Green Dot: The $2 Billion IPO You've Never Heard Of

There’s a good chance you’ve seen prepaid credit cards on the shelves at 7-11, Walmart, CVS, Rite Aid, Radio Shack or a variety of other retail outlets. Those cards are usually issued by Green Dot, a Los Angeles based startup that went public earlier this year and is worth over $2 billion.

They allow people who normally can’t get credit cards – like teens and those with poor credit – a way to pay for things like the rest of us do, with a Visa or Mastercard. And people love them. The company made $64 million in profit in 2009 on sales of nearly $235 million. The company boasts over ten million customers.

That isn’t what makes Green Dot special though. You have to hear the story of the ten year old company from founder and CEO Steve Streit and early investor/board member Michael Moritz from Sequoia Capital.

There were ups and downs, many of them, over the years. And we’ll have both Streit and Moritz on stage this morning at TechCrunch Disrupt to talk about the good times, the bad times and, more recently, the exceptional times.

A few notes about the company taken from an investor presentation during the IPO process:

  • Green Dot began its life ten years ago at a small table in the bedroom of my home in Pasadena, California. The idea was to provide MasterCard and Visa debit cards to people who otherwise couldn’t get a card from a traditional bank.
  • Our first big innovation was creating a way for consumers to buy and fund a bank debit card right off the rack at a neighborhood store. The first card we ever sold was a so called “prepaid” MasterCard at a Rite Aid store in Loudoun County, Virginia.
  • Now ten years later, Green Dot products are sold at roughly 50,000 retail stores coast to coast with a Green Dot location within a short walk of just about everyone.
  • These locations along with our Green Dot website enabled us to acquire over 5 million new accounts and process over $7 billion in deposits to those accounts over the past 12 months.
  • Our second big innovation was in 2004 when we created the first “cash reload network” where any prepaid card issuer- including our competitors- could have their customers go to a Green Dot retailer to load money onto their prepaid debit card.
  • Today, over 100 prepaid card programs rely on our “Green Dot Network” for reloading cash- with over 25 million reload transactions sold over the last 12 months.
  • Our third innovation, developed along the way to serve our expanding business, is our Green Planet technology platform that today serves as the “operating system” for how regulated bank issued debit cards are purchased, activated and reloaded at retail stores.

This is one of the companies that Mortiz is most proud of. He’s been with them since the early days and put $10 million or so into the company. Total investments from others accounted for another $8.5 million, and Sequoia invested additional cash to buy out some of those early investors.

By the time Green Dot began the IPO process Sequoia Capital owned over 30% of the company. It netted up to 35.2% at the closing of the IPO. Sequoia has never sold a single share in Green Dot, before or after the IPO.

So what’s that investment worth now? Roughly 35% of $2.1 billion in highly liquid public company common stock. By my count that’s about $700,000,000 in gain from a $10 million investment (plus another $10 or so put in to buy out other shareholders over time.

That’s a 35x on $20 million investment. That is what the big boys in Silicon Valley call a big fucking home run deal.

You may be familiar with other Moritz/Sequoia deals recently – Flip selling to Cisco for $590 million or so. And Zappos being acquired by Amazon for nearly $1 billion.

Those deals, which most VCs would kill for, don’t get Moritz out of bed in the morning. He expects every single company he works with to go for the big score – an IPO and a life an an independent public company. Zappos and Flip didn’t make it over the hump. Green Dot, by God, did.

Laws of awesomeness ensure that founders with the right level of intelligence, risk tolerance and patience can stay the course and get over the IPO hump. These are the companies that will forge the future of Silicon Valley and help spawn countless new startups down the road. We celebrate Green Dot and we celebrate Sequoia Capital for taking an idea and running with it, patiently, until they became a $2 billion company.

We, too, were too busy breaking news about Google’s most recent $15 million acquisition of, or whatever, to even notice what Green Dot was doing down there in the glitzier part of our state. Shame on us – this company is providing a low cost solution for people unable to get credit cards to be able to participate more easily in our economy. It’s a good thing.

Tune in around 9:30 am later today (Tuesday) to watch me interview Mike and Steve at TechCrunch Disrupt. You can watch the live stream here. It will be a rare treat to hear Moritz himself, a Silicon Valley legend, talk about how he helps companies through good times and bad, not selling a single share until well past the IPO.

To put it another way, getting the chance to listen to Moritz talk about how he does what he does is like being able to watch Michael Jordan play baskedball with you, one on one. You’ll want to be there as he dunks the ball hard a few feet over your head.