Intuit recently acquired Mint.com for $170 million, but Mint never would have made it that far without being nurtured by super-angel VCs:
Mint.com owes much of its success to one such investor, First Round Capital, which opted to back the fledgling company at a time when other VCs demurred. Indeed, the Mint.com acquisition is First Round Capital’s largest exit, beating out the $100 million sale of portfolio company Powerset to Microsoft. And although First Round Capital would not quantify the return on its investment, co-founder Josh Kopelman says the Mint.com deal generated the highest return of any deal the firm has done. Previously its best return came when eBay acquired StumbleUpon for $75 million, which generated more than 14 times First Round Capital’s original investment. “I don’t think this changes our strategy,” Kopelman says. “It is continued validation for our approach.”When First Round Capital made its initial investment in 2006, Patzer was a 25-year-old software engineer working for an electronic design automation company. But the Duke- and Princeton-educated entrepreneur envisioned building a Web site that would help consumers manage their money—one much easier to use than Quicken, the market-leading product from Intuit. “Quicken is not quick,” Patzer recalls saying to himself at the time. “There’s got to be a better way to do this.”
After spending 14 hours a day for six months building an early version of Mint out of his own savings, Patzer began looking for money to take the company to the next level. He was turned down by a dozen angel investors and many top established venture capital firms, including Sequoia Capital, Greylock Partners, and Clearstone Ventures. “Every single VC told me I would fail because no one would trust a startup with their financial info,” Patzer says.
First Round Capital saw something other investors missed. At a networking event for entrepreneurs in the summer of 2006, Patzer pitched Kopelman, piquing his interest. “I had a server running on a laptop in the trunk of my car,” Patzer says. “He waited a couple of minutes. I ran out and got the laptop and fired up a demo.”
Kopelman liked what he saw. He asked Patzer to send him a business plan. “We saw a really big market and someone who had really thought it out,” Kopelman says. “He saw an opportunity to solve a really big pain point for customers.” Within 10 days, First Round Capital offered to invest in the startup. “They moved incredibly fast,” Patzer says. “First Round Capital put down a term sheet without caring what anyone else would do.”
First Round Capital didn’t stop helping the company there:
Guidance from First Round Capital also helped Mint.com avoid several potential disasters. After Mint.com won the top award at the TechCrunch 40 conference in 2007, its Web site was besieged by users. The company’s servers went down, hampering its ability to capitalize on the coveted distinction. The Mint.com team traced the crash to a problem in its database technology. Later that night, Kopelman personally contacted an executive of MySQL, Mint.com’s database provider, asking him to help solve the problem. “We were able to resolve the issue within 24 hours—if not faster—because of the connections Josh had,” Patzer says. “It was a crucial moment.” Thanks to that save, Mint.com met its initial three-month goal for user acquisition in 36 hours.