Building a Fat Startup in Corporate Training: Karl Mehta, CEO of EdCast (Part 3)

Sramana Mitra: There’s a lot of room for fraud.

Karl Mehta: We solved a lot of problems in the payment and transaction space that had never been solved. We didn’t start out to solve the problem. We just wanted to provide a simple service. We built anti-fraud technologies. We built multi-account technologies. The most important things that we built was the micro-transaction capability because you could not do a transaction less than a dollar because credit card charges you at least 2.8% and 30 cents.

PayPal has the same rate. Even now, it’s difficult to do a one-dollar transaction. We figured out that by doing a prepaid aggregation we could support a transaction for as little as 10 cents. That whole technology grew and became very big. We were the underlying monetizing platform when Facebook launched Facebook Credits.

Sramana Mitra: You shifted out of this marketplace of virtual goods and started marketing your payment technology?

Karl Mehta: Right. We became a full-fledged payment platform. Pretty much, for every company that was doing digital goods transaction like Disney, we were the dominant platform or the only platform running their virtual economy. That grew very rapidly. In just four years, we became the category leader. We beat even PayPal.

In roughly four and a half years from starting, I had offers for acquisition from PayPal, MasterCard, Amazon, and Visa. We ended up taking the offer from Visa, which was $190 million cash upfront, and another $50 million in earn out over a period of two years. It was a pretty nice exit.

Sramana Mitra: Did you do this company all the way to exit as self-financed, or did you, along the way, raise money?

Karl Mehta: We had Series A. Because the company was growing rapidly, we were about 150 people in just four years. We were north of $40 million in ARR. We had done Series A, B, and C.

Sramana Mitra: What year did the Visa acquisition take place?

Karl Mehta: 2010.

Sramana Mitra: You stayed two years to do the earn out?

Karl Mehta: Yes, I ran the Digital Wallet. What you see in the Visa checkout is the wallet technology.

Sramana Mitra: What happened after you left Visa in 2012?

Karl Mehta: I was called by the White House. President Obama was starting a new program for Presidential Innovation Fellow. I was one of the first Innovation Fellow in the White House. I ran that for a year. At that time, the first program was only for six months, but they extended it. There was a lot of interesting projects that I was working on for the State Department and the Defense Department. I did that for a year. Then Menlo Ventures, who was one of the big investors in my company, invited me as a venture partner. So I joined Menlo.

Sramana Mitra: How long did you stay at Menlo?

Karl Mehta: Less than a year. I had no intention to become a career VC. Having been an entrepreneur for the past 20 years, I felt that I still need to keep building. It was not time to move from being a player to a coach. Being a VC felt more like a coach. The time at Menlo was more about thinking and reflecting on what is the next big thing to do. That led to what I’m doing now where I got obsessed with this idea of a knowledge network where I personally felt the pain for not having it. I started EdCast out of Menlo and also incubated it at Stanford University.

This segment is part 3 in the series : Building a Fat Startup in Corporate Training: Karl Mehta, CEO of EdCast
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