Mint.com: Nurtured by Super-Angel VCs

Intuit is acquiring a startup conceived by a "25-year-old kid" and funded by First Round Capital, a new breed of high-risk, early-stage venture capitalist

By Spencer E. Ante

Editor's Note: This story contains an updated list of angel investors lined up by First Round Capital.

Intuit's purchase of Mint.com was a big win for Mint CEO Aaron Patzer and the rest of the 38-person staff he assembled to run the personal finance Web site. Yet the $170 million acquisition also vindicated a new breed of early-stage investor that is betting aggressively on startups while big-name venture capital firms conserve capital and shy away from risk. These so-called super angels are trying to reinvigorate venture capital by taking it back to its roots, when firms were smaller, nimbler, and more adept at helping to build companies from the ground up.

Mint.com owes much of its success to one such investor, First Round Capital, which opted to back the fledgling company at a time when other VCs demurred. Indeed, the Mint.com acquisition is First Round Capital's largest exit, beating out the $100 million sale of portfolio company Powerset to Microsoft (MSFT). And although First Round Capital would not quantify the return on its investment, co-founder Josh Kopelman says the Mint.com deal generated the highest return of any deal the firm has done. Previously its best return came when eBay (EBAY) acquired StumbleUpon for $75 million, which generated more than 14 times First Round Capital's original investment. "I don't think this changes our strategy," Kopelman says. "It is continued validation for our approach."

When First Round Capital made its initial investment in 2006, Patzer was a 25-year-old software engineer working for an electronic design automation company. But the Duke- and Princeton-educated entrepreneur envisioned building a Web site that would help consumers manage their money—one much easier to use than Quicken, the market-leading product from Intuit (INTU). "Quicken is not quick," Patzer recalls saying to himself at the time. "There's got to be a better way to do this."

An Impromptu Demo

After spending 14 hours a day for six months building an early version of Mint out of his own savings, Patzer began looking for money to take the company to the next level. He was turned down by a dozen angel investors and many top established venture capital firms, including Sequoia Capital, Greylock Partners, and Clearstone Ventures. "Every single VC told me I would fail because no one would trust a startup with their financial info," Patzer says.

First Round Capital saw something other investors missed. At a networking event for entrepreneurs in the summer of 2006, Patzer pitched Kopelman, piquing his interest. "I had a server running on a laptop in the trunk of my car," Patzer says. "He waited a couple of minutes. I ran out and got the laptop and fired up a demo."

Kopelman liked what he saw. He asked Patzer to send him a business plan. "We saw a really big market and someone who had really thought it out," Kopelman says. "He saw an opportunity to solve a really big pain point for customers." Within 10 days, First Round Capital offered to invest in the startup. "They moved incredibly fast," Patzer says. "First Round Capital put down a term sheet without caring what anyone else would do."

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