Before Sam Altman took the reins as OpenAI's founder, CEO, and the driving force behind ChatGPT, he left Stanford University to launch a location-based social networking app called Loopt. Altman was just 19 years old when he co-founded the company and, as a portent of good things to come, managed to sell the company and its modestly used app to Green Dot Corporation in March 2012 for an eye-popping $43.3 million. That deal got the green light despite Loopt's flagship product gaining little ground in the social media market that was getting really competitive around 2010.
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The acquisition of Loopt gave Green Dot, an early fintech player, a bundle of key strategic benefits at a time when social media apps were kicking into higher gear. Those benefits included new banking and payment products targeted at new markets and better methods of customer acquisition and retention, which gave Green Dot a major leg-up with U.S. retailers. While Loopt never became a mass-market consumer app, the deal "gave Green Dot a shortcut into mobile payments," Roman Milyushkevich, CEO of HasData, a technology infrastructure company, told Moneywise.
"Loopt had location technology, mobile development experience, patents around real-time location-based messaging, and a team that had already spent years solving problems Green Dot was only beginning to face," Milyushkevich noted. Green Dot already had customers, payment infrastructure, and retail distribution, and Loopt had mobile product expertise and location technology. "Green Dot was betting that combining those assets would produce something neither company could build as quickly alone," Milyushkevich added.
Read More: Vanguard reveals what's coming for U.S. stocks — and it could be bad news for this group of investors The main deal takeaway is that Sam Altman dropped out of Stanford to build Loopt, struggled to turn it into a breakout consumer product, but still ultimately achieved a multimillion-dollar exit. For entrepreneurs and investors, the deal offers a few lessons about the difference between building a successful product and building a company with assets another business considers strategically valuable. "A company can fail at its original product thesis and still build valuable assets," Milyushkevich said.
"Loopt did not become the dominant consumer location network. Its products were ultimately shut down after the acquisition, while its roughly 30 employees became Green Dot's Silicon Valley mobile product development team." Loopt shows what Milyushkevich describes as a perfect middle ground, designed by Altman. "Build something useful enough that, even if the original market does not develop as expected, another company can see a valuable second life for what you built," Milyushkevich said.
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