Wesabe

What did it do?

Wesabe was a personal finance management site that analysed users' financial data and offered suggestions to help them save money. Founded in December 2005, the site went live in November 2006. Users could also share financial advice with one another on its Groups page.

Why did it shut down?

Wesabe was overshadowed by its rival Mint, which took the stage at TechCrunch50, won the competition and was later sold to Intuit for $170 million. The growth that came with its iPhone app, launched in April 2009, did not last, and traffic fell steadily. In its final months the company ran on a very tight budget and could not give users enough support. According to CEO Marc Hedlund, running such sensitive data with a limited operations and security team was not acceptable; on 30 June 2010 Wesabe announced it would shut down its services on 31 July.

The story

On 30 June 2010 a letter to users appeared on Wesabe's home page: download your account data by 31 July. After that date almost all of the service's features would be switched off and the data deleted. So one of the first enthusiastic start-ups in personal finance management said goodbye.

Wesabe was founded in December 2005 and went live in November 2006. The site analysed users' financial data to offer suggestions for saving money, and its Groups page let users give one another financial advice. According to TechCrunch, the company raised $700,000 from O'Reilly AlphaTech Ventures in February 2007 and $4 million in a round led by Union Square Ventures the same year.

In the same market a rival pulled ahead fast. Mint took the stage at the TechCrunch50 conference, won the competition and was later sold to Intuit for $170 million. When Wesabe released its iPhone app in April 2009 it saw growth for a while, but traffic fell steadily after that. In TechCrunch's assessment, the site had largely been left in Mint's shadow.

In its final months the company was staying afloat on a tight budget, supported by a few developers and operations staff from the core team. In his letter CEO Marc Hedlund wrote that they could not give users the support they needed and that running such sensitive data with a limited operations and security team was unacceptable. Users were able to export their data, and it was announced that an open-source version of the site would be released; the Groups page lived on after being taken over by a customer. Hedlund later also wrote a piece explaining why Wesabe lost to Mint.

Wesabe's story holds two lessons for fintech start-ups. First, when a more visible rival pulls ahead in the same market, user acquisition can quickly seize up. Second, for a product that handles financial data, security is not an option but a condition of existence; when there are no longer the resources to meet it, closing in a controlled way can be a responsible decision.

Lessons for founders

• For a product that handles sensitive data, calculate the cost of the minimum team needed to keep it secure as your shutdown threshold and plan your cash accordingly.
• Do not underestimate the visibility of a rival pulling ahead in your category; publicity moments such as Mint's TechCrunch50 win can decide user acquisition.
• Letting users export their data when you close preserves trust; Wesabe offered a way to download data and promised an open-source version.

Sources

1. Wesabe (Wikipedia)
2. Online Finance Startup Wesabe Heads To The Deadpool (TechCrunch, 2010-06-30)
3. Wesabe Secures $4 Million Investment Round (Wired, 2007-06-20)

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