Sam Altman was just 19 when he left Stanford to build an app Loopt that struggled to take off; years before ChatGPT, Green Dot paid $43.4 million for it

Before Sam Altman became the face of ChatGPT and one of the most closely watched names in artificial intelligence, he was a 19-year-old Stanford student trying to build a social networking company. Altman left Stanford University to co-found Loopt, a location-based social networking app. Thought the startup never became a major hit, but it eventually delivered a multimillion-dollar exit.

In March 2012, Green Dot Corporation agreed to acquire Loopt for about $43.3 million, offering insight as to why why a startup does not necessarily need millions of users to become valuable.

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Sam Altman left Stanford at 19 to build Loopt

Loopt entered a social media market that was becoming increasingly competitive, but its location-based product struggled to gain widespread consumer adoption. Despite that, Loopt attracted the attention of Green Dot, an early fintech company looking to expand its mobile capabilities.

The acquisition ultimately gave Green Dot access to technology, patents and employees with experience in mobile development and location-based services. "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," Roman Milyushkevich, CEO of HasData, a technology infrastructure company, told Moneywise.

At first glance, buying a social networking app that had failed to become a mainstream hit might seem unusual. But Green Dot was not simply buying Loopt for its users.

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Green Dot already had customers, payment infrastructure and retail distribution. Loopt brought mobile product expertise and location technology that could potentially be used to expand Green Dot's business. "Green Dot was betting that combining those assets would produce something neither company could build as quickly alone," Milyushkevich added, according to Yahoo Finance.

The acquisition therefore made strategic sense even though Loopt had not become a dominant social media platform.

The Loopt deal shows another side of Sam Altman's early career

The Loopt story is particularly interesting because it predates Altman's rise at OpenAI by more than a decade. He left Stanford to build a consumer technology company, struggled to turn it into a breakout product and nevertheless managed to secure a multimillion-dollar exit.

"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."

Milyushkevich described Loopt as a kind of middle ground for startups: a company whose original vision did not fully take off but whose technology and expertise still had value to another business. "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.

That idea is also reflected in how technology companies evaluate acquisitions. A startup's value does not always come from its number of users.

"Building a consumer product that gains a large following is different than building a company with strategic value," Kyle Szives, software engineering analyst and co-founder at ANTLR Interactive, told Moneywise. "There is a lot of value in technology, intellectual property, talent, and know-how even if you don't have a bazillion users."

Why Green Dot's $43 million Loopt acquisition made sense

Technology experts said the acquisition becomes easier to understand when Loopt is viewed as a technology and talent acquisition rather than simply a social media deal. "Green Dot wasn't paying for users; there weren't many," Shammi Thakur, research director at Vyansa Intelligence, told Moneywise.

"They were paying for the location tech, the patents around real-time mobile marketing, and a team that already knew how to build that stuff. That's basically an acquire hire, just a bigger one than usual."

Such deals are not unusual in Silicon Valley. A product can struggle with consumers while the underlying technology, patents or engineering team remain valuable to another company.

"A product can flop with consumers, and the company still walks away with a good exit because someone else wanted the IP or the engineers," he said. "Loopt is a decent example of that, maybe on the larger end given the price tag."

The timing of the deal also matters. In 2012, mobile wallets and location-based commerce had not yet become the everyday technologies they would eventually become. Some of the ideas Loopt was working on would later become much more familiar to consumers.

"Mobile wallets weren't really a thing yet, and location commerce was still theoretical for most people," Thakur noted. "A chunk of what Loopt was doing ended up becoming pretty standard a few years later."

What Sam Altman's Loopt story says about startups

Long before Altman became associated with OpenAI and ChatGPT, Loopt gave him an early lesson in building technology that could have value beyond its original purpose. The company did not become the social networking giant its founders may have envisioned. Yet its technology, patents and employees helped create a deal worth tens of millions of dollars.

"The bigger takeaway for founders may be that Altman built something that never really took off with regular users, but still had real value sitting inside it," Thakur said. "That gap, between what people use and what a company is actually worth, is something more founders should think about," Thakur said.