Ask an expert: Monzo chief executive, Tom Blomfield (part 1)

Think Progress Team

Monday 28 March 2016

Think Progress talks to the CEO of the London-based fintech startup about embracing the 21st century and transforming the way in which users manage their money.

While sectors such as healthcare, manufacturing and education have been quick to adapt to this technology revolution, banking – with its legacy IT systems – has long been seen as the most outdated and arcane.

But now, the business of banking is finally being rewired by a host of fintech startups, with those in London leading the way.

Think Progress caught up with one such London-based fintech startup, Monzo, who are looking to drag banking into the 21st century and transform the way in which users manage their money.

We spoke to Monzo CEO Tom Blomfield, an experienced startup founder who launched GoCardless in 2011, about the secrets of FinTech start-up success.

Thanks for joining us Tom. Can we start by talking about what makes London such a hotbed for fintech startups?

Yes, the relative concentration of fintech startups in London is certainly very interesting. It’s driven by a few things, I think. Firstly, it helps that London is a global financial hub and that there’s therefore greater access to early stage capital.

Another thing is that, since 2008, there have been a lot of people coming out of the banks. These highly-driven and highly-qualified people know finance very well – and know where to get access to funding.

Thirdly, there’s the 21st-century payment systems – Faster PaymentsBACS and SEPA. While, relatively speaking, there are more fintech startups in the US, their payment systems are actually decades behind ours here in Europe.

The other advantage we have in London is to do with banking regulations. It’s being driven at a European level. The Directive on Payment Services (PSD 1), in 2007, the banking changes of 2013, and the application of PSD 2 coming in the next two years have all been embraced by the UK government. There’s a general will in the UK to make regulation more lightweight and more transparent.

Having said that, regulation could still be better! We’ve gone through a fair amount of pain to get our own banking licence. It could be dramatically eased!

What is interesting is that it’s a bit different across the rest of Europe. They are a little bit more risk averse than the UK. That said, there are some really interesting companies coming out of Scandinavia. I think Holvi are really cool, as are Tictail.

What are the things that hold fintech start-ups back? What are the most common mistakes made by fintech start-ups?

I find that way too many founders, and I include myself in this, spend too much time debating what their business strategy might be in three to five years instead of what’s happening now. All startups should do in the early days is focus on one thing – the kernel of utility. What is the most pressing problem they’re trying to solve for their customers?

People try to build things which are too big and too fully-featured, too early on. They should instead focus on what the biggest pain point is that they’re trying to solve. Does their solution solve that problem? And do you have that market fit?

What are your rules for fintech start-up success?

I recently wrote these up for my blog. I have five…

1. Choose your co-founders carefully

Invest the right amount of time getting to know each other. Ideally, you’ll have worked with these people for a few years at another company before you do your own thing.

2. Written agreements from the start

An investor friend recently told me that he makes a rule of telling founders, “I won’t ask you to trust me”. All deals go into writing immediately.

3. All stock must be on a vesting schedule

Vesting is a good thing for everyone. It ties people’s incentives to the long-term success of the company.

4. Keep company money separate

When your company needs to pay bills and you’ve not raised outside investment yet, be very clear who’s paying and under what terms. Is the money going to be repaid? When?

5. When you go out to raise investment, don’t over-optimise for valuation

Choose the investors you think you could work with for next five to 10 years. Don’t spend time shopping the deal around to increase your valuation.

Doing these won’t guarantee you success but not doing them could kill you, if that makes sense. I’ve broken all of them! It hurt and I’m trying to avoid breaking them again because it’s hard to fix them when they go wrong!

Coming soon

Look out for the second part of our interview with Tom, where we look into the tech behind banking and how his startup Monzo are looking to change our relationship with money.

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