The Web Startup Success Guide (Part 2):
Case Study of Mint.com

By Guest Author Bob Walsh

[Bob’s interview with Aaron Patzer, founder and CEO of Mint.com, continues with a discussion of the company’s funding and how it tackled the security issue. For more information, see Bob’s new book, “The Web Startup Success Guide”, which will be published on July 22.]

Bob: OK, let’s talk more about money. Specifically you’re saying that when you talked to VCs, they were of the attitude that this is never going to fly because nobody is going to give you any personal financial information.

Aaron: Yes.

Bob: When you got your first round of capital, which according to CrunchBase was $325,000, how did you sell that?

Aaron: I found one guy who believed in the vision or was willing to take a bet on me and the team that I put together. Here’s the catch of venture funding. It was in spring of 2006. I went to see Sequoia. And I came in and gave them a pitch, and they said, good idea, but no one will trust it and, by the way, you have no team and no product, so there’s no way we can ever give you money. The catch-22 is they only want to invest in something they know will work or is starting to work.

Bob: Right.

Aaron: But you need money in order to get it to that point. We won’t invest in the company unless they’ve built a product, but you need money to build the product. I built Mint.com off my own savings and sat alone in a room for seven months and worked 14 hours a day, seven days a week, until I got a prototype of the system—front end, graphics, functionality, everything. Then I was able to do a demo in front an investor, Josh Kopelman (First Round Capital), who’s the founder of half.com. He said, yes, I think this might work, but, to help with the trust aspect, don’t use the domain mymint.com, which is from before; mint.com is much more valuable. We spent three months negotiating for mint.com because that’s a much better and a more trustworthy name.

Bob: Was Josh the person you were referring to that was your first VC believer?

Aaron: Yes, he was.

Bob: And just to clarify, what then was the $325,000 that CrunchBase is referring to? Is that the money and time you put into it?

Aaron: That’s how much First Round Capital put in.

Bob: OK.

Aaron: The $750,000 was $325,000 from First Round Capital and $425,000 from other investors.

Bob: Hence don’t always believe what you read on the Web. Let me ask you: How about when you went to talk to the banks and credit cards and Visa International and you’re saying, hey, look, we want to put all this information online, how about it? How did you convince what is basically a whole bunch of conservative people that this was in their interest?

Aaron: Yes, there’s a way around that, in that someone else had already solved that problem. In the late 1990s Microsoft and Intuit developed the OFX standard, which was the Open Financial Exchange. That lets you sync with bank servers and, if you have credentials, download transactions and balances and things like that. Some banks use that. And for the banks that didn’t support it, we partnered with a company called Yodlee; they do what’s known as screen scrapping, which is essentially logging in as the user; they pull down the web pages and pull out the columns of data representing your transactions and your balances. They already had those relationships set up, and they were partnered with Bank of America and some of the large institutions.

Bob: So, bottom line, it wasn’t a problem. It was basically outsourced to Yodlee for those people who don’t use the sort of standard industry format.

Aaron: That’s right.

Bob: There’s not that many people in their mid-20s who already have 800,000 users. To what do you attribute your success?

Aaron: Well, first and foremost, solving a real need and a real pain point that people have. I mean, every adult in the Free World needs to manage his money, and existing tools just made it way too difficult. Then bank web sites only show you your balance for a particular credit card or account. The average American has 11 different accounts they need to track. All their loans, investments, 401(k)s, IRAs, credit cards, checking and savings accounts. We just made it really easy to do that, really easy navigation. We hired a user action designer, who built apple.com, so we took our inspiration from Apple and then we focused a lot on the product, usability and the user interface.

We brought people in to help with software right off the street. A woman brought her kid with a stroller in and tested mint.com out while the kid was screaming. We brought in people in their 40s and 50s and people in their 20s, men and women. Got a diverse set of people in and saw where they were using the software well and where things weren’t going well. Just took a really user-centric approach. Once we launched, I will basically do any and every interview from any blogger or any press.

Bob: [laughs] OK, that helps.

Aaron: Yes.

Bob: One more question on that. Did going multiplatform . . . In other words, you start as a web app and now you’ve added an iPhone interface. How much did that help?

Aaron: Well, it’s been four weeks, but it’s helped tremendously. We are the number 1 finance application in the finance category in the apps store, which means we’ve beaten Bank of America, Wells Fargo, PayPal, the AT&T mobile banking system. At one point we were ranked as high as number 30 on the top 100 free applications overall, and we’re the only finance app ever to have done that. We were almost as high as Pandora and Facebook at one point.

Bob: Was this part of your strategy way back when, that you wanted to diversify across platforms, or was it, Hey, wow, this iPhone is incredibly cool. Lots of people are buying them. Let’s go for it.

Aaron: Well, we didn’t launch right when the iPhone launched. We did some user research and found out that 40% of our users had iPhones. And of the 60% who didn’t, half were planning to buy one within the next year. The overlap between Mint.com’s user base and iPhone usage was phenomenal. It was a highly requested feature, so we put some engineers on it, got it out in very short order and launched it. I always knew that I wanted Mint.com to be mobile, but originally I thought that was going to be text message based.

You can—and you’ve been able to do this for four months now—you can get text message alerts and little reminders and you can query for your balances. You just text shortcode mymint.

Bob: OK.

Aaron: And type the word balance or bal. It’ll send you your balances when you’re at a restaurant and you want to figure if you have enough money to pick up the tab. Or if you’re in a store and you want to make a purchase and see how much you’ve got on your credit card bill, it will tell you your balances right then.

Bob: OK. If you’re sitting down with yourself right now and you’re going to do another type of startup, another whole new venture, what lessons have you learned that you’d want to pass on to avoid some pain?

Aaron: Well, managing, raising capital, and figuring out what value the company should be at and when you should raise and when you shouldn’t is definitely a big lesson that I didn’t entirely understand until after raising a couple of rounds of financing. The other lesson would be: hiring people is the most important thing that you do at a company, so have a greater focus on the interview process, and train everyone to interview people well and deliberately. A lot of times people interview and they get into a room and they’re, like, well, I thought that guy sounded like he knew what he was talking about. You need well-defined criteria for how you evaluate: who asks what questions. Make sure you cover all areas of technical and management skills. Ask the same sort of technical questions between two engineering candidates so that you can compare them head to head accurately, efficiently. All those things matter, but they’re actually not done all that well in most companies.

Bob: There is one more question that I really should ask: Here we are in 2009; the offline economy is looking like a train wreck.

Aaron: Yes.

Bob: Do you think it’s a good, or a bad, or a great, or a horrible time to create a startup?

Aaron: I think if you’re solving a real problem, it’s always a good time to start a company, because if you don’t do it, someone else will.

This segment is part 2 in the series : The Web Startup Success Guide
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