This is part 2 of Mint’s story written by Aaron Patzer, founder and CEO of Mint.com. Read part the first part here.

By trade, I’m an inventor of sorts – or at least I like to think so . So in March 2006 I quit my day job as a software architect and came up with a (now patent-pending) way to categorize financial transactions with amazing precision (often 95%+ accuracy), just given a text description.

Automatic categorization — that’s our secret sauce. It let’s you see where your money goes. See how much you spend on DVDs, shoes, clothes, or Thai food – without having to put work into the system. That’s great, it’s an essential feature, but how was a startup going to compete selling boxed software against Intuit and Microsoft? I realized we didn’t want to compete with Intuit or Microsoft… we wanted to make a product for everyone else out there.

For starters, it seemed odd to think about “software-in-a-box” locked to single desktop. I mean really, who does that anymore? Easy decision, Mint would be web-based, available anytime and anywhere you make financial decisions.

Okay, what about price? Quicken charges $30-70 depending on the version; and they’re very clever about up-selling – the average purchase price is $54.

But wait a minute; personal finance software ought to help you have more money…somehow it seems wrong to charge for it.

Free is always the best price for consumers – especially if you’re supposed to be helping them do more with their money. So, we decided Mint would be completely free.

Then we realized Mint could go beyond free – it could actually make users money by…more to come.

Problem was I got busy; I hadn’t kept up with Quicken in many, many months. And that meant trouble. Really all I wanted to see was how much I spent on gas and groceries, and maybe learn if I was buying too many DVDs on Amazon. But to figure all of that out, it was going to take a whole Sunday’s worth of work.

Now fortunately I already had Quicken set up. If you don’t, you’ll need to:

• Drive to Best Buy
• Buy it for $30-70
• Install it
• Click through no fewer than 29 screens to link just one credit card and one bank

(fyi: with Mint it takes ~90 seconds and 2 screens)

Even though setup takes half an hour minimum, that isn’t the real problem since it’s a one time thing. For me, it wasn’t even importing data from my online accounts that was problematic. The real issue is that it just didn’t do anything with that data.

I could see all of my transactions, true, but in order to see where my money went, I had to sit there and categorize almost every one of them. Quicken auto-categorized maybe 40% of transactions (many of which were grossly mis-categorized), and when I tried MS Money, it was even worse (it got maybe 15% of my transactions). That left several hundred transactions to categorize. I just wanted to see a pie chart of my spending! Also, if you haven’t synched Quicken in a long time, there will be gaps in your history. When that happens, Quicken asks you to manually balance and reconcile your account. It’s a computer program, why can’t it balance things itself?

Okay, so at this point I could have invested an afternoon into categorizing transactions.

But instead of putting hours of work into the system to have that glorious 5 minutes analyzing a nice chart of my spending, I took a different tact: I started a company to make personal finance effortless.

Part two of Mint’s story.