Loopt acquired by payment card provider for $43.3m in cash(thenextweb.com) |
Loopt acquired by payment card provider for $43.3m in cash(thenextweb.com) |
As far as I can tell, Loopt wasn't doing very well. http://www.google.com/insights/search/#q=loopt.com&cmpt=... They had an attempt to revive the company to compete with Groupon last year that many here thought was stupid and died an early death (http://news.ycombinator.com/item?id=2696412)
Michael Moritz (Sequoia partner) is still on the board of Green Dot, now a publicly traded company worth north of a billion dollars. Almost the entire board (http://ir.greendot.com/phoenix.zhtml?c=235286&p=irol-gov... ) is Private Equity/VC guys, they do this kind of inside baseball all the time, it's no sweat off their back to do Moritz a favor.
He convinces Green Dot to acquire Loopt for a huge amount of cash (Green Dot was sitting on $225 million in cash). Sequoia makes a cool $15 million.
Related: the always-informative Planet Money did a special on Private Equity and you can see how Bain Capital got its money back on a company that went bankrupt: http://www.npr.org/blogs/money/2012/02/23/147257517/how-mitt... TL;DR the company they bought acquired another company and raised significant debt- they used that debt to pay back Bain Capital.
Product + Hype -> Big Exit is starting to seem like a perfectly legitimate business plan nowadays.
Sam and Chris are both brilliant guys and great BRANDS. Not Steve Jobs great-- but great nonetheless. Guys like this attract A-players and attract PR. Could Sam and his group have $43M in impact for the buyer? Surely.
Listen, success is just a big multiplication formula. If your "leadership brand" number is high enough, you just about can't lose. But that holds true for any other number in the formula (product awesomeness, timing, marketing, business model, etc).
Additionally, Loopt (being founded in 2005) did a ton of work that was obsolesced by the iPhone and ubiquitous GPS. Their timing was off, but you really can't fault them for giving it the college try. At a minimum GreenDot's internal engineering capacity has been massively upgraded.
Google's acquisition of Slide for $100m crushed me. Myself and several others built more successful companies. We had 10x the userbase, larger profits (assuming this based on userbase), and fewer employees (team of 3 here). The difference was I was bootstrapped and working in stealth.
Lesson's learned: avoid bootstrapping. Raise venture capital from well networked investors. Do not work in stealth mode. Do a lot of PR. Be loud!
This ensures that the failure of your company will be an embarrassment for your investors. The louder the better. They will be inclined to have a friend buy you out to save face.
Disclaimer. I'm not saying that should be your primary goal. Goal number one should be passionately building a product you love. A buddy exit is simply a safety net.
Now if we ask ourselves if Loopt was not a Sequoia company, would Green Dot have paid that much money for Loopt's people and technology. They could of easy got a better deal somewhere else.
However I think Sequoia needed to save face on Loopt. They needed to make sure it had an successful exit. The more successful company's in Sequoia portfolio the more investors are willing to invest in them right?
[1]http://www.quora.com/Green-Dot-company/Why-did-Sequoia-inves...
I don't know why PG is trying to hype this up. I see ycombinator becoming more and more like a old boys network.
If your doing a startup don't get discouraged. The reason you should be doing it in the first place is cause you truely believe in the product and the business and not looking to flip your startup for quick cash.
the VCs of silicon valley are very far away from the Wall St type of private equity (although they are becoming closer with the secondary markets now opened up - it used to be that your vc investors were in all the way until the exit)
as for Sequoia, it is pretty well known that the top tier VCs look after their own. Look through the Sequoia history and you won't find very many outright failures, it is a reason why entrepreneurs choose to work with them. I very much doubt Moritz can 'make' Green Dot do the deal, but I am pretty sure he put it all together - it is more a testament to his/their dealmaking abilities than any leverage he would have as a minority shareholder and director in a public company.
Oh, I just want people to stop pretending this is a meritocracy.
The company executives all got bonuses, Bain made a ton of money and the workers got to keep their jobs. The company is still running today.
Still, many think location services can only pay off via connections with payments/coupons/promotions so the tie-up does make sense as more than just a favor between investment buddies.
Less: 17MM Preferred to VCs (Face Value of VC Investment) = 16.6 MM (split among VCs, founders, employees)
VC Participating Share: ~35% * 16.6 = ~5MM
Available for Founders / Employees = 11MM
Total to VCs = 17+5=22MM
I had the opportunity to interview with Loopt sometime ago, right when they in fact did the name change to Loopt.
My read than was that they in long term terms were going to fail as certain constraints to do things were not in their best interests...at that time it was Mobile Operator limits..tie-=ups
Its a sad thing as current deal looks to be only based on patents values..not what Sam's team put into it..
Though Sam himself may not realize it, he has had a big effect on Y Combinator. One of the most important components of YC is the alumni network. It's now quite large (over 800 people) and the founders help one another a lot. We can affect the size of the alumni network very directly, but we have less control over how much they help one another-- without which of course the size doesn't matter.
Sam is, more than any other single person, the one who set the standard for how much the alumni help one another. He set it by example. After each new batch of founders got lots of help from Sam, it seemed natural to them when they in turn became alumni to help new founders that much. We encourage the founders to help one another of course, but Sam's example had more effect than our exhortations. And we lucked out in that respect because Sam is remarkably generous with his time. He's a sort of natural teacher.
He also knows everyone. He has not only done countless introductions for alumni, but did most of the initial intros in Silicon Valley for YC itself. He introduced us to our lawyer, Wilson Sonsini, and he was even the one who introduced us to Sequoia. YC now does many intros per day, but if you follow the tree back to the beginning, Sam was the root node.
If you are one of the few entrepreneurs that has come far along enough to get to a sale - for any amount - I just flat out applaud you.
And congratulations, I'm personally excited to see where you go with this.
This is why pg talks about looking at founders before their ideas.
It's very plausible they walked with between $500k and $1m. That's an awesome return on $20k.
The figures here work out almost exactly to Sequoia and NEA getting their 2x (they invested a combined $17M) and plus the employee pool (2 x $17M = $34M + $9.8M = $43.8 - the announced sale price was $43.4M)
That is just me speculating, but I would be surprised if it isn't far off.
I think it is sad, especially because of all the efforts that we as entrepreneurs put into these Companies. Most of all, I criticize this general sentiment in SV right now, that success=money through acquisition/IPO. If SamA gets his vision realized through Green Dot - all the better for him and for the Loopt team! (and us as users!)
Good luck guys!
To continue succeeding, currently successful but "old world" payment companies like Green Dot need to become technology companies. Given Loopt's stellar team, Green Dot couldn't have chosen a better company to acquire. I have been fortunate to receive advice/help from both Sam and Nick, but read "Shit Sam Altman says" and you'll know how smart these guys are. http://anandkulkarni.posterous.com/-sam-altman-says
It also seems to me that the demographics of Loopt users overlap nicely with the demographics Green Dot wants to target. A head start of 1M+ users in the demographic you are targeting is very valuable.
Congrats Loopt!
That makes more sense now. I was wondering how the talks got started.
I am really looking forward to what Sam has up his sleeves now that he is free.
Everyone seems to forget that before iPhone, and later Android, you had no choice but to partner with carriers - there was no other way to distribute your application.
Even in Europe, where the phone ecosystem is different, access to location required carrier support, and nearly no handsets had the ability to locate themselves without network assistance.
Loopt made mistakes, many of which were mine, but that wasn't one of them.
Which is a perfectly valid option. Just because someone has an idea a good idea doesn't mean that it will make a good business.
The cell phone software market pre-iPhone simply wasn't a good place to be starting a business, no matter what the idea.
I was in the UK 2008-2010 and you could only get Loopt through American carriers. BTW, far back early 2000s, you could get mobile software from getjar.
I just shrugged and closed the tab.
(This is meant as a genuine question, not a snarky comment)
During last summer at YC Sam helped us quite a bit on different fronts. He has this amazing clarity in his thought process and is generally a really helpful guy.
A brief conversation with Sam was what convinced me to apply to YC in the first place, and I'm very glad I did. Sam has shown himself to be an expert, a smooth operator, and an excellent teacher. Green Dot is very lucky to have Sam & co joining them.
Ignore that haters - unfortunately Hacker News comments seem to have reverted to the mean (pun intended) as the site has grown.
But it's not.
This sale demonstrates that.
It's a good time to adjust expectations and decide what, exactly, it is in your best interest to believe in.
http://news.ycombinator.com/item?id=3647026
Please note: I say this as someone who has great respect for the look, feel, and polish of Freckle and your other work. My disagreement in that thread was purely about the empirical question of whether lifestyle business are better than moonshots in terms of the "get rich some day" probability.
Have you changed your mind or am I reading incorrectly?
2 - Was your monthly active user base above 2M?
3 - What contributed to Loopt loosing its appeal over the past 12/18 months?
2. not for our core loopt app.
3. i think in general location services have lost some luster over the last 12/18 months, but i also think a lot of the things that we've been doing--real-time deals, loyalty offers, etc are generating a lot of interest among users and we'll hopefully be able to take that to the next level at green dot.
Congrats on the sale!
Not sure why you thought I might have changed my mind based on the above. Misreading perhaps? I wasn't PERSONALLY expressing any of the sentiments in my comment above. I was echoing what I see & hear from people who do care about acquisitions.
My position is, and has been for years, that the VC game is way more of a game of chance than a game of skill. (Unless you think it's a skill to have friends who can bail out your failing startup with an acquisition. It might be. But it's sure not the skill everybody promotes.) A game that, in a lot of ways, reduces your potential for self-determination. That's why I'm such a tireless promoter of bacon busines (http://baconbiz.com).
There were successes though, even back then. It was a long shot, yes, but not a proven dead end.
It's hard for big companies to find talented engineers, and so when they acqui-hire, they can just instantly shuffle those smart people out of the project they're working on and onto something else.
The bet is that each smart engineer will provide at least $1-2M of value to the company in the long-run.
That is increasingly false for A rounds, at least.
This 2 year old discussion talks about that, but from what I hear these days, any startup that doesn't "desperately" need money will not agree to participating preferred in the valley.
http://www.quora.com/How-common-are-participating-preferred-...
It took all our effort on both the business and engineering side to do what we did. And then iPhone came out, the world changed quickly, and in retrospect, we were reluctant and missed some opportunities. I would play that part and things after differently if I had another chance - but nothing before.
Things were more complicated then. I could go into boring details, but here's one example - MapKit on iPhone wasn't released until mid May in 2009. We had to maintain our own tile generation and geocoding infrastructure even after that for non-iPhones.
In the end though, international availability didn't matter because the product didn't resonate the way it needed to. Users in the US who weren't using it weren't simply waiting for their foreign friends to join. International availability would have brought more users, yes, but not success.
From outside,it was obvious what was wrong. From outside,it always is.
Doesn't everyone know that it's "more about who you know that what you do"? Even on HN most people don't pretend otherwise unless it's the all too prevalent press releases and astroturfing posts/comments.
I have never heard anyone successful talking about the state of things refer to a meritocracy actually existing. Lot's of comments about how some method is more of a meritocracy or closer to this hypothetical ideal. Talk to anyone about nearly any business and the advice is to make good connections. The "it's not what you know, it's who you know" is such an old saying that it's a cliche. It's "a saying". It's conventional wisdom.
The aphorism "build a better mousetrap, and the world will beat a path to your door" has only been used, during my lifetime (30 years), as an example of naivete. You also need good design and marketing and the right connections. To me, this is the conventional wisdom.
Nothing about money in the western world is a meritocracy, I honestly can't find anyone serious trying to say it is. Especially with all the number crunching lately concerned with the growing class divide in the US.
Am I ignorant? Outside of some kind of Glenn Beck style "woooo America! Fuck Yeah!" pundit that have I completely missed a meme or school of thought that is claiming a meritocracy exists (even though that's objectively wrong)?
Surprising given their small stakes. All I've seen are the surface features of the YC deals, so I'm not up to speed on the specific terms they get.
What about the minor things like, you know, making money? They took 17 million in funding and failed. But that's OK because they're buddies with the VC's and can try, try again.
Is it okay/smart for Facebook to buy/hire a team of 4 engineers for $8M or is that because they are buddies with VCs? I assume Loopt had an engineering team of 20+. Is it that out of bounds to think that that (plus patents and perhaps some tech) could have an eventual financial impact of more than $43M?
Their job was to grow Loopt and make money. They failed to do that. So either they're not as brilliant as you say or that stuff isn't as important as you make it out to be. Result matter. Whether you're a great brand shouldn't.
Judge people on their success/failure. Not on what other people think of them.
Loopt was a flawed, quickly obsoleted idea. That was pretty obvious from the outset.
That isn't really true. The main reason most VCs are friends with people is because they think they can make money out of them in the future. But it shows how far into falsehood you've leaned in your attempt to be nasty when you end up unintentionally implying something so nice it isn't true.
That VC money is investor money. These aren't angels being nice with their own money, these are VC's playing fast and loose with their investors money and it's not ethical behaviour.
what do you mean by impact? how can this even be measured?
"If your "leadership brand" number is high enough, you just about can't lose. "
again, what does leadership brand mean? And what does it have to do with building a business that earns money/makes profit (revenue - expenses). Just because something/someone has market or exchange value, doesn't mean they have use value. If the goal is to sucker some large corporation out of a small chunk of cash (small for the large corp) be upfront about it. But saying there's some higher form of value that 'brands' bring that has nothing to do with building profitable businesses is disingenuous. Steve Jobs built companies that earned money (from business operations, not financial market operations). HUGE difference.
Where the heck did I say that? I said building profitable businesses is a formula and leadership/brands are a multiplier in that (very complex) formula.
I'm saying that A-Players with great brands have value. It's pretty hard to unravel that value. What's the financial impact of bringing Jobs back to Apple? What was the financial impact of Google buying Android? What would the financial impact be if I was running Square instead of Jack Dorsey? There's no way to know. But you can't disregard the impact of great people because you can't precisely measure it is wrong.
People have value (in general), calling some people A-players is trying to ascribe value to some, and as you say, that's hard to unravel. I agree ranking and valuing people is hard/impossible, why should we try . . . why are you trying? Why not let people show their own value by doing great things. I don't disregard the value, i just admit that we don't know it, the only thing we do know is if a business made money or not. It doesn't mean the person that started a shitty business is also shitty, but it also doesn't mean they're a success if all the sudden someone bestowed a crown of exit on them.
NeXT alone was never going to do what Apple has done. Apple had a sustainable hardware business (after being fixed up a little with sexy designs) that gave them enough manufacturing leverage to do iPod, and iPod gave them enough operations leverage and economy-of-scale to do what they're doing now.
More of it than is around now. Location based apps are just getting started.
I think there is sort of a last mile problem for data, in the same way that there is a last mile problem for hardware. As much people come to see the world this way I think we will end up with more and more possibilities for local social than we can currently even imagine. I think this acquisition will be a good opportunity, as Loopt will effectively be able to use these financial tools as bait to get more people into their system.
Great teams can attack crappy markets or just get the timing wrong. The leadership team that brought Apple back from the brink was the same team that built NeXT. Next wasn't astoundingly profitable and none of us were using it.
blasterford2 2 hours ago | link [dead]
Thanks hackernews for silently banning my account for posting a couple of non-abusive, pretty well backed up opinions.
Well done! Censorship at its best.
Hacker news used to be good. What the hell happened.
Be careful what you say on HN. If it goes against the agenda of YC or is critical of past YC funded companies, you'll be banned.
I think it's just that the anti-spam/anti-troll algorithms have become very sensitive to flagging and/or downvotes. I think I heard that greater weight is given to flags and downvotes by highly respected users (the list of which which is probably also algorithmically determined). Some of those weighted users are bound to be human and (over)react to criticism of their friends-of-friends' companies with flags or downvotes.
An example: a while ago I reluctantly clicked "flag" on a comment that really didn't belong, to the extent of warranting more than a downvote (which I also do incredibly rarely). I must have been among the flags+votes that pushed the comment over some algorithmic threshold, as the comment immediately became [dead]. Your second account, created for this comment, probably met the same fate due to the comment's reactionary nature.
I know what it feels like to worry about being cut off from a community. A few weeks ago I read about another account that got auto-killed, and the user didn't figure it out for quite a long time. I ran a couple of tests on my account to see if I was "slow banned" and accidentally scared myself by not realizing that the HN delay setting has an upper bound of 10m. My delay setting was 20m, so it took me a couple of days to figure out why my posts started out [dead] for 10m. I eventually found the original thread where pg explained the delay setting, the only place where the 10m max delay is mentioned, and realized what was going on.
I do agree that some topics on HN elicit more downvoting and flagging than they should. I ardently avoid commenting on any Apple-related articles, for example. Most of the risky topics can still be addressed by wording one's comments more carefully, but sometimes even the most insightful comment will be met with downvotes.
I used to get my intellectual discussion fix from the Off Topic thread on Groklaw. I discovered Hacker News when someone posted a link to YCombinator and slowly became converted. I finally left Groklaw when I realized that it achieved its S/N ratio in large measure by aggressive human intervention and moderation (and... getting face-slapped by Peter H. Salus, who had (has?) a lot of sway on Groklaw, certainly helped my decision to leave). I'm a technology lover to the core, so I'll take HN's touchy human-guided anti-spam algorithms over a 100% human-driven system any day.
I haven't found any place quite like Hacker News. It's not quite as nice as it was when I first joined (back then the existing HN regulars joined forces to fill the front page with articles about esoteric programming languages like Erlang to drive away a recent influx of new traffic, of which I was a part -- those articles convinced me to stay). However, the comment quality on most of the articles I read still exceeds anything I've found anywhere else. Try reading a comment thread on Ars Technica, for example -- full of trolls, shills, and overreactions.
I'm in no way connected to HN or YC, apart from unsuccessfully applying to YC quite a while ago. I've just sort of taken it upon myself to find [dead] accounts that I don't think deserve to be so and post comments like this one. As such I hope you'll give HN another chance (adjust your commenting strategy, and maybe try e-mailing someone at YC about your existing account -- tracking down such an e-mail address is left as an exercise for the reader). [I also hope I'm not upsetting pg or the YC alumni who serve as moderators by posting these comments - please say so if you'd like me to stop]