In this episode of 20 minutes VC, host Harry Stebbings interviews Tom Blomfield, founder and CEO of Monzo, a UK-based fintech startup revolutionizing banking through its mobile app which allows users to open a full UK bank account in minutes. Tom shares his journey from co-founding GoCardless to launching Monzo, which has raised over $190 million in VC funding. He discusses the importance of building a product that customers love, the challenges of scaling in London, and the future vision for Monzo as a financial control center. The conversation also touches on the role of branding, customer acquisition, and the necessity of iterating based on user feedback. Additionally, Harry talks about various sponsors and offers available to listeners.
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This quote introduces the podcast and the host, Harry Stebbings, and how listeners can interact with the show.
But without further ado, I'm delighted to welcome Tom Blomfield, founder and CEO at Monzo.
Harry Stebbings expresses his excitement about having Tom Blomfield on the show and gives a brief introduction to Monzo.
It really started with an itch we had to scratch, you know what I mean?
Tom Blomfield describes the personal motivation behind starting Monzo – to solve a problem he experienced firsthand.
But the one thing we could never figure out on a sort of intellectual or strategic basis was how do we acquire customers?
Tom discusses the early strategic challenge for Monzo: customer acquisition.
However complex something it is, if you understand it at a fundamental enough level, it becomes simple.
Tom Blomfield talks about the power of understanding complex systems, which can give a competitive edge.
Consumer products are often hard to explain in economically rational terms, but they're all about emotion and brand and feeling and these sort of slightly irrational ways that human beings make decisions sometimes.
Tom contrasts the rational B2B sales process of GoCardless with the emotional and brand-driven consumer market that Monzo targets.
Viral mechanics will get us to our first million customers. And every VC who saw that was like bullshit, not going to happen. And here we are, 1.2 million customers and 99% through viral mechanics.
Tom Blomfield shares a bold claim from Monzo's pitch deck that was met with disbelief but ultimately proved true.
Pre product market fit for me is sort of, you might be five or ten or 15 people, even with a little bit of seed funding, maybe an early product out there, but it's not growing exponentially.
Tom Blomfield defines the pre-product market fit phase and its challenges, emphasizing the small scale and potential lack of growth.
"But we fixed those so quickly and then added extra functionality that the main point of sort of customer feedback changed from why isn't my card working again? To can I have a second or third card for my husband or wife or friends or kids or whatever?"
The quote highlights the shift in customer feedback from dissatisfaction to increased engagement and demand, signaling a successful transition to product market fit.
"For us, the tipping point was when we started growing faster than we could even handle, faster than we could dispatch plastic cards."
This quote signifies the moment Monzo realized they had achieved product market fit, as their growth outpaced their operational capacity.
"And I think there's actually a third phase now of sort of business model."
Tom Blomfield introduces the concept of a third phase beyond product market fit, emphasizing the importance of developing a sustainable business model.
"Do your customers love this product? Is, I think, the only thing that actually matters at that point."
Tom Blomfield explains that customer passion for a product is the most crucial factor when deciding whether a product is ready to scale.
"So we go to our customers and say, you're using this for a portion of your spend. What's stopping you making this your main account?"
Tom Blomfield explains Monzo's strategy for product development, which involves directly engaging with customers to understand their needs and improve the product.
"It's this sort of gut instinct that's informed by data and informed by user feedback."
Tom Blomfield emphasizes the importance of using data and feedback to refine instinct and intuition in product development.
"It's very hard to split test a company."
Tom Blomfield acknowledges the challenges in determining the best strategic direction for a company, as there is no way to test multiple strategies simultaneously.
"One thing that is obvious is that every single person in the world needs a bank account and then probably a dozen different financial services around the bank account."
Tom Blomfield points out the universal need for banking and financial services, indicating a large potential market for Monzo and similar companies.
"I think it's a classic adoption cycle really. You start with the early adopters and the early mainstream and sort of crossing that chasm."
This quote explains that Monzo is following a traditional market adoption strategy, beginning with early adopters and then moving to the mainstream market.
"We've already spread outside London pretty well. So something like 30% of our customers are in London, but 70% are outside London."
This quote highlights the geographic expansion of Monzo's customer base, indicating successful growth beyond the initial city-centric user group.
"We spend really all of our attention on product growth."
This quote emphasizes Monzo's strategic focus on improving their product to drive growth rather than spending heavily on customer acquisition.
"It's awareness, acquisition, activation, retention, referral, and then eventually revenue."
The quote outlines the stages of the pirate metrics funnel that Monzo uses to measure and drive growth across different aspects of their business.
"Those two for me, really embody the design spirit behind Monzo and then the brand and community tone of voice."
Tom Blomfield credits team members Hugo and Tristan for their significant contributions to Monzo's design and marketing approach.
"It's certainly true that in the early days of Monzo, a lot of people sacrificed a huge amount."
This quote acknowledges the personal sacrifices made by the Monzo team during the company's early growth phase.
"I think can certainly take it too far and really push people to work crazy, crazy hours."
Tom Blomfield expresses concern about the potential negative impact of overworking and the importance of finding a balance.
"We didn't need to raise money until early to mid 2019. The market seemed good and we'd made a lot of progress, particularly on contribution margin."
Tom Blomfield explains the timing and reasoning behind Monzo's fundraising strategy, highlighting the importance of a strong business position.
"Just build a product that loads and loads of people love and want to pay you money for, and then it'll be easy to fundraise."
This quote suggests that the focus should be on creating a valuable product, which will in turn facilitate the fundraising process.
"His advice was to, as a VC, as a board member on someone else's board... is this one of the two or three points I really want to make this board meeting, and if not, I'll just stay quiet and I might ping the CEO a note later..."
Tom Blomfield shares advice from investor Mickey Malcolm on how to be an effective board member by focusing on making only the most impactful contributions during board meetings.
"I think that's something I see from Miles and also Eileen Burbage, who's on our board. We don't hear a lot from her, but when she talks, everyone else listens because it's so insightful."
This quote highlights the value of board members who speak less frequently but offer profound insights when they do, influencing the discussion significantly.
"You can use it as a really useful tool to drive operational excellence."
This quote emphasizes the role of board meetings in driving the company's operational performance rather than getting bogged down in lengthy strategic discussions.
"I don't think our board management, I don't think it's something I've yet been very good at and I'm looking to get good at it at go card."
Tom Blomfield admits his need for improvement in board management, reflecting on his experiences and the differences between past and current practices.
"We're actually in the process of searching for a new chair, so we'll hopefully have some exciting news in the next two or three months."
This quote indicates a significant development in the governance of Monzo, with the anticipation of a new chairperson joining the board.
"I think the brutal, almost warlike reality of his startup experience really resonated."
Tom Blomfield connects with the harsh realities of startup life as depicted in Horowitz's book, finding comfort in the notion of making the "least bad decision."
"A good decision made today is better than a perfect decision made tomorrow?"
Tom Blomfield agrees with the sentiment that timely decisions are preferable to waiting for perfect solutions in the context of startups.
"Or if you can find those executives who've done it before, it makes your life a lot easier."
Tom Blomfield stresses the importance of having experienced executives who can preemptively address common scale-up challenges.
"It's on the t-shirt that y combinator gives every new intake. Really, I think that's the only thing that matters."
Tom Blomfield quotes Y Combinator's motto, emphasizing its significance as a guiding principle for startups.
"I think you've got to really just understand emotion."
This quote reflects Tom Blomfield's realization that emotions play a critical role in how decisions are made, a departure from purely analytical thinking.
"My biggest strength is the ability to take in a huge amount of varying information... and then to concisely articulate a direction for the company."
Tom Blomfield describes his aptitude for processing diverse inputs and setting a clear course for the organization.
"I don't think I'm very good as a line manager."
Here, Tom Blomfield candidly assesses his own management skills, recognizing areas for personal development.
"We've got the pinnacle of current accounts. It's sort of finished. And so I'm really, really excited about building out this marketplace of products from third parties on the Monzo platform."
Tom Blomfield shares his enthusiasm for Monzo's future direction, emphasizing the transition towards a broader, more innovative financial ecosystem.