Tom Blomfield: How I Created Two Billion-Dollar Fintech Startups

When you look around you at all of the structures in place, like the physical buildings, the transportation system, the laws and rules for society, all of these things were created by people. Everyone has a choice to either live in that world and merely follow the rules, and that's fine, but I think there's this alternative path where you have the chance to create something; to, in some small way, have an impact on the world and change the rules, change the structures, and have other people interact with the things that you're building.

Today we're joined by Tom Blomfield; he's the co-founder of GoCardless and Monzo, which has raised over £1 million. I've created companies that will last for the next 100 years. An esteemed founder of not one, but two unicorns, I think choosing that alternative path to create something from scratch has obvious benefits. You get to create products that millions of people use and love, which is so, so rewarding, but it also comes with challenges. The emotional highs and lows are so much more extreme. You think you're on top of the world and then two hours later, something goes disastrously wrong, and you're like, "It's all over, we're doomed."

"The UK is tonight officially in recession. Is the bank in trouble? Is the money safe? What happens if they go under?" They told us that we needed to start preparing to wind the company down, 'cause it was losing £100 million a year. Every founder does not truly understand how hard it's going to be. I started companies because I saw problems I wanted to fix, and it's the most direct way you can have that kind of impact.

I'm Tom Blomfield and this is my backstory. I was fascinated by computers really from a very early age. I think my parents bought like an Apple II or something when I was about seven years old. I remember playing a game where you had to make as much money as you possibly could from running a small lemonade stand. I just absolutely loved it. So at the age of 15, I started making money building websites for local businesses, and really I was just gripped. I never thought I could do it as a job; no one I knew worked in computers. The Internet was really a very, very early thing. Everyone always had these professional careers, and I just assumed that's what I would do as well.

My parents, from a very young age, told me I should go to Oxford and study law and become a corporate lawyer. It seemed like a pretty safe, well-paying job, pretty respectable, with a pretty predictable linear career path. So sure enough, I applied to Oxford and got in to study law. But it felt too narrow for me. I was more interested in learning about lots of different kinds of business and figuring out how the world worked and potentially starting something for myself one day.

So while I was at Oxford, I met my first co-founders, Harj and K. There, we started an online student marketplace which I was running alongside my law degree. They actually graduated from Oxford and went to do Y Combinator, but I dropped out of the startup to do my final exams at Oxford. I always think about how my life might have been different if I hadn't taken that decision. But after my law degree, I had no idea what to do. I got in touch with two guys from Oxford, Matt and Heroi. I went to start a dating website, but they convinced me that would be a bad idea, and instead we should start a bill-splitting app, which is one of Y Combinator's classic tarpit ideas.

Luckily for us, he got us an interview with Y Combinator. We thought the bar was here, and YC showed us the bar was like up here. We went from thinking we were the absolute top of the class to realizing we were really flunking it; that there was just much higher caliber of people and ideas and execution. We were just play-acting. Honestly, when we were in London, we were play-acting at running a startup. Getting onto YC was like a resetting moment; we just realized the bar was so much higher and we'd have to focus and work so much harder to get there. We pivoted pretty quickly from this tarpit bill-splitting idea into a much better B2B payment idea, so that became GoCardless.

After YC, we got back to London and launched GoCardless. Growth was pretty slow, honestly, for the first year or two, but we ground away at it. We stuck at it, and month after month, year after year, we added more customers. The biggest challenge for me at GoCardless, though, was I'd never run a small business collecting money. I couldn't really put myself in the shoes of our customers and didn't speak to me. I wasn't passionate about it. I loved the business; I loved my colleagues, but the problem we were solving just wasn't close enough to my heart.

So after three years, I talked with my co-founders and told them it wasn't the place I was going to spend the next five or ten years, and so it's best that I leave the company. Now, 12 years in, Hiroki, my co-founder, is still running it. They must be processing tens of billions of dollars of payments in dozens of countries around the world. It's become a really big payment processor. When I left GoCardless, it wasn't a big company; it wasn't a big success by any means, and I hadn't accomplished everything I wanted to. So I wanted to swing bigger; I wanted to see what I could accomplish if I really put everything into it. What could I create?

I chose the path of starting companies because I have these ideas. I see things that are broken and I want to fix them. It frustrates me so much when someone says, “No, no, no, it's not important. You just leave that.” I'm just like, “How can you exist when this thing is so broken?” We saw all these problems in the banking space and that's when we started Monzo. At the start of 2015, banking was excruciatingly painful. It was like this clunky old interface; it was really hard to navigate. The people running these banks did not understand what software could do, and that, I mean, that was at its core, like the very naive view. We can write the software from scratch and then the bank would work better.

It turns out that's true. It's miraculous. So what we did at the start of Monzo is we launched a prototype really, really quickly, leaning on my YC days. I have all the notes from the time; it's full of, you know, launch early and talk to users, do things that don't scale. We launched a prototype of a bank in about three or four months on a prepaid debit card, and it allowed us to get the product into people's hands. We grew from zero to a million customers in about two and a half years without spending anything on advertising, and it was all through word of mouth.

We had a hot card that people would spend within a bar and as soon as they tapped to spend, a notification would chop on their phone. I remember the first time I saw someone use a Monzo card who wasn't a member of my family or a friend. I was standing in line in a coffee shop in London, and this person pulled out the card to tap it to pay at the counter, and the Barista said, "Is that a Monzo card? I've been waiting in line to get one! How is it?" This person said, "It's amazing! It's just awesome." I remember that feeling of watching these people interact, talking about a product I'd built. It was indescribable.

I think there are a few things that made it successful. One was we had this big ambitious vision to start a bank from scratch, something that was pretty rare. It's somewhat counterintuitive; taking on a really hard problem actually makes some things easier. The smartest, most ambitious people want to come and work with you because they know that's where they'll find other smart, ambitious people. The press wants to write about you because you're doing something so big; customers want to sign up because you've got this bold, ambitious vision, and they're excited to be part of it.

Beyond that, I think the sheer user experience was so delightful that people loved it, and they showed their friends, and their friends all signed up. Monzo's user growth was like a rocket ship, and at times we were just hanging on for dear life. It wasn't smooth sailing the whole way; we spent a lot of time monitoring illegal activity, financial crime, money laundering. Some of the people whose accounts we shut down didn't like it very much. There were people threatening to come to the office and throw acid in our face. There was a Facebook group dedicated to trying to find my personal home address. I had to change my phone number; I changed my email address, and that was only problem number seven in the stack rank of all the things that I was worried about.

The biggest thing, honestly, was we were processing £50 to £100 billion of payments a year, something like that. If we had an outage, even for a few seconds, that meant tens of thousands of payments wouldn't go through; it meant people's paychecks potentially wouldn't be deposited. We had millions of people relying on us, and the pressure of knowing that the infrastructure was so vital was immense. We had outages, you know, that lasted sometimes minutes and sometimes hours. And then the outages would be followed by a negative press cycle. The BBC, at one point, commissioned an ice sculpture of a frozen Monzo card and dumped this thing outside the front door of our office with a camera crew. "What's going on, Monzo? This is insane!" This is not some tabloid newspaper; this was the BBC. The press likes to do this—they like to build up the newcomer until you're big enough, and then it flips and then they tear you down.

I've been having a tough time. I was pretty anxious. I wasn't sleeping well. I was waking up in the middle of the night in like cold sweats thinking about the company. And then COVID hit, and it all got worse. "You must stay at home. The United States has extended the travel ban on most European countries.” Eighteen years of economic growth evaporating in the space of two months. A lot of our revenue came from people using our card overseas, so revenue dropped by about 50%. I had a £10 million funding round lined up. I'd spent the last nine months traveling around the world to get these investors on board, and all the paperwork was agreed. It was due to close on Monday morning, and on Friday afternoon, the world went into lockdown. The investors phoned up and said, "All investments are on pause." So this £10 million funding line that was vital to the survival of the company got pulled 72 hours before closing.

Sorry, I was getting very emotional; I talk about this. No one knew what was going to happen. The financial regulators were terrified. The banking system as a whole was, "Is it going to stand up?" Monzo, that one of the newest banks that was losing £100 million a year, was that going to stand up? And they told us that we needed to start preparing to wind the company down. Meanwhile, we were fighting tooth and nail to keep it alive.

Whenever I was worried about things or, you know, we were struggling to raise money, I would go and do an allowance in front of like 2,000 people. I would talk about all of the stuff that was going wrong, and the vulnerability created this immense bond. We were working seven days a week, you know, 16, 17 hours a day to try and figure out what other revenue we could drive, what costs we could cut to support the company.

But really, I was at the end of my tether, and I talked to my board and investors about what I could do. I talked about taking a step back, and the answer was always the same: "Yeah, yeah, yeah, absolutely. In two or three years, you can absolutely take a step back." It got to the point where I was not functioning anymore, honestly. You know, I knew there was an alternative, and the alternative was stepping away—was giving up this huge part of my identity. The company and my identity were so intertwined—like any newspaper article, it was always my face, you know, and I was Monzo. Stepping away was like letting all of that go, but I knew it's the only way I was going to survive.

I went to my investors and said, "Look, it's—I can't do this anymore." They said, "Yeah, yeah, two or three more years." And I said, "I'm sorry; maybe you've got two or three more weeks, but that's all I can do." And so I stepped back from the company. But I was so lucky that I had a new CEO and a new COO who had just started. I feel incredibly grateful to those two, along with the existing exec team, Jonas, my co-founder and CTO. They carried it through. I think Monzo now has more than 8 million customers in the UK, which is 15 to 20% of the entire adult population, and Monzo is now profitable.

So I'm hugely, hugely grateful to those two and the whole team that's put in so much work over the last three years to turn Monzo from this like scrappy, fast-growing startup into a huge profitable bank. After I left Monzo, I took a year off just recovering, really. Then eventually, one of my previous investors sent me an investment they were doing. I said, "It's a fintech; we'd love to get you involved. You can write an angel investment if you'd like." They said, "Would you maybe, if you're feeling up to it, have a conversation with the founder? He'd love to learn from your experience."

So I spent 30 or 40 minutes talking to this guy, and I could feel my brain coming back to life. I could feel the questions he was asking just made my brain fire. All of the things he was going through, I could identify with. I told him all the different ways I'd screwed up in the past and how he'd avoid that. I really loved that process of engaging with newer founders. So I started angel investing, and because I can't do anything in moderation, I went from that one investment to making about 75 investments in the next nine months or so. I went a bit overboard, but I just love the process of engaging with these smart founders working on hard problems.

It was after about those 60 or 70 investments that I got an email from YC that said basically, "Hey, it seems like you're enjoying this investing thing. Have you ever thought about doing it full-time?" So I joined Y Combinator as a visiting partner, and just this year, I got my visa and then my green card, and I got the full group partner job here at YC. So it looks like I'm here for the long term now. Rejoining YC felt like coming home. I mean, a lot of the people who were there in 2011—Harj and Gary and others—are back here today. YC's played such a pivotal part in my career; I really couldn't have done it without YC.

It feels amazing to be kind of on the other side giving back in some small way—helping the next generation of founders. I think this technological progress is so good for the world. This prosperity, this whole economy is driven by you building and growing businesses. All of these things were created by people no smarter or harder working than you or me. You have the chance to create something—to define the rules—and make the world feel different.