Challenger bank Monzo announces a £20 million crowdfunding round - and invites its customers to invest up to £2,000

27 November 2018

Monzo customers are being given the opportunity to invest in the fast-growing challenger bank.

The bank says it wants to raise £20 million of funding in order to fund various parts of the business, including research and development and marketing.

Customers of the bank over the age of 18 will be given the opportunity to invest up to £2,000 from 5 December.

The bank says to participate you must open your Monzo banking app after 10am GMT on 5 December, where you will be prompted to participate and select how many shares you wish to buy.

Shares are being offered at £7.7145 per share. Monzo says at its last round of crowdfunding in November 2017 it sold shares at £2.3566 per share.

However, the caveat is that the bank says in order to be eligible to invest, you must have been a customer as of 26 November. Unfortunately, this means if you don’t already have an account now, you won’t be eligible.

Any customer who participated in previous rounds of investment will be given early access to the offering, on 3 December.

Tom Blomfield, Monzo’s co-founder and chief executive, says: “We’re so grateful for our amazing customers because they’ve helped us to build Monzo into what it is today.

“We couldn’t have done it without them. There’s lots more to do and we’re excited to be able to give them another chance to join us on the journey.”

As well as a share in the bank, customers will also receive a specially designed “investor card”, and for those who participate in Monzo’s active customer forums, an investor “badge”.

Tom Blomfield Monzo co-founder
33-year-old Monzo co-founder Tom Blomfield

How investing in a private company works

Anyone who buys shares in the unlisted company would have to hold onto the shares until what is called an "exit" took place. This can take the form of a share buyback from the firm, an initial public offering (IPO), where the company lists on the stock market, or sale of the firm to another. 

This makes Monzo shares a very illiquid asset. Unlike buying shares on the stock market, an investor has to wait for one of the aforementioned events to occur if they wish to make a profit on their money. And of course, it is highly possible the shares' value will go down and you'll lose money. 

Monzo is using a firm called Crowdcube to manage its crowdfunding campaign. Once the bank reaches its target funding the completion process starts and you'll be issued a copy of the Articles of Association by email. This document identifies key information for the investor such as how the company plans to issue shares, pay dividends and audit its financial records. 

There is also a seven-day cooling off period before payment is taken from you.

Rebecca O'Keeffe, head of investing at Interactive Investor (Moneywise's parent company) comments: "Crowdfunding has become a very popular way to invest, but investors need to be mindful of usual investment rules.

"Know and be happy with what you are investing in - and be aware of the risks as well as the opportunities.

"Unquoted companies also need careful consideration, as they can be quite illiquid. Read the small print to check how accessible your money is, should you need it."

If you're new to investing an investment portfolio can be a good starting place, investing in funds rather than individual companies. Investing in large funds is a safer way to get started with the stock market and grow your money.

Fund managers make stock picks based on informed decisions on your behalf, and your money is spread across a range of companies to reduce the risk of your investment losing value if one investment fails. Alternatively passive funds spread your money across a range of companies without invidual stock picking by a person. 

You can find out more by starting with our guide to 50 funds for starter investors.

How investing in Monzo stacks up

As with any investment in individual shares rather than more diversified funds, investing directly in Monzo is on the much riskier end of the equity investment scale.

Investing in private company shares that are not listed on a stock exchange is also unusual. But it is increasingly common amongst fund managers looking for high-quality investments.

Monzo has experienced astronomic growth since its launch in 2015 - nearly trebling its customer base this year alone.

As a business it clearly seems to be doing something right for its now more than 1.2 million customers in the playing field of a banking industry where many high-street and older banks are seen to be out of touch and old fashioned.

Monzo is a fully regulated and licensed bank. Customers are protected up to £85,000 for their deposits in the event the firm were to go bust. However, this is little succour for investors, as buying shares carries a risk that the value of their shares could fall or in the worst case they could lose all their money.

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