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.