
Loopt acquired by payment card provider for $43.3m in cash - speedracr
http://thenextweb.com/2012/03/09/green-dot-acquires-location-based-services-pioneer-loopt-for-43-4-million-in-cash/
======
alapshah
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=...](http://www.google.com/insights/search/#q=loopt.com&cmpt=q)
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...](http://ir.greendot.com/phoenix.zhtml?c=235286&p=irol-govBoard) ) 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...](http://www.npr.org/blogs/money/2012/02/23/147257517/how-mitt-romneys-
firm-tried-and-failed-to-build-a-paper-empire) TL;DR the company they bought
acquired another company and raised significant debt- they used that debt to
pay back Bain Capital.

~~~
majani
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=...](http://www.google.com/insights/search/#q=loopt.com&cmpt=q)
) and yet people still got rich off of it.

Product + Hype -> Big Exit is starting to seem like a perfectly legitimate
business plan nowadays.

~~~
webwright
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).

~~~
richcollins
Next was profitable. OS X and iOS are Next. Care to make a long bet on how
much of Loopt tech is still around in 5 years?

~~~
webwright
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.

------
pg
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.

------
wilschroter
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.

~~~
sama
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
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.

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

~~~
rokhayakebe
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?

~~~
sama
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.

------
javery
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)

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

------
Harj
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
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.

------
2pasc
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!

~~~
kenrikm
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.

~~~
2pasc
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!)

------
kenrikm
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!

------
ajju
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!

------
dmix
"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.

------
OoTheNigerian
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.

~~~
kogir
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.

~~~
Alex3917
"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.

~~~
kogir
While you're absolutely right, I don't think the OP realized that's what he
was saying, or he would have written it. I was merely pointing this out.

There were successes though, even back then. It was a long shot, yes, but not
a proven dead end.

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

------
whyleyc
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)

------
randome3889
How much money did the founders make off of this?

------
lyime
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.

------
davidwhodge
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.

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

~~~
kenrikm
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...](http://www.danshapiro.com/blog/2010/08/vc-insanity-economics/)

------
sunmoon
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...

------
staunch
Congrats sama. Looking forward to your next one.

