The Monzo Effect – how is the UK challenger bank getting on?

In 2016, a major crowdfunding record was smashed by a challenger bank seeking to disrupt the mobile banking industry. Despite capping each investment at £1,000, Mondo (which later changed its name to Monzo) raised a whopping £1 million in just 96 seconds on Crowdcube – that’s nearly £10,000 per second.

Enthralled by their success, we managed to chat to the Crowdcube team the morning after the round closed to discuss the secret to their success. This is what we found.

So, how have Monzo done since their momentous 2016 campaign? Well, according to TechCrunch, they now have more than a million customers – with 800,000 monthly active users – and have raised £85 million in Series E funding in a round led by U.S. venture capital firm General Catalyst and Accel.

The latest funding was at a pre-money valuation of £1 billion. Perhaps they’ll take a fundraising break, for a while at least? Quite the opposite.

With its million-strong dedicated community and swathes of investors watching their activity like a hawk, Monzo is set to build on this momentum – it’s already plotting another crowdfunding campaign before the year is done.

Monzo co-founder and CEO Tom Blomfield told TechCrunch that the new funding would be used to advance the Monzo product line and meet other operational costs. Monzo is now at a stage where the average customer is generating more revenue than the cost of servicing their current account.

The challenger bank has apparently brought down costs in a few different ways and has a number of revenue streams, such as overdrafts, interest gained on customer deposits, interchange fees generated from debit card transactions, and its emerging marketplace.

The bank also cited a Nationwide annual report showing that Monzo accounts for 15 percent of all new bank accounts opened each month in the UK.

Blomfield told TechCrunch that his biggest challenge over the next year will be to boost revenue – partly by growing its marketplace and third-party product partnerships – and putting Monzo’s lending models to the test.

It’s clear that Monzo is not just making a splash in the UK, it has also turned heads in the US, leading to the backing of General Catalyst.

This is what the US venture capital firm’s Adam Valkin told TechCrunch:

We’re investing in Tom and his team because they are delivering a high-quality banking experience for consumers at scale that is sorely missing from the market. Today’s incumbent UK banks represent billions of market cap but suffer from low NPS scores, reflecting their inability to meet their customers’ needs. Monzo, in contrast, explicitly builds product and banking features in a community-driven approach based on customers’ feedback and requests.

This has driven very high organic growth, strong retention and engagement, and unprecedented customer love for and trust in Monzo. Beyond this, Tom and the Monzo team have improved upon the traditional business model of banking, removing the traditional offline retail-based banking model in favor of a highly scalable and lower cost mobile-only experience.

All of this creates the potential for Monzo to become a leading U.K. bank, launch a successful financial marketplace, and eventually expand internationally.

This is all very exciting for Monzo’s customers, investors, and for the world of crowdfunding in general. We’ll certainly be watching their next round closely!

Autumn Budget: A Fruitful Harvest for Crowdfunders

Autumn Budget: A Fruitful Harvest for Crowdfunders

Investors using the Enterprise Investment Scheme (EIS) had a huge reason to celebrate after ‘Spreadsheet Phil’ doubled the investment limit from £1m to £2m in his Autumn Budget. After months of consultations with VCTs, Phillip Hammond defied all the predictions by widening the EIS scheme, rather than introducing any significant restrictions.

This means that while an investor has been able to claim back up to £300,000 in tax relief this financial year, the threshold will leap to £600,000 from April 6 2018. On the other side, new eligibility criteria means that a company will only be pre-approved for EIS if they can show they are taking real risk (albeit reduced by a taxpayer subsidy) in exchange for the potential to achieve high returns.

There has also been an increase in the period during which “knowledge-intensive” companies can qualify for EIS and/or VCT investment up to 10 years following the date at which annual sales first exceed £200,000.

The government also announced additional support to companies in the life sciences and technology sectors through an increase in R&D tax allowances and other additional schemes, although the specific details have been fairly light in that area.

The revision of the EIS scheme aims to discourage investors from putting their money into low-risk assets – often seen as tax vehicles – and instead back Britain’s innovative, higher-risk, and “knowledge-intensive” early-stage firms, or KICs for short.

This new EIS limit will be a boon to forward-thinking companies looking to crowdfund their innovative ideas, and for the investors who support them.

TribeFirst looked at three knowledge intensive life sciences campaigns that will be allowed to double their EIS allowance from £5m to £10m and get almost three years longer to take advantage of it.

OR Productivity’s FreeHand

FreeHand designs and manufactures robotic assistive arms, which hold and manipulate laparoscopes and cameras during keyhole surgical procedures.

By providing a still image for a surgeon to operate from, FreeHand eliminates the need for a medical assistant to hold the camera, freeing-up crucial staff for more important work. The system has also been shown to reduce the duration of surgery, patient recovery times, and in-turn, hospital bed occupancy.

The wide availability of systems like Freehand will make it difficult for hospitals to justify the retention of their current, manual camera holding practices. And with staff, bed and budget shortages among the NHS’s biggest future challenges in a continued age of austerity, technology like FreeHand could be crucial.

OR Productivity can raise up to £1.8m in its current round on Capital Cell – the first European equity crowdfunding platform specialising in BioTech and life sciences – which will accelerate their growth beyond the UK and allow them to be more aggressive with global sales.

If they raise their maximum, it will increase the ROI for investors, and the speed of generating investor returns.

The new rules raises the stakes, making it more likely a round of this size will be filled by a smaller number of investors. Also, having a decade to take advantage of EIS means they can innovate further without worrying about future investors missing out on tax relief, which has the potential to maximise value for shareholders whilst giving the business the time it needs to realise its full potential.

Equinectar by Tharos

Tharos has created a new malt extract feed supplement that aims to address the overwhelming number of health, welfare and performance issues caused by modern day, high-carb feeding practices in horses; these practices can lead to life-threatening problems.

By helping to maintain balanced equine body function and improving condition by promoting an optimal gut environment, Equinectar could be instrumental to the improvement of health of horses and has been demonstrated to increase the win-rate of performance horses, verified by independent analysis of racing data for a well-known race yard over a three-year period.

Tharos will soon launch an equity crowdfunding campaign in order to fund veterinary trials to further support patent pending Equinectar, and a pipeline of other products and diagnostics in the growing equine healthcare market.

OvuSense

Clinical studies show after six months of trying to conceive, 75% of women have an ovulatory issue which can result in variable ovulation timing. This variability makes it difficult for women to know at what point in their cycle is best to try for a baby, and many women who struggle are told that they may not be ovulating at all.

The OvuSense fertility monitor solves this problem by predicting ovulation 24 hours in advance using data from the current cycle which is not affected by this variability. Based on the clinical evidence, the company claims this more than doubles the chances of conception for couples, including those which struggle due to ovulatory issues.

OvuSense comprises a vaginal sensor which tracks changes in core body temperature, and via a smartphone app for data upload. It is a Class 2 medical device but sold directly to consumers in the UK, Ireland, USA, Canada and Australia via the company’s website: www.ovusense.com

OvuSense’s patented technology also uniquely enables diagnosis of ovulatory issues and tracking of fertility treatment.

Recent press coverage shows exactly how OvuSense helps women who struggle to conceive.

OvuSense is currently crowdfunding on Capital Cell and a successful raise will allow them to accelerate sales and improve the product further, helping even more couples around the world to conceive.

Some of the biggest winners in the government’s drive to fuel innovation are life science companies like the above, and the investors who back them. They’re companies that are very R&D-intensive and have the chance to add significant value to society, but also require deeper investment and longer timeframes to test their products and get them approved for use in the various global regulatory systems.

And with the new EIS threshold, we hope to see more and more innovative companies put their disruptive ideas to the crowd, and be met with renewed enthusiasm from increasingly confident investors.

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Why are women more successful at crowdfunding?

Why are women more successful at crowdfunding?

Women having a higher crowdfunding success rate, so why are they more hesitant to launch a crowdfunding campaign?

Last month, PwC in collaboration with The Crowdfunding Centre released new research which has provoked much debate among the crowdfunding community and beyond.

The research revealed that women are more successful at reaching their seed crowdfunding target than men – 32% more likely to be exact – but far less likely to put forward a project to the crowd, according to the two-year study analysing 450,000 worldwide campaigns.

Women were also able attract an average a higher individual pledge amount than men, averaging $87 per funder, compared to $83 for men.

So why the higher success rate?

Soft Skills Engage the Crowd

Selling your idea to the crowd and getting investors on-side requires a strong character and honed social skills. Women often perform strongly in terms of soft skills, such as communication, organisation, listening and sociability – attributes that can be particularly useful when trying to connect with a diverse crowd.

Women also tend to be more empathetic which can help them identify key benefits, rather than focusing on technical features as men often do.

Let’s take two key attributes found in an empathetic person – the willingness to listen, and humility.

So, when it comes to feedback from the crowd and investors, women might just be better at truly listening to what the crowd are saying, taking into account what they are doing both right and wrong, and adapting their campaign accordingly.

“Female crowdfunders also tend to use more emotional and inclusive language in their videos and pitch descriptions than men,” according to the report. This communication style is better at engaging backers of both genders and is “positively correlated with fundraising success.”

More Developed Ideas

The PwC findings can also be understood as a matter of statistics. Fewer female entrepreneurs launch crowdfunding campaigns, yet they are more successful. This indicates that they spend more time developing their business, setting a higher confidence threshold before launching crowdfunding.

Meanwhile, men have a tendency to be overconfident in their ideas and ability to figure things out on the fly. As such, they’re probably more likely to launch a campaign prematurely or with an under-developed idea.

So, women may undertake fewer campaigns, but achieve a higher success rate due to well-developed ideas ready for the crowd to give their verdict.

In our experience…

Of course, these differences are sweeping generalisations and there are exceptions to prove every rule. But by considering the PwC report and what it means, we can discover insights that will help both genders become more successful in crowdfunding.

Identifying successful crowdfunding attributes from both male- and female-led campaigns helps us develop a reliable template for success. For men, that might involve developing ideas more thoroughly and honing a message that communicates benefits in an honest and engaging way. For women, it might mean going in with more confidence and having the flexibility to work things out on the fly.

From the amazing female entrepreneurs we’ve worked with, it’s clear that women excel at crowdfunding campaigns. Hopefully we see more and more women entering the world of crowdfunding, and more men learning from their success!

Autumn statement & crowdfunding

Autumn statement & crowdfunding

What does the Autumn statement mean for crowdfunding?

“It’s the most wonderful time of the year” sang London’s financial journalists as Chancellor of the Exchequer Phillip Hammond thrust his signature red briefcase towards the sea of press gathered outside Number 10. But, what, metaphorically speaking, is inside? And, how will it affect SMEs and startups?

Luckily for us, Virgin Startup have taken one for the team and dissected the budget. For startups and small business owners, and any firms thinking about crowdfunding, the statement is clear; and it’s a positive one.

Here are some reasons for small and fledgeling firms to be optimistic in these times of financial uncertainty:

Increased Connectivity for the Capital

5G technology (yep, that exists now) will soon be rolled out in London. Anyone familiar with modern startups will know that better connectivity, particularly for those always on the go, is great news.This is good news for crowdfunding campaigners. With investor emails pouring in and social media interactions popping up at every turn, you can’t afford to leave a potential investor’s question unanswered while you’re stuck on the tube.Tax Breaks “for the digital age”

5G isn’t the only technological embrace from the government. Micro-entrepreneurs will enjoy two new tax-free allowances worth £1k a year and receive “a tax break for the digital age that 500,000 people will benefit from”, according to Virgin Startup.Considering that many businesses using crowdfunding are micro-entrepreneurs, and rely on digital platforms for the entire process, this is a welcome change.

Corporate Tax Avoidance

Meanwhile, money generated from a crackdown on tax for larger corporations will go towards small businesses. The public debate around corporate tax avoidance has rightly intensified in recent years with high-profile cases involving the likes of Amazon, Google and Vodafone making headlines.Taxpayers will be happier that this new revenue will used for SMEs. And, as more and more small businesses use crowdfunding, more and more people will become stakeholders in the businesses of the future.Closing Loopholes

Although Panama will remain the ‘official’ residence for tax-dodgers everywhere, the UK government will close a VAT loophole used by overseas internet merchandisers, improving competitiveness for small firms. A small victory is still a victory…Business Rate Relief

Business rate relief will double to £15k – exempting 600,000 small businesses from paying any rates at all.

From 2018, Class 2 National Insurance will be abolished altogether. The self-employed which make up a large proportion of startup teams, and indeed their many freelance workers, will be high-fiving as we speak.

Like (increasingly expensive) Marmite, any government’s decisions, particularly financial, are, well, loved or hated. But SMEs, startups and firms seeking to crowdfund, will have reason to be optimistic about the next financial year. Maybe they’ll celebrate by doubling their Xmas Toblerone stash to counteract the reduced size.

What did you make of the budget? Let us know on our social channels, or in a comment below.

Launching new brands

Leveraging the power of crowdfunding to launch a credible brand

In a world where consumers can have anything, it is often challenging to create an identity. Trying to establish a brand successfully amongst the ‘big players’ of business, in any industry, is a very hard craft. But there is one marketplace that’s allowing new brands to quickly break into the mainstream: crowdfunding.

Crowdfunding is a carefully constructed cocktail; tried and tested upon many new businesses, with overwhelming success at providing credibility for new brands. But why is it so effective? To create a brand, in any instance, you need a guaranteed pipeline of interest and demand. Balancing the delicate equilibrium of having a refined product, and knowing what the market wants, is the difference between a product flopping or flying off the shelves.

Crowdfunding enables you to identify and establish your target market, invest its expertise further by getting honest feedback, and give you a platform for future growth by having a passionate and vocal audience to promote your marketing campaigns. The Pebble Smartwatch Campaign is the perfect example of how these factors can come together to achieve optimum momentum, with funds of $1m being gained within just 28 hours of being launched through Kickstarter. An effective crowdfunding campaign will attract initial interest from backers who are inspired, who truly believe in your product, are passionate and giving. This allows you, as a business, to communicate, to connect, to drive a force, to set goals, to thrive, to have all the attributes that make a modern brand.

Need even more convincing…?

‘Skully’, now an established brand, invented ‘the world’s smartest motorcycle helmet’ by using advanced technological features such as a heads up display, situational awareness and connectivity, in order to improve the safety and driving experience for motorcyclists. The campaign, which smashed its original target of $250,000 to an impressive $2,446,824, continues to be a success. The Skully campaign has now collected a loyal backer base, therefore they can continue their project, and invent more innovative products with the funds raised through Indiegogo.

One of Indiegogo’s biggest campaigns to date, Solar Roadways, has raised funds in excess of $2 million. Co-inventors Scott and Julie Brusaw, leveraged the knowledgeable user base of Indiegogo in order to increase exposure, raise funds and employ more engineers. The campaign video soon went viral and rocketed its success[1].

This type of innovation could improve quality of life for our children, and our children’s children. This should be the ultimate aim for a modern, ethical brand; to supersede the expectations of all of us, to positively change the world and to sustain it for generations to come. In the short time that crowdfunding has been available it has fortified this new way of thinking about a brand. It has created opportunities that go beyond the traditional thinking behind a brand; it has allowed our society to actively support the ideas that will better the lives of all of us.

In an analogy, building a new brand could be compared to a tree. Without the essential products, water, soil and co2 the tree can’t survive, let alone grow. However if a tree is provided with a consistent supply of all these products the tree will flourish, the branches becoming longer and leaves becoming greener. Without market research, financial planning, marketing and advertising your business can not survive or grow. Crowdfunding offers all of these essential elements to your seedling brand, giving it the potential to branch out, to make stronger connections with your customers; leading to successful brand loyalty as well as brand reputation and image.

[1] https://www.indiegogo.com/projects/solar-roadways#/