The Exchanges

Q A lot of founders worry, yeah, but I'm going to have a super specialized product then, and I can't sell that big vision to VCs. What do you say to them?

A So this is a key skill of a founder, which is holding these two realities in your head simultaneously without the cognitive dissonance or driving yourself crazy. One is the big vision of 10 years. Say the, the one percent best outcome, if this really, really works, what could this become? And holding that in your head. And for Monzo it was, we're building a bank for a billion people around the world. That's the big vision that you have to hold in your head. And then you have to hold the, what is my top priority today and this week and this month, which is very, very different from this billion people around the world, right? And you have to execute on that and get your team to focus on it. But you have to have both. If you only have the big vision and you think that's today, you're a bullshitter. You're just full of hot air. None of it's real. Whereas if you're too execution focused and you continue that for several years, you build a small business. You build a very successful, or rather a medium-sized small business that's very profitable, it's never going to get big. So you have to have both simultaneously.

AI assessment note: “holding these two realities in your head simultaneously without the cognitive dissonance”

Q And they're not allowed to start before then?

A We strongly encourage them not to, and we'll be very, very disappointed if they do, because it's not in their interest, because running a competitive process with lots of people bidding is going to get them better terms. And what happens is nervous founders will fundraise early because they're like, well, what if demo days aren't going well, so I'll just talk to some early. And then what happens, either the VC looks at you without much progress and writes you off because you've not made enough progress, or they like you so much, they give you a preemptive offer. But the valuation is not as good as you would get by demo day, because that's why they're doing this, right? So they give you an offer of two million on, pick a valuation, I don't know, X, right?

AI assessment note: “We strongly encourage them not to, and we'll be very, very disappointed if they do”

Q You guys seen 10? You guys seen that? No, no, no, not for a while, huh?

A No, but the nervous founder is like, two on 10, wow, this is more money than I've ever seen in my life. And they can't turn it down. They don't have competitive offers, they can't turn it down, so they accept this preemptive offer, and they've just screwed themselves. And this happened to a couple of my companies, this batch, where a phenomenal, like, crazy all-star team, like, ridiculous, like, every sort of pedigree you'd want, um, amazing product, profitable, like, more than a million in revenue, and that just, the founder was just so nervous about fundraising that she took an, it was fine, it wasn't terrible, It was fine, but it was heartbreaking for me because I, I knew that if she just trusted the process and waited till, um, this sort of auction process, she'd get a better round.

AI assessment note: “No, but the nervous founder is like, two on 10”

Q What was the worst investor meeting you had?

A There was one, and I can't actually remember his name even. I probably, I shouldn't name him, even if I could remember. He was an intro through one of our existing investors. And he, on the first call, was like, raving. He's like, this is so exciting. This company's great. I really want to be in reserve, like, ten million. I want ten million allocation. Will you give me ten million? And we're like, yeah, well, like, yeah, sure. Like, we're raising a hundred million, but yeah, we can, we'll earmark 10 for you if you're that keen. Like, go through diligence. And we got the rest of the round together over the next few weeks. And, like, a week before signing, he was like, oh, Ah, I've, you know, I've been looking at your numbers and the cohorts, the cohorts really aren't as good as you said they were, and really this valuation that we agreed doesn't really make sense anymore, Tom, and really I, you know, I agreed at one, but actually I'm only going to do this at 500 or something, and it was like three days before signing the term sheet, and I was like, okay, no worries, I'll just give your allocation to someone else, thanks. He's like, argh, what are you doing? I was like, you're backing out, like, I, we agreed on something, you're backing out, like, you've not got it, and he went, fucking apeshit. And I heard from another investor, he, this is just standard practice for him. He wi…

AI assessment note: “There was one, and I can't actually remember his name even.”

Q And then I want to finish, Tom, on the next five years ahead for you and for Monzo. What's that exciting roadmap ahead?

A I'm really, really excited about this, because I think we've spent the last three and a half years getting a banking license, launching a current account, adding The functionality to the current account that gets it to, I think we're now as good and probably better than any current account out there. It's taken three and a half years. It's like we've made the Nokia 33 10. You know, it's the pinnacle of the, of the analog phones of the pre-smartphones. But I think we're about to embark on the smart. I think we're about to launch the smartphone. The Nokia 33 10 was great because it had a great battery life. It sent SMS. It made phone calls. You could play Snake. All the things everyone thought a phone should do. And then Apple came along with the iPhone and showed all the things you could do with a smartphone. You could solve a much broader range of problems, and I think that is going to happen in retail banking. We've got the pinnacle of current accounts. It's sort of finished, and so I'm really, really excited about building out this, this marketplace of products from third parties on the Monzo platform to be a real control center, to let our customers manage all of their money wherever it sits within a single place. It's Monzo.

AI assessment note: “building out this, this marketplace of products from third parties on the Monzo platform”

Q Absolutely. And then how did Monzo come about? What was that founding moment there where you realized that this was something you had to dedicate the next 10 years or rest of your life to?

A Yeah, GoCard, so it started at GoCardus, really. And the problem, I hope Matt and Hiroki don't mind me saying this, but the problem we were really trying to solve with GoCardus was How can we not be management consultants anymore? So we were really looking for anything that would let us start a company. We were more interested in the starting of the company than the, you know, the underlying idea, and we, we started out, it was called GroupPay. It was a tool for collecting money for groups of people, and it was sort of pivoted into direct debit management for small, medium, and now very large businesses, and it's a fantastic business, but it wasn't, was up in the middle of the night, really, like, dreaming about how we could make direct debit great, but at the time, we really did think a lot about Uh, retail banking. No, I'd never run a small business collecting direct debits, so it was always sort of secondhand experience for me, whereas I used a bank every day, and I hated the experience.

AI assessment note: “whereas I used a bank every day, and I hated the experience.”

Q I mean, you mentioned Revolut strategy there. I'm super interested. It's always a big question for me. Is this a winner-take-all market with one dominant player, like maybe an Uber mic Be considered to be so, or is this a, a kind of multi-winner market whereby this is just the next generation of consumer banks that change the way we think about managing our money?

A Again, I really don't know, and I think only time will tell. 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, and so the market is indescribably huge, and our brand awareness at the moment in the UK is something like 15%. Revolut will be slightly lower than that, maybe 10 or 12%. What that means is really, even if there's no crossover in awareness, which there absolutely is, something like 75% population have no idea who either of us are. And all of our customers are coming from RBS and Barclays and HSBC. So again, talking with an investor just this week, his hypothesis in financial services is there are probably fifteen hundred billion dollar companies out there in, in financial services around the world. So I think that's absolutely true. So it's, it's just a huge, huge market. Whether or not ourselves or Revolut end up kind of fighting for particular geographies, I, I really don't know.

AI assessment note: “Again, I really don't know, and I think only time will tell.”

Q Yeah. Oh my god. I know, I probably, uh, should have. But tell me, what's the hardest element of scaling a business in London?

A Um, going back to what we talked about earlier, that that scale-up phase is so different from the kind of pre-product market phase, and we just need executives who've done it before. Or, if you can find those executives who've done it before, it makes your life a lot easier. You don't, scale-ups, you don't have to reinvent the wheel, there are just things that happen every time, like how do you triple headcount in nine months? The same things break every time, and it's very, very painful if you're figuring out those, those things, like, as you go, whereas if you've had someone who's done it before, they're like, look, here are the five things that are gonna, they're gonna fall over, let's fix them all before we do it, and everyone will, will sleep better at night. So execs with that kind of scale-up experience is something I think you get a lot of in Silicon Valley, and really not a lot of in London yet.

AI assessment note: “execs with that kind of scale-up experience is something [...] really not a lot of in London”

Q Tom, what do you tell yourself, 95 times in? I fundraise now, and it really hurts me, actually.

A It was horrendous, and that's not even the worst no. Um, it was really dispiriting, just saying the same thing over and over again, about how I believed this bank was going to be valuable, how we're going to make money, how people are going to deposit their salaries, and people just not believing me, 95 or 96 times in a row. I mean, now I feel vindicated. It turned, all of the stuff I said turned out to be absolutely true. But, uh, at the end of 96 no's, we got these Two Canadian pension funds to say yes. And they agreed to put in a hundred million along with our existing investors at a flat valuation. I thought, phew, the company's like, we were burning a hundred million a year at the time. So the company's going to survive another year. And this was like March or April, 20, 20. And the documents were all agreed and ready to sign on Monday morning, ready to sign and wire. And on Friday afternoon, London went into lockdown, and they phoned me up and said, the investment committee back in Canada has said, every investment's on hold. Like, we're not doing the investment. We're out. We're not investing. And that feeling of, like, the world's going into lockdown. There's this crazy pandemic, and no one knows what's going to happen. Um, we're running out of money. Our revenue in the next week halved, went down by 50%. And I'm, like, staring down the barrel of this Um, this funding h…

AI assessment note: “It was horrendous, and that's not even the worst no. Um, it was really dispiriting”

Q You guys seen 10? You guys seen that? No, no, no, not for a while, huh?

A No, but the nervous founder is like, two on 10, wow, this is more money than I've ever seen in my life. And they can't turn it down. They don't have competitive offers, they can't turn it down, so they accept this preemptive offer, and they've just screwed themselves. And this happened to a couple of my companies, this batch, where a phenomenal, like, crazy all-star team, like, ridiculous, like, every sort of pedigree you'd want, um, amazing product, profitable, like, more than a million in revenue, and that just, the founder was just so nervous about fundraising that she took an, it was fine, it wasn't terrible, It was fine, but it was heartbreaking for me because I, I knew that if she just trusted the process and waited till, um, this sort of auction process, she'd get a better round.

AI assessment note: “No, but the nervous founder is like, two on 10, wow”

Q What is the bad investment? Because often people talk about this, but I'm like, I didn't see it.

A Um, so YC has an investor database, which has 10,000 people in. I'm sure you're in there. We can perhaps look it up. Um, and it has reviews from all of the YC founders that have taken investment from them, both on their process and what they would like to work with after the investment. And it has a rating. And all YC companies have a huge amount of inbound investor interest, and before they book meetings, they will look each investor up in the database and see, I, have you treated found as well or have you not? And if you've not treated found as well, you're not getting meetings with YC companies. And some investors go, why, why is everyone ignoring my emails? It's like, well, dude, because you've fucked over these companies again and again and again. Very typical bad investor behavior would be something like making a binding handshake offer. We have a protocol on this, you know, I offer this amount on this valuation, and yes, I agree. And then not wiring the money. Or just saying, oh, I'm, of course I will only wire when the round's full. Let me know when you've got your, the, the full round completed and then I will wire. It's like, you've, you've signed it safe. You have to wire the money straight away. Or being, um, extremely onerous in terms of like, you must meet with us every two weeks or whatever. Like, I want to be helpful. Um, and being a little too helpful.

AI assessment note: “Very typical bad investor behavior would be something like making a binding handshake offer”

Q If we start on infrastructure layer, we see so much money going into the core providers today, your OpenAI, your Mistrales, your Anthropics. Do you think there's money to be made investing in foundation models?

A I don't know. And I sort of don't really have a horse in that race. What I hope The best case for, for me, and for YC, probably, and for you, and like humanity, I'd argue, is that, um, roll forward 10 years, and there are like five or six foundational model companies, and they're probably attached to Google, and Microsoft, and Amazon, and Facebook, and Apple, because they have the funds to power them, and they are all about as good as each other. It's like how, you know, GCP versus AWS versus Azure, they kind of do this, you know, it's like different things, But there's great functionality and commodity pricing because they've all, like, beaten each other down on price. And that is not so great for the investors who invested in those companies, but great for the world, great for humanity, great for startups.

AI assessment note: “that is not so great for the investors who invested in those companies”

Q What is the bad investment? Because often people talk about this, but I'm like, I didn't see it.

A Um, so YC has an investor database, which has 10,000 people in. I'm sure you're in there. We can perhaps look it up. Um, and it has reviews from all of the YC founders that have taken investment from them, both on their process and what they would like to work with after the investment. And it has a rating. And all YC companies have a huge amount of inbound investor interest, and before they book meetings, they will look each investor up in the database and see, I, have you treated found as well or have you not? And if you've not treated found as well, you're not getting meetings with YC companies. And some investors go, why, why is everyone ignoring my emails? It's like, well, dude, because you've fucked over these companies again and again and again. Very typical bad investor behavior would be something like making a binding handshake offer. We have a protocol on this, you know, I offer this amount on this valuation, and yes, I agree. And then not wiring the money. Or just saying, oh, I'm, of course I will only wire when the round's full. Let me know when you've got your, the, the full round completed and then I will wire. It's like, you've, you've signed it safe. You have to wire the money straight away. Or being, um, extremely onerous in terms of like, you must meet with us every two weeks or whatever. Like, I want to be helpful. Um, and being a little too helpful.

AI assessment note: “Very typical bad investor behavior would be something like making a binding handshake offer”

Q If we start on infrastructure layer, we see so much money going into the core providers today, your OpenAI, your Mistrales, your Anthropics. Do you think there's money to be made investing in foundation models?

A I don't know. And I sort of don't really have a horse in that race. What I hope The best case for, for me, and for YC, probably, and for you, and like humanity, I'd argue, is that, um, roll forward 10 years, and there are like five or six foundational model companies, and they're probably attached to Google, and Microsoft, and Amazon, and Facebook, and Apple, because they have the funds to power them, and they are all about as good as each other. It's like how, you know, GCP versus AWS versus Azure, they kind of do this, you know, it's like different things, But there's great functionality and commodity pricing because they've all, like, beaten each other down on price. And that is not so great for the investors who invested in those companies, but great for the world, great for humanity, great for startups.

AI assessment note: “not so great for the investors who invested in those companies”

Q Um, My question to you is, when you speak to the other partners, especially I guess going through COVID where it was completely remote, do they have any lessons, observations from the complete all remote YC to the all in person?

A Everyone's a lot happier now with the all in person. There are elements that we have retained of not very many of the remote batches, so we had a few that were fully remote. Um, doing demo day with remote presentations, like record or live but On Zoom presentations with an investor reception in the evening seems like a really good balance of the two before, uh, of the, you know, all on Zoom versus all in person. Sitting through two days of presentations in a stuffy lecture theater where the AC doesn't work well is not a pleasant experience. So that's one thing. Uh, remote interviews. We used to fly everyone to San Francisco for interviews, which is, seems insane now. Um, I don't know when that changed actually, whether that was pre or post COVID. Um, But overall, the in-person experience is dramatically better. Having in-person office hours, group office hours, even cooking for people, like the, the act of cooking dinner for a group of people you've invested in, and then serving them with your own hands. It's just like a, an act of care, in a way, that, that creates a, just an emotional bond. Totally. I trust you not to give me food, boys. That when it's just, When it's just a 20 minute zoom every week, it's so transactional and empty. I really feel like I know these founders now after four or five months.

AI assessment note: “Everyone's a lot happier now with the all in person.”

Q Tom, what do you tell yourself, 95 times in? I fundraise now, and it really hurts me, actually.

A It was horrendous, and that's not even the worst no. Um, it was really dispiriting, just saying the same thing over and over again, about how I believed this bank was going to be valuable, how we're going to make money, how people are going to deposit their salaries, and people just not believing me, 95 or 96 times in a row. I mean, now I feel vindicated. It turned, all of the stuff I said turned out to be absolutely true. But, uh, at the end of 96 no's, we got these Two Canadian pension funds to say yes. And they agreed to put in a hundred million along with our existing investors at a flat valuation. I thought, phew, the company's like, we were burning a hundred million a year at the time. So the company's going to survive another year. And this was like March or April, 20, 20. And the documents were all agreed and ready to sign on Monday morning, ready to sign and wire. And on Friday afternoon, London went into lockdown, and they phoned me up and said, the investment committee back in Canada has said, every investment's on hold. Like, we're not doing the investment. We're out. We're not investing. And that feeling of, like, the world's going into lockdown. There's this crazy pandemic, and no one knows what's going to happen. Um, we're running out of money. Our revenue in the next week halved, went down by 50%. And I'm, like, staring down the barrel of this Um, this funding h…

AI assessment note: “just saying the same thing over and over again, about how I believed this bank”

Q Absolutely. And then how did Monzo come about? What was that founding moment there where you realized that this was something you had to dedicate the next 10 years or rest of your life to?

A Yeah, GoCard, so it started at GoCardus, really. And the problem, I hope Matt and Hiroki don't mind me saying this, but the problem we were really trying to solve with GoCardus was How can we not be management consultants anymore? So we were really looking for anything that would let us start a company. We were more interested in the starting of the company than the, you know, the underlying idea, and we, we started out, it was called GroupPay. It was a tool for collecting money for groups of people, and it was sort of pivoted into direct debit management for small, medium, and now very large businesses, and it's a fantastic business, but it wasn't, was up in the middle of the night, really, like, dreaming about how we could make direct debit great, but at the time, we really did think a lot about Uh, retail banking. No, I'd never run a small business collecting direct debits, so it was always sort of secondhand experience for me, whereas I used a bank every day, and I hated the experience.

AI assessment note: “whereas I used a bank every day, and I hated the experience.”