The Abstract Truth

Why Wesabe Lost to Mint – A Second Opinion

Posted by rbpasker on October 2, 2010

Recently, Marc Hedlund, the founder of Wesabe, ruminated on Why Wesabe Lost to Mint.

I feel somewhat qualified to comment on this topic because I did the technical diligence on Mint for First Round Capital, which led me to become an investor in the company. Furthermore, I have been a business acquaintance of Marc’s for over 10 years.

Marc’s answer to this question revolves around two criteria for success: (1) “making users happy quickly” and (2) “actually helping people” with their finances, and that “Mint totally won at the first…and we both totally failed at the second.”

Both of these points are correct, but I’d like to make some additional comments.

First, I think that by focusing on Yodlee’s impact on Mint’s out-of-the-box experience, Marc underestimates the other benefits of Mint’s decision to use Yodlee. There are almost as many banking APIs as there are banks, and Yodlee’s product supports over 10,000 data sources, and over 100,000 different account types. That’s almost a “boil the ocean” problem. When I spoke with Aaron Patzer back in 2007, I had the same doubts about Yodlee that Marc expressed, and Aaron’s answer was something along the lines of, “Well, if it works, it eliminates a tremendous amount of work for us. If it doesn’t work or if they screw us, we’ll rip it out and do something else.” They key principal for “build versus buy” decisions is “buy for parity, build for advantage,” and (as Marc freely admits) Mint made the right choice. Wesabe should have spent the money and engineering resources on building its unique value.

The second key point from my perspective is based on the impression that Aaron made on me during our first discussion. In the past 10 years I have seen over a thousand pitches and have meet thousands of entrepreneurs. Aaron Patzer is in the top 5 entrepreneurs I have ever met, and certainly the youngest. Mint also holds the distinction of being the only company where I didn’t know the founders, yet pulled out my virtual checkbook immediately after the first meeting. [In all fairness to Marc, he has never pitched me. I tried very hard to hire him once (and would again), and it was a fairly big loss that he turned us down. And given the opportunity, I would likely pull out my checkbook for him, too.]

My last comment is about the question Marc asks in his title: “Why Wesabe Lost to Mint.” The personal finance market, unlike, say, social networking, has no network effect, nor is the market a zero-sum game. We should have seen multiple exits in “web 2.0 personal finance,” like we did in the Java Application Server space. I think the real question Marc should be asking himself is “Why did Wesabe Shut Down instead of having an exit?”

One Response to “Why Wesabe Lost to Mint – A Second Opinion”

  1. Brad Matthews said

    Great 2nd perspective. I read Marc’s post when it came out and I really appreciated his candor…it’s rare to see such a post from a CEO whose co. hits the deadpool. For a startup founder, going through the process of pitching to angels, can you opine on what it is about Aaron that made him stand out? It would also be great to hear what it was about his pitch that was so compelling that you “pulled out my virtual checkbook immediately after the first meeting”? Thanks, Brad

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