RIP Wesabe

It's always sad when any business is forced to shut its doors.  More than just a cash-generating entity, a business is also the manifestation of a dream, the real-world expression of an original idea and the unending toil necessary to bring it to life and to sustain it.

Wesabe is an example of a company with the right idea, at the right time, but with incomplete execution.  Wesabe's early success was impressive, and was largely due to the novelty of what it offered: the ability to manage the entirety of one's personal finances in one place.  The aggregation of personal financial data - credit cards, bank accounts, bills - was truly revolutionary, and in an era of increasing economic uncertainty and complexity, was embraced by many consumers.  Online personal financial management (PFM) seemed to have almost unlimited growth potential.

But Wesabe faced a host of challenges along the way, not only in the form of competitors (Mint, Geezeo, Jwaala, and Yodlee, to name a few), but a lack of revenue model.  In those "early" days of Web 2.0 (four years ago), the prevailing business model was (and in many cases, still is) free.  That is, offer the product for nothing to generate buzz and a sizeable user base, then monetize later.  Of course, sustaining operations in the absence of meaningful revenue can be a true test of faith (and capital), and investor patience is only so long.  Mint, Wesabe's chief competitor, realized early on how to leverage its data to generate substantial revenue via targeted ads.  Nine months ago Mint was acquired by Intuit for $170 million.

Wesabe went a different route, seeking to white label its product to credit unions.  Springboard, as it was known, only generated moderate success, and Wesabe signed on a handful of licensees.  Fierce competition from Yodlee and Geezeo posed a sizeable challenge to market penetration, and the Mint acquisition meant that Mint would be deployed to the 1,800 banks and credit unions serviced by Intuit.  As resources were allocated to the development of an institutional market for its product, Wesabe's ability to service its consumer user base slowly degraded.

Wesabe's failure may be due to a host of factors, but surely at the center lies a fundamental crisis of business identity.  The lesson for start-ups in any industry is clear: know who your customer is, and have a viable revenue model from the outset.