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.
Buddy exits like this one and the Hunch exit are very demoralising. They make startups look like some sort of game. As you indicated, Loopt was clearly dying ( http://www.google.com/insights/search/#q=loopt.com&cmpt=... ) and yet people still got rich off of it.
Product + Hype -> Big Exit is starting to seem like a perfectly legitimate business plan nowadays.
I think calling this a "buddy exit" isn't really fair. Same with Hunch. That's like calling Next selling to Apple a "buddy exit". If Square went south, what kind of exit could they command based on Jack and his team? If Facebook was dying, what would Zuck and his team be worth?
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).
> Sam and Chris are both brilliant guys and great BRANDS [...] Guys like this attract A-players and attract PR.
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.
You should consider your tone here. It's unwarranted. You literally know nothing about what went on here, know nothing about the value that they're are getting (patents? team?).
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?
I question your original assertion that these two guys deserve success because they are great brands and can attract PR.
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.
"If the team were worth that much, then they would have made Loopt astoundingly profitable in the last 7 years, and we'd all be using it."
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.
[responding to myself since both child comments are [dead] -- I hope you see this]
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]
I know you meant this to be a nasty remark, but do you realize you're actually saying something very nice about VCs? You're saying that they're driven by loyalty to their friends rather than by profit.
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.
Loyalty to their buddies only brings the VCs profit in the long term if their buddies are good, which is exactly the point of webwright's that underwater is trying to contradict.
That boils down to the efficient markets claim. Unfortunately we've seen a lot of counterexamples for that. As just one popular example, Wall Street - the people that, among others, underwrite tech IPOs that go on to pop 50% and 100% - is profitable in the long term for people in the front office, and buddy-based for people in the front office. Would you say most people's buddies there are "good"?
"Could Sam and his group have $43M in impact for the buyer?"
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.
"But saying there's some higher form of value that 'brands' bring that has nothing to do with building profitable businesses is disingenuous."
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.
you said success is a formula, and because you were talking about an exit for an unprofitable company as being a success, it seemed logical to me that you ranked ceo 'brand' value over business profitability.
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 was profitable? Do you have a source for that? They raised hundreds of millions of dollars and sold 50,000 units. In '93, Canon plowed a second investment in to keep them afloat. Even with the new $, they laid off 300 of 540 employees. They couldn't sell their hardware operations and went pure software. I'm not saying they toss out all of the tech, but calling NeXT profitable is just plain false. It was a failed company with great leadership. Certainly there was some technical value in the deal, but much of the $429M paid was for Jobs and the people he had working with him.
Profitable, but underwater. NeXT sold to Apple for half a billion when over a billion in funding had been pumped into it (let alone valuation).
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.
"Care to make a long bet on how much of Loopt tech is still around in 5 years?"
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.
Sales is part of doing a startup. Selling the company is the biggest sale. You have to give them props for finding the people willing to buy.
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.
don't be demoralized, and don't let others decide how you should run your business or what you should value. if you have a profitable business be happy with your success and build on it. lottery winners happen every day, don't let that ruin building great products and businesses for you. the problem with outside investors (any investors, VCs, angels etc.) is that your business automatically inherits their values, and if their values are different enough from yours the friction could destroy your business and/or destroy your values.
At some point, depending upon why they're buying, I think having fewer employees is a bad thing. It means whoever is acquiring you has to do more work to turn it into a fully fledged business. At least that's the sentiment I heard when our startup sold (4 employees total).
It's no secret that the "going rate" for startups that are successful and get acqui-hired is $1-2M per engineer.
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.
Your answer seems correct. Moritz and Sequoia invested allot of money ($10 millions) over 10 years ago into Green Dot. 'Sequoia Capital owned about 30% of the company during its over $2 billion IPO last year.'[1] Needless to say Sequoia and Moritz have allot of power at Green Dot.
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?
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.
raising debt to pay a dividend back to investors is more common than not amongst the LBO funds. it makes sense if you have a steady and decent income stream, it is a bit like drawing down on equity in your house in order to take a holiday, except the rates are much better (when people complain about this, I am not really sure what they want to be done about it)
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.
>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.
Oh, I just want people to stop pretending this is a meritocracy.
Planet Money also did a follow up on one of Bain's deals that went right. TL;DR Bain bought a company, levered it up, restructured it and successfully took it public.
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.
If the $17 million previously raised bought half or less of the outstanding equity, then the VCs (depending also on other preferences) might only have a claim on about ((43.4 total - 9.8 retention pool)*50%=) $16.8 million of the deal proceeds. So this might be a largely-sideways exit for the venture investors.
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.
Typically, venture rounds are participating preferred securities (at least). So, the more likely scenario here is:
43.4 MM Sale
Less: 9.8 Cash Retention Pool
= 33.6 MM Available for Shareholders
Less: 17MM Preferred to VCs (Face Value of VC Investment)
= 16.6 MM (split among VCs, founders, employees)
>typically, venture rounds are participating preferred securities (at least)
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.
Yes, that is a good point. Some research suggests that today only ~35% of Valley Series A are part preferred(according to recent legal reports), but Crunchbase suggests that Loopt took series A in 2005, Series B in 2008 and Series C in 2010. Total capital raised (according to that post) was $32MM across 3 rounds. Not sure how much was primary or if any of it was taken out by later rounds, of course. Anyhow, I don't know for sure, but I suspect there were some protections around the securities, given the timing of the early rounds and the total amount invested. http://www.crunchbase.com/company/loopt
You clearly don't understand VC or Private Equity very well. 15 mil is chump change for Sequoia. Sure they would rather not lose it but 43 million is not a "huge amount of cash" in the VC world. They probably just got back a 1x or 2x return and that is about it.
Which is why buddy exits are such a problem: there's so much money in the greater pool that they can hand out life-changing cash on a whim to people who might not deserve it as much as others. Sure, life isn't fair, but I'd rather people didn't pretend otherwise.
Fairness is less of a problem than VC's treating their investor money as a slush fund to dole out to their friends.
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.
No, everybody doesn't know. Why do you think the conventional wisdom doesn't reflect that it's a buddy game rather than a meritocracy? Why is the word "meritocracy" ever even mentioned? Is it just a red herring thrown out by successful people to keep the masses suffering?
I think we disagree on what the conventional wisdom is.
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)?
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.
I get so annoyed when I see people pick apart an acquisition. I saw this same behavior for Gowalla, and then Mint before it. "They didn't make any money. They sold too early." They remind me of people that would be sitting at the finish line of a marathon telling the last people to cross "Boy, your time really sucked."
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.
Thank you. It's a bummer to be so excited for something I've worked hard for and then read haters hating all over the internet. This brightened up my day; hope we meet in person some day so I can properly say thanks.
Congrats Sam, it sounds like a good outcome, and I've always been impressed that you had the boldness to pursue a vision that involved working with carriers.
Ignore that haters - unfortunately Hacker News comments seem to have reverted to the mean (pun intended) as the site has grown.
Let the haters hate. Just like you might have shrugged off other, bigger downs during the 7 years of running Loopt, just shrug off the haters and savor the success, no matter how small or big it is. Very few people can lay claim to running a company for 7 years and coming out successful on the other end. Congrats and good luck for whats next.
While some of the comments may be negative...I just want to say that many many people here NOT like that. There are a lot of hard-working people who have hacked on projects, taken risks, and worked just as hard as Sam. But without the recognition, the acknowledgement, or the publicity. They hack on their side projects while holding a day job, while raising a kid, sacrificing sleep, health, etc. I feel some people just feel slighted when they see others receive a monetary reward because of this "publicity". But please.. many people here are also in the arena, just like Sam.
The people "hating" (I haven't seen anyone hate, merely question) are frustrated because everybody around them tells them it's not luck, it's awesome, and that if you build a great product, get popular, etc., your day will come. That it's a meritocracy, as one commenter put it.
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.
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?
Actually, I was saying lifestyle companies make more people rich, not people more rich. Depends on your definition of rich, of course. :)
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).
Any chance we'll see a retrospection? You've been building Loopt for 7 years - I'd love to hear how you managed team morale, the high points, the lows, etc. There's bound to be some amazing stuff.
And congratulations, I'm personally excited to see where you go with this.
1. yes, although that gave us some advantages as well.
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.
obviously it's not going to go down as a massive success (although i hope what we do at green dot does!) but i feel pretty good about it. it's hard for me to put a number on it, though.
Thanks. I'm sure the lessons you learned will be applicable to whatever you do next. You could do a hell of a lot worse than having a $40M+ exit the first time around, even if you raised $17M.
We realized that to be really successful, we needed to be about finance and payments as well as location--I think the most interesting things will happen when those two come together. We talked to a number of companies and were most excited about the team and vision at Green Dot.
* ready to sell business because it wasn't going anywhere, sequoia knew greendot well and got them to get a return on the $ put in so it wasn't a total buss. Hence the huge (relative to the sale) incentive for founders to stick around since they got nothing from the sale. is my guess.
Not sure if you figured this out, but sama = Sam Altman = ceo of Loopt. I think sama's words on this situation carry a little more weight than your guess.
Oh - so he's going to tell the truth then? I guarantee he has confidentiality agreements about all of that - so I don't believe anything he says for a second. Loopt was a total bust for VC returns.
I am very curious how YC makes out in a deal like this - when there is 17M of capital invested after them in A and B rounds if there was any sort of liquidity preference you can pretty much guarantee YC didn't see a dime. (especially since 9M of this was retention for employees which makes me think that the employees weren't going to make anything from their equity/shares)
I would imagine there's a lot of long term value created by folding sama and team into the YC ecosystem. I'd be willing to bet that Loopt isn't the last venture Sam's going to be involved in, and when the time comes to start something new YC will likely be part of the conversation.
This is why pg talks about looking at founders before their ideas.
Not how it works since with later rounds you have both dilution and probably a liquidity preference
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.
Those aren't the terms we use. Those docs are something we and WSGR created for the startups we fund to use to when raising money later. We don't get any liquidation preference or pro-rata rights.
I've been incredibly impressed by Sam since he started as a part time partner at YC, as have all of the founders. Greendot are lucky to have him and his team.
Likewise. Sam is extremely effective, works super hard for YC companies, and knows something about seemingly everything. Even as a talent acquisition alone this would make sense.
Seriously...been getting a lot of help from Sam lately and it's unbelievable how insightful the guy is. If I had a billion dollars, I'd pay $43M to have Sam in my corner. ;)
The sad truth about startup life and Silicon Valley is that many people become wealthy not because they created something meaningful with lots of customers or users or revenues, but because they get acquired and let die. This would be all fine if founders did not equate net worth with success and smarts. I admire Companies that get acquired and where the product continue to live on beyond the acquisition like PayPal, Siri, Youtube, Admob etc... That's the proof you created something really meaningful!
I think you're missing the point, If you're in this just to get wealthy there are many other professions that offer a much safer route to get there (Lawyer, Doctor) I don't think you just fall into being an entrepreneur for the money, otherwise you would give up when you're eating ramen noodles pulling 18 hour shifts for months on end without a return. Nope, I think to build a company you need something else driving you rather than the dream of wealth alone. From what I have seen it's clear that SamA has that drive or the company would not have made it as far as it did.
I don't know SamA, and so I am not saying this against him at all. Nor am I saying that people become entrepreneur for the money. As you mention, there are safer routes to get money. I am describing something I have observed in Silicon Valley, especially in the last few years.
You have the lucky folks who flipped their Company fast, and sometimes see themselves as the master of the universe. You also have the dedicated ones - and Dennis Crowley from Dodgeball and Foursquare is definitely in this category.
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!)
I don't think that the team at Loopt deserves anything less than a huge amount of respect. They built something big and it did not work out, it happens. It's easy to sit and play armchair quarterback but I doubt anyone who has ever tried to make something big would chalk this up as a failure.
No one one learns how do ride a bike without a few scrapes but eventually you do learn. I'm certain Sam and the team will know nothing but success if not in this venture than the next.
The world of payments has already changed dramatically with technology companies from Square to even Groupon essentially building a way to "pay with your phone".
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.
I think Loopt made an error in partnering exclusively with carriers. I remember when I was in the UK and heard of loopt the first tifme. I visited the site and was told to put in a US number. It was there they lost it.
I am really looking forward to what Sam has up his sleeves now that he is free.
In 2005, there was no other choice but to work directly with the carriers if you wanted your software widely distributed on mobile phones. At the time, Sam was acknowledged for having the chutzpa to go negotiate directly with the carriers and succeed.
You're essentially saying that trying to do Loopt at all was a mistake and we just should have done something else.
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.
No man. I am not saying Loopt was a mistake. I reiterate that the exclusivity with the carriers was a mistake.
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.
Ah, but the difference between exclusivity and these deals taking longer than the average lifespan can't be discerned optically - I assure you that in the early days we were never for any reasonable length of time in a position to offer more than we did.
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.
Let me clarify something. I fully respect the effort Sam and you guys put into Loopt to make it something. I just guess I am quite frustrated on your behalf that although you pioneered (at least in my eyes) location, you did not benefit from it.
From outside,it was obvious what was wrong. From outside,it always is.
I had a very similar experience. I heard about Loopt on here when they first launched. It seemed really interesting and I wanted to sign up but it was only for Boost Mobile at the time, which neither I nor any of my friends used.
Congrats to Sam and the team. Green Dot is lucky to have him.
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.
what a shame if anyone can walk out this failure with the illusion of success. The funny part is there is no failed founder, only successful or very successful founders, it also tells us how risky to join startup not as a founder...
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.