah, but not for public record.
But many of those are great stories.
We actually recount and tell ourselves, remember that?
And then my team will say to me like, you should never have gotten out of bed for that call, right?
You should never have gotten out of bed for that size of check.
And I'd be like dude.
The question would be what would I get into bed for, not what would I get out of bed for, even right.
Because you just had to do what you had to do.
So no event in isolation may feel like that, but that phase feels like type two fun.
That phase of, you know, the whole world's sort of crashing around you.
There's not many believers.
And yet you have this conviction that you're going to build this thing out with this amazing team, with you.
And as I was saying earlier, you sort of see through the storm.
It's an extraordinary privilege to have an experience like that.
Monzo is always kind of characterized as a nice culture, but like a work-life balance culture.
Do you buy that?
And is that something you do?
So, I mean, here's the thing.
There's a false binary in what you're saying, right?
Because there's this belief that a values-oriented culture can't also be a high-ambition, high-growth culture.
And I actually don't.
I reject that binary because I think Well no, I think it's a specific value that rejects that, which is that a work-life value rejects that.
But work-life is a part of an overall value system because ultimately, I believe that if you hire amazing people, put them into a culture which really values them and is an inclusive culture.
People work incredibly hard against that mission.
And it's a lot of things that add up to this culture where you care about customers not because they're a number, not because they're an ARPU, not because they're sort of a stepping stone or a vanity metric, but because you say okay, let's build it right.
And I think if you get that magic right as a company and as a team, the outcomes of that are the quality of the business that we're building.
I mean, the proof points are here.
If I was saying this to you four years ago, you'd have been right to be even more skeptical and say like what the hell?
They're never going to happen.
But look at where we are now.
40 to a billion and profitable.
Are you proud of yourself?
I'm proud of the team, Harry.
Inherited some amazing people that I've got to partner with.
You know, Jonas, the co-founder, who stayed on as CTO.
Sujata, the CEO, who joined us right after I'd started.
And all of the amazing people that we've hired since then.
And the amazing original Monzonauts that are still here building out the dream.
I'm insanely proud of all of us.
The odds were decked against us.
The naysayers were having a field day.
And it's amazing to actually build out what we've built.
How has the way that you lead changed in four years?
Yeah, a lot feels to me like it has not changed.
The size of my ambition for what we think Monzo will be has not changed.
If anything, it's only been amplified.
At each point of inflection in the business, what we have done as a team is bent the curve upwards.
This is why I hate visions.
Because if you stick to a vision, you kind of put this artificial glass ceiling on yourself and you kind of downward-flecked the curve of what it could be.
And actually, when you turn the next page, you're like, whoa, stocks is that?
I wouldn't have guessed that.
Yeah.
So that's just it.
You have to have a really clear sense of scale of ambition.
You have to have a really clear sense of the product vision that you want to build out.
But on the journey to getting there right, you hope like hell that you only inflect to raising the ambition.
It's like rock climbing, right?
You're always focused on the next ledge, right?
You know that you want to get to that summit, but your focus is on the next thing and the next thing.
That's exhilarating, right?
It's fun to take stock for a minute and see how far you've come, but really what you're thinking about is the next thing.
Yeah.
Final one for you.
What question have I not asked or are you never asked that I feel really guilty for this show, dude.
I'm so sorry.
T.S., tell me a song or a track you'd recommend I listen to now.
I wish people asked me that more often.
I always have music playing in my head, so there's always a track there.
What's your favorite track?
If I put on a track that is the one track that's going to get you dancing, what track is it?
I've never asked that question in any 20 years.
So I'm a cheap date with dancing.
There's like you could play like 500 different tracks and you wouldn't have to convince me to get on the floor.
Then talent is not correlated with desire to be on the floor with enthusiasm.
So that's a low bar.
I don't think there's a one track.
You could play 500 tracks that would do it for me.
But different question is what if there's a deep track that sort of touches my soul?
That's a different question.
What would it be?
There's a few, but I guess the one I'm going to go with is, you know, Eddie Vedder with Pearl Jam.
He did this insane collaboration in the 90s with Nusrat Fateh Ali Khan.
You know who Nusrat is?
Nusrat is a Pakistani Sufi music singer, probably one of the best musicians of the 20th century.
Pearl Jam.
So Eddie Vedder, grunge rocker from Seattle, and Sufi Qawwali, singer Nusrat, collaborated on this album, which was the soundtrack of the movie Dead Man Walking, and there's a bunch of tracks in that which are amazing.
The face of love, the long road are both insanely beautiful tracks that never fail to uplift me.
I'm really sorry, i'm gonna make you listen to this after this.
No no, you can't.
You can and i'll listen after, after this.
You've been amazingly patient and kind.
Thank you for putting up with my pressing questions and i really appreciate it.
Thank you very much for having me here, harry.
Now let's go have a laugh.
That show was so much fun to do with TS in person in the studio.
If you want to check it out, you can find it on YouTube by searching for 20VC.
That's 20VC on YouTube.
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As always, we so appreciate all your support and stay tuned for an incredible 20VC on Monday with Nabil Hayat at Spark Capital.
