Loopt acquired by payment card provider for $43.3m in cash

http://thenextweb.com/2012/03/09/green-dot-acquires-location-based-services-pioneer-loopt-for-43-4-million-in-cash/

by speedracr • 14 years ago

200 118 14 years ago

javery• 14 years ago

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)

shingen2• 14 years ago

Assume they got 5% of the company for $20k.

It's very plausible they walked with between $500k and $1m. That's an awesome return on $20k.

nikcub2• 14 years ago

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.

sawyer• 14 years ago

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.

dwynings• 14 years ago

Or sama becomes a full-time YC partner. Either way, it's a win for YC.

OoTheNigerian3• 14 years ago

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.

sspencer• 14 years ago

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.

I just shrugged and closed the tab.

jeremymims• 14 years ago

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.

Iroiso• 14 years ago

You are right, Lately I've thinking of loopt as holding down sam, let's see whats under his sleeve now.

saddino• 14 years ago

If a significant portion of his return is tied up in the retention, he's going nowhere soon.

kogir3• 14 years ago

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.

Alex39172• 14 years ago

"You're essentially saying that trying to do Loopt at all was a mistake and we just should have done something else."

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.

OoTheNigerian3• 14 years ago

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.

alapshah• 14 years ago

In case anyone is missing what has happened here, this is why people hate on private equity/VC.

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.

shareme• 14 years ago

some backstory..beware personal opinion

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..

nikcub2• 14 years ago

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.

phillmv• 14 years ago

>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.

adamtmca• 14 years ago

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.

majani2• 14 years ago

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.

webwright5• 14 years ago

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).

bitterfounder0• 14 years ago

Demoralizing indeed.

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.

temphn2• 14 years ago

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.

gojomo• 14 years ago

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.

rksf2• 14 years ago

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)

VC Participating Share: ~35% * 16.6 = ~5MM

Available for Founders / Employees = 11MM

Total to VCs = 17+5=22MM

randome38892• 14 years ago

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.

rhizome2• 14 years ago

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.

dwerew45234sdf• 14 years ago

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?

[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.

dmix• 14 years ago

"It also helps that Sequoia is an investor in both Loopt and Green Dot, of course."

That makes more sense now. I was wondering how the talks got started.

sama10• 14 years ago

Happy to answer any questions I'm able to. Looking forward to the great stuff we're going to do at Green Dot!

rokhayakebe2• 14 years ago

1 - Would you say you guys were too early to market?

2 - Was your monthly active user base above 2M?

3 - What contributed to Loopt loosing its appeal over the past 12/18 months?

sama10• 14 years ago

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.

codinghorror• 14 years ago

Per http://venturebeat.com/2012/03/09/loopt-dau/ daily active users were below 500 prior to the sale.

razin• 14 years ago

Why did you sell?

sama10• 14 years ago

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.

suking3• 14 years ago

sequoia made them.

rdl2• 14 years ago

Congratulations!

How long did the deal take to bring to this point (if that's public)?

sama10• 14 years ago

i think i can answer this but let me double check.

kareemm2• 14 years ago

On the spectrum of 1 (abysmal failure) to 10 (raging success), where do you place Loopt?

sama10• 14 years ago

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.

sgrove2• 14 years ago

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.

sama10• 14 years ago

yes when the dust settles.

edw519• 14 years ago

If the 2005 instance of sama knew what the 2012 instance of sama knows now, what would he have done differently?

sama10• 14 years ago

that is a very long and hopefully interesting post i am still gathering my thoughts on.

majani2• 14 years ago

What has been your biggest mistake(s) so far?

schoudha• 14 years ago

Sam, did you guys raise any additional money besides what's listed in Crunchbase? It says you guys were backed by Maverick capital as well?

Congrats on the sale!

rokhayakebe2• 14 years ago

The lesson here is social applications go in and out of style and entrepreneurs must really entertain early acquisition offers when they are hot.

kenrikm3• 14 years ago

That's not always an option. Check out this Article (also on the HN front page) http://www.danshapiro.com/blog/2010/08/vc-insanity-economics...

wilschroter• 14 years ago

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.

sama10• 14 years ago

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.

comatose_kid• 14 years ago

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.

aswanson• 14 years ago

Hey man, haters gonna hate. You compressed more success in 7 years than 99.9 % of programmers will in 4+ decades in a cubicle. Kudos.

unohoo• 14 years ago

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.

budu3• 14 years ago

Congrats Sam! You have accomplished a lot.

AznHisoka• 14 years ago

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.

ahoyhere2• 14 years ago

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.

temphn2• 14 years ago

But wait a second, weren't you stating a few days ago that lifestyle companies make people more rich than moonshots:

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?

whyleyc• 14 years ago

Sam - Did Loopt ever make any profit, if so what area of the business turned out to be most profitable for you guys ?

(This is meant as a genuine question, not a snarky comment)

Harj• 14 years ago

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.

justin• 14 years ago

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.

pc• 14 years ago

Agreed. I wrote a bit more here: http://news.ycombinator.com/item?id=3560102

earbitscom• 14 years ago

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. ;)

2pasc2• 14 years ago

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!

kenrikm3• 14 years ago

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.

2pasc2• 14 years ago

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!)

randome38892• 14 years ago

How much money did the founders make off of this?

rdl2• 14 years ago

This is the second biggest announced and second to fifth unannounced amount YC sale to date, right?

kenrikm3• 14 years ago

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.

Good luck guys!

staunch• 14 years ago

Congrats sama. Looking forward to your next one.

ajju2• 14 years ago

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.

Congrats Loopt!

lyime• 14 years ago

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.

pg4• 14 years ago

Congratulations, Sam!

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.

davidwhodge• 14 years ago

Congratulations to Sam & team.

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.

sunmoon• 14 years ago

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...

Loopt acquired by payment card provider for $43.3m in cash

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