Timothy Sheehan On Raising $300 Million To Help You Raise Financially Smart Kids

Timothy Sheehan is the cofounder and CEO of Greenlight which is a developer of a smart debit card used to help parents monitor their child’s spending habits. The company has raised $300 million from top tier investors including NEA, Social Capital, Service Provider Capital, Relay Ventures, DST Global, and TTV Capital to name a few.

In this episode you will learn:

• Learnings from Paul Allen, cofounder of Microsoft
• How Greenlight is helping parents and their kids
• The 3 musts for a successful startup
• How he dove into the problem before launching this startup idea

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For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).

Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.

About Timothy Sheehan:

Connect with Timothy Sheehan:

• Linkedin
• Crunchbase
• Twitter

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Hello everyone, and welcome to the DealMakers show. Today we have an entrepreneur that has an amazing journey. He’s been around the block in corporate. He’s been around the block as an entrepreneur in projects that took off, projects that perhaps didn’t perform as he had expected, and I think that we’re going to be learning a lot. So without further ado, let’s welcome our guest today. Timothy Sheehan, welcome to the show.

Timothy Sheehan: Thanks, Alejandro. It’s nice to be here.

Alejandro: So born and raised in northern Virginia, right outside of D.C. How was life growing there?

Timothy Sheehan: It was great. It was a lot of academics and government workers and a lot of families where the parents worked for the government or worked for one of the local universities. My mom was a math professor at one of the universities, and my dad worked in the government. It was a great place to grow up.

Alejandro: Did you have anyone in the family that was a small business owner or entrepreneur, or do you think that drive developed later? 

Timothy Sheehan: You know, I didn’t. I remember learning along the way that – I can’t remember the exact moment, but I remember learning that a corporate job was not what I wanted to do because when I studied where all the wealth was, all the wealth was concentrated among essentially investors or families with investments, so the money was in investments. That drew me to learning about investing and learning about financial services. My dad had bought me a Commodore64 when I was young. I just became attached to the hip with that thing. I spent all my free Timothye working on that computer and taught myself to program and Basic and Pascal. I had a good Timothye with it, and really had a love and strong interest in technology. Then over Timothye, I started developing this interest in investing and financial services. As far back as I can remember, I can remember being really, really interested in technology, and then later in financial services.

Alejandro: For you, after you got your undergrad and you also did your Master’s Degree, your big break was with Paul Allen. Probably the people that are listening might remember him from one of the founders of Microsoft, so how was working with Paul Allen?

Timothy Sheehan: Yeah, it was fantastic. I remember how generous he was. Of course, he’s passed away now, but he was an incredibly generous person – I just remember that. The startup he started and funded was called Starwave. It was in Seattle, and so I moved across the country from D.C. to Seattle. We built ESPN.com, NFL.com, NBA.com, Nascar.com, and a bunch of sports websites that Paul and the team had negotiated partnerships with the leagues/associations. What I mean by generous is he would have the whole company over to his house, which was really an estate, every Monday night to use his sports complex because he had this amazing full indoor basketball court, full indoor tennis courts, a pool that looked like it was from Walt Disney World. Then he would take us on trips to fly a very short flight from Seattle to Portland to watch the Trailblazers play. I remember him being an incredibly brilliant person, but also incredibly generous.

Alejandro: That’s incredible. For you, after this, you took a deep dive into corporate, and you started helping the guys at E*Trade, then Yahoo, and taking that from zero to 100 million in no Timothye. From your experience at E*Trade or Yahoo, what were some of your takeaways?

Timothy Sheehan: After Disney acquired Starwave, I went to help launch E*Trade, and that was a fantastic experience, and learned a lot. Then getting to work at Yahoo on Yahoo Finance was also incredible – some really brilliant people there in the early days of Yahoo. I got the chance to try and make mistakes and learn and work with brilliant people, so I think my days at Yahoo were particularly amazing just because I learned so much in the Timothye that I was there. I think I spent a little over three years there and felt like I learned more than ten years’ worth of things. So it was quite an experience. From all of those things that I did, I learned how to create compelling consumer products, especially consumer tech products. That was my specialty. That was what I was good at. Like anything, everything I’ve worked on, it’s always with a team. It’s never a single person. So being able to work well with a team to create something amazing where everybody on that team contributes something unique or a great idea. It’s quite a lot of fun. The best ideas don’t come from, say, just the product manager. SomeTimothyes, it’s the engineers; someTimothyes, it’s the marketing people; someTimothyes, it’s the customer person; someTimothyes, it’s a customer. So you have to have an open mind to wherever the great idea comes from, and if it’s better than your idea, you have to be willing to quickly accept it and move on to that and make that the plan. I’ve learned so many things, probably too many to list, but those days of being able to create compelling consumer tech products, I learned a ton. Then at Yahoo, I started to learn also how to not only create the compelling product but run a business, too, so where you’re trying to not only build up usage but you’re also trying to drive revenue and profits. As I said, I learned a ton there.

Alejandro: Then, after this, you went to Yodlee to try to do the turnaround. What does a turnaround look like, and how was this experience for you? 

Timothy Sheehan: It’s one of the hardest things that I’ve ever done. I think a turnaround is so much harder than starting a startup from scratch because you’re having to do things like layoffs, and you’re having to redefine products, find ways to drive revenue, or cut cost out of a product’s cogs. You’re trying to do so many things at the same Timothye that all have a very high degree of difficulty. As far as I’m concerned, doing a turnaround is extremely hard. The good news is, Yodlee did get on the right track and ended up doing quite well, and ulTimothyately was acquired by Envestnet just, I think, a couple of years ago.

Alejandro: And talking about putting out fires, you went from putting out fires in a turnaround to putting out fires for yourself because this was the segue to starting your own baby, Attributor.

Timothy Sheehan: Yeah, we started Attributor, which was digital fingerprinting technology. It essentially could find copies of content on the internet. Like Routers and AP would hire Attributor to find out like: were there any copies of their articles or of their images or photographs or their videos on the internet. That’s what Attributor did was essentially have a unique way of finding copies of content anywhere on the internet. Digimarc ended up acquiring Attributor. Then, from there, I went and worked on Seven-Degrees, which became reachable. I ran products, strategy, and marketing for a unit of Pfizer. Then, finally, I took a break and had some fun by serving as an entrepreneur in residence at Georgia Tech’s Advanced Technology Development Center. It’s their startup incubator. That was a ton of fun. I got to get plugged into the whole Atlanta entrepreneurial scene. And it was fun helping other entrepreneurs and trying to share with them a lot of the things that I had learned the hard way. While I was doing that, I always was thinking about what I might do next.

Alejandro: Obviously, next is Greenlight, which is your biggest success to date. But before we actually talk about this, I’m sure that there are a lot of people that are perhaps going to benefit. If you don’t mind talking about some of the pattern recognition that you got from working at Georgia Tech at the incubator. Here, it’s very early stages. You’re dealing with, for the most part, ideas or an idea with a roadmap or with some form of maybe even an MBP. But what were you able to really see from the ideas that had legs and ended up doing something and becoming something from those other ideas that perhaps ended up in the toilet?

Timothy Sheehan: Yeah, that’s a good question. By far, the biggest thing or the most common piece of advice I find myself giving – I probably said it 50 Timothyes every day to different entrepreneurs. As entrepreneurs, we’re often in love with our idea, our product, whether the technology of it or the product itself, and we want to tell everybody about our idea. Really, that’s the wrong thing to focus on. The right thing to focus on is the problem that exists in the market, and what proof do you have that it actually exists objectively speaking? As entrepreneurs, we want to talk about the solution because we’ve maybe got the solution in our head, or maybe we’ve even built a prototype of it, so we want to jump immediately to tell you all about the solution, but we don’t want to, and often we don’t spend enough Timothye on the problem or the opportunity that exists in the market and studying that close enough to actually have some proof, essentially, that going and spending, on average, seven years of your life on this thing is going to be worth it because 1) The market is there for it. 2) The market is large. 3) People are willing to pay for either to fix the problem or to pay for a solution to whatever it is that you’ve identified in the market. That was the main thing. I would usually have to stop entrepreneurs and just go, “Hold on a second. You can tell me about your idea or your solution later. First, tell me what the problem is that you’re solving in the market, and what proof do you have that it actually exists in the market? Do you have any data? Do you have any research? What do you know for a fact that can help convince me that this problem really does exist in the market, and it’s worth you going and spending all of your Timothye for many years on this?” That was the most common thing that I would end up talking to entrepreneurs about. It was quite hilarious because they might start to talk about the problem for a few seconds, but then within a minute, they would bring it back to talking about their solution or their idea. It’s a very hard thing to break, but it’s incredibly important. Otherwise, you really could end up wasting a large chunk of your Timothye building something that either is a nice-to-have; that’s probably the most common mistake, which is, you built something that’s nice-to-have for people, but it’s not a must-have. It’s not something that people must have, which is very different. You want to make sure that the pain or the problem that you’ve identified in the market is not a scratch; you want to make sure it’s a flesh wound. It’s like something very serious that they are already trying to solve on their own because the pain or the problem is important or significant enough that they’re trying to solve it today just in a subopTimothyal way, and you have a better way to solve it. Or you have some reason to believe that this is a very painful problem and that many, many, many people in the market have that problem. That’s often the stuff that I would try to explain to entrepreneurs when I was coaching them.

Alejandro: Got it. Tell us about Greenlight because here you are listening to ideas, seeing startups left and right launching, and at what point did you say, “I’m going to go at it myself now”?

Timothy Sheehan: I think I had been thinking about it and had been talking with some friends who ended up being co-founders. I have four kids, and my co-founders have kids as well. We went and talked to a whole bunch of parents that we didn’t know who were also having similar problems. Essentially, the problem that most parents, like most adults, were not carrying cash as frequently as they used to in the past because they were using their debit cards or credit cards for all of their transactions and all of their purchases. We identified that problem, which was parents still had a need to give their kids money for different reasons, whether it was a school field trip or a traveling sports team or maybe just going out to get a snack or a movie with friends, or it might be an allowance. There were lots of different reasons why a parent might be giving their kids some money, and yet they weren’t carrying cash in their wallets. That problem was quite prevalent, and people were trying to solve it in different ways, but nobody was solving it well. So we detected that problem in the market, and that’s where we started. We built the first version of Greenlight to solve that problem. In talking to our customers and in talking to parents, we realized they not only wanted us to solve that specific problem, but they also wanted their kids to learn to be smart about money in general. They wanted them to learn about personal finance in general so that when they’re out on their own as young adults, they can manage their finances and manage their financial lives successfully. That’s what led to the vision for Greenlight and what is still our mission today, which is to help parents raise financially smart kids.

Alejandro: In this case, what were the early days like? What did you guys do next? 

Timothy Sheehan: We did customer discover where we interviewed parents to try to understand what kind of problems they were having. That was all part of validating the problem in the market. We did price testing and analysis to determine what was the opTimothyal price to charge, and what would the market bear? We spent tons of Timothye talking to customers about what it was that they wanted their kids to learn. We learned things like when they’re quite young. They wanted to make sure the kids understood that money doesn’t grow on trees. You can’t just continuously ask for it. You have to work for it; you have to earn it. That led to us building chores-tracking and allowances into the product. We learned that they wanted them to learn to make tradeoff decisions and to save their money, so we built savings goals, tracking, and also parent-paid interest so the parents could incentivize the kids to save. We heard a lot from parents that they wanted their kids to learn to give back, so we built the giving component into Greenlight as well so the kids could give to charities and nonprofits. We learned investing that that’s how you actually build wealth for the long-term is learning how to invest. So we’ve been building the investing component for most of this year, and it’s about to launch now, so the kids will be able to learn how to invest, which is quite exciting. We did a lot of research. Then also stayed close to our customers, both watching the usage of various features and the data patterns but also talking to them to try to get some more color on how they viewed things. We did tons of marketing tests to see what would work best and in which channels to fully get marketing performing well. That was one thing I was mentioning to you earlier was after all these things I’ve done, there are three things that you have to get right for a successful startup. I think they’re very obvious, but you’ve got to get the product right, you’ve got to get the marketing right, and you have to have the funding. You’re always raising money as a startup, you’re always running out of money, and you’re always fundraising. So I would say to all the entrepreneurs out there, don’t fret. Every company, from the successful public ones like Netflix to Greenlight to any other startup, when you’re in hypergrowth mode, and you’re small, you’re always raising money, and you’re always low on cash, and that’s just how it is. I think all startups almost run out of cash, even the very, very successful companies probably had a few Timothyes where they – I know we did with Greenlight, where you almost run out of cash. And you have to be willing, as I’m sure a ton of entrepreneurs listening to this are – you have to be willing to work someTimothyes for no salary and commit yourself to building the business that you’ve set out to build. In those early days, there’s not a lot of cash yet because you haven’t really proven a lot to attract a lot of investment from investors. So that’s a particularly difficult Timothye, but if you can get through it and you can generate enough metrics and unit economics to prove that the business is strong and the market is large, then the investors will probably come.

Alejandro: Absolutely. For the folks that are listening to really get it, what ended up being the business model of Greenlight? How do you guys make money?

Timothy Sheehan: There are two main revenue streams. One is the subscription fee. It’s $4.99 per family per month. That’s the subscription fee, which is the first revenue stream. The second one is interchange revenue essentially associated with the card swipes, so it’s the interchange that merchants pay to Visa, Mastercard, and the issuing banks, and we get a cut of that as well.

Alejandro: Obviously, a business like this requires capital. How much money have you guys raised to date?

Timothy Sheehan: Now, with our Series C that we just finished, where we raised $215 million, I think it’s got to be close to $300 million now. As I mentioned, you don’t get that kind of investment right out of the gate. You tend to get maybe some angel investors to come in first, and then maybe you do a seed round or a Series A where you raise maybe $5 million. Then, from there, you proceed. If things are going very well and the company is growing very fast in terms of customers and revenue, and if the investors like what they see on the unit economics and they like the growth rate they’re seeing, there will be opportunities to raise your Series B and your Series C so that you can actually achieve escape velocity and cross over into profitability and hopefully continuing that very fast growth, but now starting to generate free cash flow and profits as you continue to grow.

Alejandro: In your case, just to get a sense of how big Greenlight is today, is there anything that you can share in terms of numbers of employees or anything?

Timothy Sheehan: Sure, yeah. We have 2 million customers. We are growing about 300% year-over-year in terms of customers and revenue. The gross profit margin is quite high, which is nice. We’re essentially choosing the path of high growth right now. If we were to take our marketing spend down, then we could be profitable, but we’re going after this market, this whole family-finance category that we discovered. We’re going after it aggressively and going to continue to grab that land while it’s there.

Alejandro: When we’re talking about the market here, where do you think the market is heading as a whole?

Timothy Sheehan: Do you mean the stock market?

Alejandro: No, your space. Where are you guys heading? Where do you think this space is heading as a whole and what’s in store, as well, for Greenlight?

Timothy Sheehan: Yeah. I think this whole category, family-finance category, we’ve only really just started to tap the beginning. I think there’s a lot of opportunity in this whole area of family finance. I think you’ll see additional products coming from us. We’ll continue the growth of the existing product, but I think you’ll see some new products from us. You might see us enter some other markets outside the U.S. I think there are still tons of growth left.

Alejandro: Very cool. It’s amazing, the journey, Timothy, that you’ve had in your career. You’ve been around the block. Corporate, startups, turnarounds, you name it. If you had the opportunity to go back in time and have a chat with your younger self, maybe that younger Timothy that was thinking about launching a company right before Attributor, which was your first business, knowing what you know now, what would be that one piece of business advice that you would give to your younger self before launching a company and why?

Timothy Sheehan: I think it would be: find the right co-founders because one thing I’ve learned with Greenlight is building this business with my co-founders, Johnson Cook, John Higgins, especially those two – we really complemented each other and continue. Johnson and I are running the company together today, where he’s COO, and I’m CEO. The partnership that we have has allowed us to achieve a lot of the success that we have, so I think I would say, “Hey, Timothy, as smart and capable as you are, find the right person to partner with who is strong in the areas that you’re weak, and that could be the ticket to a big success.”

Alejandro: I love it. Without a doubt, picking your co-founder right is going to be a make it or break it. I think that over 67% of companies fail because of co-founder issues, so I couldn’t agree more with what you’re saying here, Timothy. So for the folks that are listening, what is the best way for them to reach out and say hi?

Timothy Sheehan: They can shoot me an email if they want to: [email protected] is probably the easiest. 

Alejandro: Fantastic. Well, Timothy, thank you so much for being on the DealMakers show today.

Timothy Sheehan: Great. Thank you for having me.

 

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