But here's my bigger bet. Using this, VISA will launch a competitor to FICO.
There's still lots of problems to solve in the connectivity space that Plaid sits in, and the pursuit of some kind of unified open personal finance data standard isn't really on the table for those steering the big initiatives (e.g. FDX). This is mostly due to the variety of the data and number of players (tens of thousands of institutions). For more on that, this interview with Jeff Leathers, founder of Quovo, a similar company that was acquired by Plaid in 2019 is not a bad listen:
Yup, and I'd clarify that the new options aren't 1:1, but calculated based on some price-per-share of the acquired company.
* $4.9B cash consideration
* $400m retention equity as VISA RSUs
Overall, I'm no fan to these scrapers. Apart from the army of engineers (internal cost) required to maintain them, on the outside they sell a promise that is putting user's privacy at risk.
This is especially prevalent in the bookkeeping space.
Many "me too apps" stitch their services using Plaid to provide bookkeepers with bank feeds & statements for their clients.
Other's use Xero's HubDoc (which Xero paid 70m for few years back) which basically does the same thing; scraping financial statements from many online services using a combination of tools and humans. It's a goldmine for hackers; plain text logins are stored in their database to practically many online accounts owned by business owners.
Amazing to what degree people will go to to save few hours of labor each month.
You gotta figure that's near the top of the S-Curve, right? Very close to 100% of the TAM in the US, and I would imagine that global expansion is costly given banking regulations in different regions. Visa already has the reputation / relationships to push forward there.
Congrats to the team!
I've seen an offer at a ~50 person company for 1-2 basis points.
>7 points by Rainymood on June 21, 2016 [-]
>I'm going to be really rude here (forgive me) but I feel like every time a security question comes up you dodge the question really hard.
>I want to know one thing: If I log into your service with my bank credentials. Do you store these as plaintext files (or "encrypted" files of which you have the encryption key)? Yes/No.
>Furthermore, congratulations! I've been trying to start something up like this in Europe but I feel like there are way more restrictions in Europe on banking data and this kind of third-party aggregation. Sorry for being so rude.
Here is some previous news on Plaid on HN.
* 2016-06-20 Fintech Firm Plaid Raises $44M (wsj.com)
* 2018-12-11 Fintech startup Plaid raises $250M at a $2.65B valuation (techcrunch.com)
* 2020-01-14 Visa Buys Plaid (wsj.com)
Not unusual at all. Pretty typical for CVC in fact. Couple of factors:
1. CVC (Corporate Venture Capital) typically tries to invest in similar markets of companies that either are competitive or pseduo-competitive (think of it as a hedge). For example, this would be like PayPal investing in Venmo.
2. It's cheaper in the long run for a CVC to make 10 of these bets to find that one that doesn't kill their core business model (usually a cash cow). That's why you see Ford/GM putting money into self-driving car start-ups.
3. They were probably not at the level of scale ready for Visa to take them on at the time of the Series C. This was basically a down-payment for their eventual acquisition. It basically "you're too risky for us to buy, so here's some money that we can write off if you end up failing, but if you do fail, we don't have to deal with all of the crap that goes with a failing bus unit (layoffs, compliance, etc).
I'm curious to learn more about strategy here since Paul Graham says there probably aren't more Googles because companies are acquired too soon. Facebook is famous for the Yahoo! offer. Stripe would have been a great acquisition (if they would have accepted any).
1. A de-risking strategy. Investing early effectively discounts a future acquisition, but doesn’t go so far as to bet the farm on the businesses success. They would also gain very early and regular access to financials that would tell them if it’s worth the follow-up plunge or if it is on its way to bust.
2. The founders thought there was more room to grow independently, but wanted to keep Visa friendly and close to home. Best way to do that is to change an acquisition conversation into a partnership/investment conversation.
Or they realized Plaid was becoming too valuable to its competitors. Or they didn't have the cash available at the time. Or Plaid didn't want to sell at the time.
Google Ventures participated in funding a number of companies that Google later acquired.
Had Plaid only been mildly successful, Visa likely would have just continued to let it run and get back its investment. But, now they have a decent amount of transaction data among other things, possibly making it more advantageous to own it outright than hope you can be one of many partners getting access to that data.
Never been a fan of scrapers. Very unreliable and a big security hole especially when MFA is used.
I wonder if the tightening data privacy regulations (CCPA et al) forced them to sell or whether it was just a good sale opportunity.
I learned about it by working in gambling. I cannot believe that people are OK with just giving their online banking details to a company. It's insane! but people are willing to use it because there is almost no other way of getting the product they want.
Take the legislative risk out of handling those types of transactions, and shit like this will disappear.
Edit: I guess I’ll look up their homepage, and try to scroll through the marketing speak to figure it out. Seems like it would be nice if someone in the know could just tell us.
maybe its a good thing i didn't get hired for their SLC office, because i would have quit over this.
i want to be a part of building something that can survive as an independent entity. selling is an admission that this is either not a goal or not possible given the current position of the company. both of these are against my ethics. why should i stay at a company that has openly admitted that they are incapable or unwilling to pursue independence?
> but there's no reason to sell if you have a solid business plan and a realistic vision for future profitability.
They had 5.3 billion reasons to sell. With an acquisition offer that high, it's not about the company's ability to survive independently. It's about doing what's in the best financial interests of the company and employees.
> i want to be a part of building something that can survive as an independent entity. selling is an admission that this is either not a goal or not possible given the current position of the company. both of these are against my ethics. why should i stay at a company that has openly admitted that they are incapable or unwilling to pursue independence?
Your distinction is a bit arbitrary. Plaid wasn't a fully independent company after they took significant money. Take a look at their board of directors. Only 2 out of 5 board members were Plaid executives. They had already "sold" part of the company when you applied.
They don't do ACH transfers.
"""To get started with ACH payments, you need a system that can connect you (the originator of the ACH transaction) with an Originating Depository Financial Institution (ODFI). Additionally, that system should be able to give updates on the status of the payment and give the developer an interface to authenticate, verify, and charge the user on demand.
That’s where Stripe comes in. In January, the payments infrastructure giant debuted support for ACH payments through its platform alongside a partnership with us here at Plaid. Now, Stripe users can authenticate their customers through Plaid (or, if they must, micro-deposits) and then charge them through ACH."""
Am I misunderstanding something?
Okay so maybe they weren't doing the transfers, but they were certainly facilitating them and adding to the adoption of more ACH based payments (which means less credit-card payments). Same conflict of interest applies. What does Visa care about bank account verifications?