How Much Would Mint Be Worth Now?

It has almost been 18 months since Intuit acquired Mint for $170 million, so long ago that we can hardly remember how vigorously venture investors defended the deal, even as Redfin and Jason Fried suggested that Mint would have been fine going it alone, too.

The Valley’s digerati were unanimous in praising Mint for taking the safe money. “Young entrepreneurs should sell out early,” one investor memorably wrote, “for the same reason that dogs lick their balls: because they can.”

Since then, the market has sent a different message to entrepreneurs: fortune favors the bold. In the last 18 months or so, Facebook’s valuation has increased from 6.5 billion to $67.5 billion; Twitter’s rumored valuation has also increased by an order of magnitude, from a hotly disputed $1 billion to a hotly disputed $10 billion. Likewise Zynga’s rumored value has increased from $1 billion to $10 billion.

And it’s not just the Internet titans. The market has rewarded mid-sized companies, too. LinkedIn and Pandora are lining up to go public at high valuations despite relatively modest annual revenues of around $215 million and $120 million, respectively. All, like Mint, created and led their market.

What about Mint’s parent, Intuit? After being nearly dismissed for its failure to bring its flagship product, Quicken, to the web, Intuit is now adored by Wall Street for delivering software as an online service, courtesy of Mint. Since acquiring Mint, Intuit  has almost doubled, increasing its market value by $8 billion.  Intuit will keep this gain for itself; Intuit paid for Mint in cash, not stock.

It doesn’t seem unreasonable to conclude that Mint, had it remained independent, would have been worth a significant fraction of that $8 billion. Maybe it wouldn’t have experienced a ten-fold increase in its value the way Twitter, Zynga and Facebook have. But even if it had grown by a factor of five, that would have been $850 million.

This is not to second-guess Mint’s CEO, Aaron Patzer, who knows more than any of us do about Mint’s prospects. He may have worried about Mint’s ability to generate massive revenues from a free service. And he probably feels that it is hard to regret the money already in the bank from Mint’s sale. I doubt Mr. Patzer has thought of anything he’d buy with hundreds of millions of dollars that he can’t buy with the tens of millions he already made from the Intuit deal.

But my guess is that a person of Mr. Patzer’s considerable talents would have found a way to generate plenty of revenue from the millions of people using Mint to make daily financial decisions, and that it would have been more fun to beat Intuit than it has been to join Intuit.

This is not to say that all entrepreneurs have to be macho about building their business, only that they shouldn’t feel like they have to be meek either. The only time you have to sell is when you’re mostly done solving the problem you set out to solve, or when you’re no longer having fun.

Could things have turned out differently than they have, with web-company valuations suddenly plunging instead of rising? Yes but I tend to disagree with the whole premise of this anxiety: that long-term the Internet is another sock-puppet-led investor scam, and we should all cash out before the music stops.

As Chris Dixon pointed out Sunday, the price-earnings ratios of major Internet stocks is still in a normal range of 10 to 25, so the only reason Internet company valuations are increasing is because their profits are increasing.

And the reason consumers and businesses are lining up to pay for web software is that we want more of it. The valuations of some private companies are probably a bit too high right now, but the fundamental reality is that there is a massive shortage of web software in the world. If software engineers were a commodity like oil or pork bellies, the futures market would bid their value to stratospheric levels.

Since there isn’t a futures market, you have to wait for the future to arrive. Which means if there’s still a company that you want to build, keep building it.

Discussion

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  • http://twitter.com/dreeves david reeves

    Glenn,

    Great post; I think all of us would be tremendously curious about Mint's prospects as an independent service, and it's a classic question.

    Having spent some time in the software-as-a-service trenches at Intuit, I did want to respond to your comments regarding Intuit's valuation.

    Although Quicken was Intuit's flagship product when the company was founded, it's no longer responsible for very much of Intuit's revenue; for the past few years, it (including Mint) has actually been classified under “Other Businesses” that don't account for more than 10% of total net revenue. The big businesses are QuickBooks, TurboTax, services and software for accountants, financial services.

    If I were to hazard guess, most of the market cap growth is coming from growth and SaaS in those core businesses than anything related to quicken or personal finance.

    • http://blog.redfin.com GlennKelman

      That's an excellent point David. I feel silly now for not having researched that more carefully; as I wrote the line about Quicken, I wondered if TurboTax and QuickBooks were bigger businesses… thanks for commenting!

  • Basho

    The valuations of the internet companies like Facebook and Twitter are not supported by current fundamentals. Chris Dixon was talking about established companies like Apple, Microsoft, and Ebay when he cited P/E ratios. It is a fallacy to think of the two groups of companies as the same. When people buy stock in Microsoft, they expect tomorrow's profits to to be similar to today's. When they buy stock in Facebook, they expect tomorrow's profits to many multiples of today's.

  • http://twitter.com/madamian Milena Adamian

    Love the post, always analytical and very eloquent… One comment – Mint acquisition was announced in Sep 2009, arguably at one of the darkest times for the economy and more specifically, VCs and start-ups and Mint guys looked like heroes. It is very hard to judge actions of the entrepreneurs and his investors at that time. I bet “panic” factor and a big deal of an uncertainty was factored into the decision.

    • http://blog.redfin.com GlennKelman

      Agree Milena, except at that time, in the darkest hour, Redfin and 37Signals questioned the deal's wisdom…

  • http://www.aspiringmensch.com Noam Lovinsky

    I don't think you can make the valuation analogy to companies that have IPO levels of revenue (e.g. Facebook, Zynga, etc.). Mint was likely many years out from an IPO and then waiting would've only lead to a larger acquisition, but my guess is that this is not your argument. You're not trying to say that Mint should've waited for a larger exit right? You're saying they should've built a large independent company? It's just not a fair comparison to take those increased valuations and say that would've been better for Mint. It may have just lead them down a path of more venture investment, ridiculous valuations and fewer options.

    I don't know much about Intuit company culture, but I don't think that beating them is necessarily better than joining them. That's a big assumption that you assert as fact. :) Companies like Intuit are killing for new talent. It's a hard hiring market and it's only getting worse. Who knows what sort of position Aaron has at Intuit? Who knows what his level of compensation is and what sorts of goals its tied to? Intuit is the 800lb gorilla in the space and they can do more to change the space in 6 months than most startups can. If you feel like you're in the middle of a revolution, sometimes it's best to be able to influence that revolution from an interesting seat inside the 800lb gorilla.

    • http://blog.redfin.com GlennKelman

      My point Noam wasn't that Mint should be focused on an IPO or nothing, only that it shouldn't feel compelled to sell, that it was a viable option to continue growing the business, that other opportunities, including M&A opportunities, would come along. As we wrote at the time of Mint's acquisition:

      This talk of “swinging for the fences” and “striking out” or “getting thrown out at home” seems like a scare tactic. The difference between software and baseball is that you can swing for the fences and miss, and then just go back to second base. With the exception of Pointcast in 1997, which startup has gotten to the point where a lucrative acquisition is possible, decided to try building the business further, only to discover that there is no longer an exit at all?

      And I wasn't arguing that Intuit is no fun, only that it is less fun than running your own startup. That has been my experience. When I have heard Aaron speak, that seems to have been his as well.

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