This morning Plaid, a fintech (finance + technology) company that had raised about $350M so far and was valued at about $2.7 B in its previous round, 1 year ago in Dec 2018, was acquired by Visa for $5.3B.
The company itself is about 6+ years old and provides APIs to help companies such as Venmo, Robinhood get API level data access to their users Bank accounts, credit cards etc.
If you have been around for a bit think about companies such as Yodlee and others.
I remembered when Mint was acquired by Intuit. Yodlee powered Mint, but Yodlee was B2B and Mint was the consumer facing app. They got the huge value.
In this case, there is no doubt that the fintech companies (59 unicorns) that depend on Plaid are valued richly, but the infrastructure provider – Plaid, also deserved the huge valuation.
In looking at why Plaid was acquired, there are 5 reasons given by Visa. (pdf file)
- Over 75% of internet consumers use at least 1 fintech app and Plaid provides the underlying plumbing to all / most of them – meaning, there are more customers to get.
- Plaid provides data and network access, which is fairly similar to Visa’s business model – making it an easy to justify acquisition
- Developers are driving new fintech app adoption and Plaid provides solutions to developers – a new audience for Visa to target
- As opposed to old banks (yesterday’s fintech companies), the new fintech companies depend on Plaid
- Plaid can help Visa with international API driven access to other fintech organizations beyond the US where this is just beginning.
Overall, a super impressive story. I am not sure this is worth $5.3 Billion, but who am I to question or value it. It is worth that and more to Visa and they are paying.