LONDON — Monzo will require an estimated £75 million over the next five years to build its vision of an app-only bank and the company could go public in as little as seven years.
The disclosures are made in the company’s latest crowdfunding campaign on Crowdcube, which went live on Tuesday. The startup bank is looking to raise £2.5 million.
Monzo says on its pitch page: “Total capital requirements over five years is forecast to be in the region of £75m, and will be agreed with the Bank of England.” Monzo expects to raise funds again in May 2018, although it does not specify how much.
The company cautions would-be investors that they are unlikely to have a chance to cash out of their investment anytime soon, saying: “The most likely opportunity for shareholder liquidity could be as part of an IPO in 7-10 years.”
Monzo’s pitch, which went live on Tuesday, reveals it made a pre-tax loss £6.4 million in the 11 months to January. It is forecasting cumulative losses of over £24 million up to 2020, with annual losses peaking next year at £9.6 million.
The cash Monzo is raising at the moment will go towards funding losses and meeting capital requirements mandated as part of its banking licence. The startup expects to break even in 2020.
The pitch shows the startup missed forecasts made in its last Crowdcube campaign in Febuary 2016 when it raised £1 million in just 96 seconds. Monzo made a loss of £5.2 million in the year to November 2016, versus a forecast of a £3.5 million loss.
CEO and founder Tom Blomfield told Business Insider that this was in fact because the company did better than it was expecting. He told BI over email: “We massively over-performed on our prepaid programme, which drove up costs. We only initially planned to roll out 5,000 — 10,000 cards. We’re now at 130,000.
“That’s why we did the extra £5 million round from Passion at the end of last summer — to support growth in prepaid.”
Monzo launched in 2015 as a pre-paid card linked to an app that categorised spending and let users budget. The product is totally free but incurs costs for Monzo and Blomfield previously told BI that Monzo loses £40 per year per user on the cards. The startup was granted a banking licence last August and plans to move pre-paid customers to full accounts shortly.
In the short-term, Monzo is hoping to make money through overdraft lending on these mobile bank accounts. Monzo is hoping to attract £175 million of customer deposits in its first year of current accounts, according to the Crowdcube forecasts, and hopes to lend £11.8 million through overdrafts.
The crowdfunding campaign is part of a £22 million funding round that values Monzo at £65 million before the additional cash raised is factored in.
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