Undoing a $5 Billion Acquisition and Building a Durable Standalone Plaid (with Plaid CEO Zach Perret)

Summary

ACQ2 by Acquired Episode: "Undoing a $5 Billion Acquisition and Building a Durable Standalone Plaid" featuring Zach Perret, CEO of Plaid Release Date: May 27, 2025

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Introduction and Background

In this compelling episode of ACQ2 by Acquired, hosts Ben Gilbert and David Rosenthal engage in an in-depth conversation with Zach Perret, the co-founder and CEO of Plaid. Plaid, renowned for enabling seamless bank account linking to fintech applications, has navigated a tumultuous journey marked by a high-profile acquisition attempt by Visa, subsequent antitrust challenges, and strategic pivots to build a robust standalone enterprise.

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The Visa Acquisition Attempt

The discussion kicks off with Zach recounting the pivotal moment in January 2020 when Visa announced its intent to acquire Plaid for approximately $5 billion.

[02:51] Zach Perret: "In January of 2020, we announced that Visa was acquiring Plaid for a big valuation, just above $5 billion. It was the culmination of a lot of back and forth over the past three to four months."

However, this acquisition faced significant hurdles when the U.S. Department of Justice (DOJ) filed an antitrust lawsuit, leading Plaid to terminate the deal.

[05:59] Zach Perret: "Despite the fact that the DOJ later investigated this transaction for antitrust and alleged that Visa was a monopolist, I have never thought that our products directly compete."

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Navigating Antitrust Scrutiny

Zach delves into the complexities of the acquisition fallout, emphasizing that Plaid and Visa operated in complementary, rather than directly competitive, spaces.

[05:17] Zach Perret: "In some meta sense, you could say we produce substitutes, meaning you could pay for something with a bank account or you could pay for something with a credit card, but even those in almost no single transaction would you consider both of those payment methods to be viable."

The DOJ's scrutiny was unexpected, particularly Zach's belief that the acquisition wouldn't raise significant antitrust concerns.

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Life After the Failed Acquisition

Following the termination of the Visa deal, Plaid experienced a surge in growth, fueled by the increasing reliance on fintech products during the COVID-19 pandemic.

[08:41] Zach Perret: "Consumers were stuck at home. They realized they still needed financial services. So usage of Plaid-powered products just caught on fire."

However, as the antitrust lawsuit progressed, the uncertainty surrounding the acquisition began to weigh on Plaid's leadership, prompting discussions about the company's future independent trajectory.

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Post-Acquisition Business Growth & Decision to Walk Away

Despite the looming antitrust challenges, Plaid continued to operate independently and aggressively grow its business. This strategic decision paid off when, in January 2021, Plaid chose to walk away from the Visa acquisition, recognizing that their standalone valuation had significantly surpassed the initial offer.

[11:35] Zach Perret: "We ended up closing and had tons of team messaging, so on and so forth. One of the hardest things is explaining this level of change management within the organization. But we got through all that stuff."

The subsequent fundraising round saw Plaid's valuation rise from $5 billion during the Visa acquisition to $13 billion, later adjusting to $6 billion amid fluctuating market conditions.

[13:30] David Rosenthal: "How close then were you to the Altimeter financing? Because that was a big step up. What was it, 5 billion to 14 billion at the valuation of that round."

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Diversifying Plaid’s Business

Transitioning from a primarily bank account linking service, Plaid embarked on a strategic pivot to build a comprehensive analytics platform leveraging its extensive data ecosystem.

[33:33] Zach Perret: "We definitely would have [diversified]. Our strategy has always been to build the API for your bank account, but in the long term, we believe we can build a much more valuable Analytics Business."

Plaid expanded into anti-fraud solutions, real-time credit scoring, and enhanced payment analytics, positioning itself as a pivotal player in the modern financial landscape.

[35:10] Zach Perret: "We've created three major new product areas: anti-fraud analytics, a real-time credit system, and payments analytics. These leverage our aggregate data set in unprecedented ways."

These initiatives not only diversified Plaid's revenue streams but also strengthened its position in the fintech ecosystem by providing indispensable tools to both fintech startups and traditional financial institutions.

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Managing Growth and Market Cycles

Plaid’s growth trajectory was significantly influenced by macroeconomic factors, particularly interest rate fluctuations that affected the fintech sector.

[27:58] David Rosenthal: "Financial services has these big cycles that they go through, basically driven by interest rates."

During periods of Zero Interest Rate Policy (ZIRP), Plaid benefited from heightened activity, but the rapid increase in interest rates in late 2022 posed challenges as investment and lending markets frozen.

[28:34] Zach Perret: "Consumers rapidly sign up for and purchase stocks when stock prices are high. When the prices drop, then the usage drops."

Despite these cyclical pressures, Plaid maintained stable revenue streams by focusing on per user per month fees and existing customer repayment collections, mitigating the impact of reduced new user signups.

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Building Trust and Brand

A critical aspect of Plaid’s success hinged on building and maintaining trust with both developers and end consumers.

[48:58] Zach Perret: "We think quite a lot about how to build a brand on three sides: developers, financial institutions, and consumers."

By ensuring a secure and seamless user experience, Plaid fostered consumer confidence, even among demographics traditionally wary of sharing financial credentials.

[53:24] Zach Perret: "The feeling that we want to create is a sense of, oh, that just worked, or, oh, that was simple, and a sense that, oh, I trust this."

Additionally, developer-centric initiatives such as providing comprehensive documentation and adopting REST architecture over the more cumbersome SOAP protocols solidified Plaid’s reputation as a developer-friendly platform.

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Future Outlook and Strategy

Looking ahead, Plaid is poised to further expand its analytics capabilities, leveraging its vast and unique data set to introduce innovative solutions in fraud detection, credit scoring, and payment analytics.

[38:34] Zach Perret: "Our thesis on product development is not just that we have a large data set, but it is that we have a unique set of things that come together in a way that no one has ever analyzed for fraud before, or no one has ever analyzed in order to build credit scores before."

Zach also highlights the importance of network effects, both in user onboarding and data aggregation, as foundational elements that differentiate Plaid from potential competitors.

[51:08] Zach Perret: "First and foremost, we get onboarding right, and we do that a lot of that through network effects. Second is that there are data network effects on the backend as well."

Furthermore, Plaid remains strategically agile, continuously adapting to evolving technological landscapes and market demands, ensuring its sustained relevance and growth in the fintech industry.

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Conclusion

Zach Perret’s journey with Plaid exemplifies resilience and strategic foresight in the face of significant challenges, including a high-stakes acquisition attempt and antitrust battles. By pivoting towards analytics, building robust developer and consumer trust, and navigating market cycles adeptly, Plaid has not only survived but thrived, positioning itself as a cornerstone in the modern financial ecosystem.

[60:29] Zach Perret: "To find Plaid is just plaid.com or Plaid on X. If you want to find me, I'm Zach Perret on X. I would love to hear your thoughts or feedback on Plaid products."

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Notable Quotes:

• Zach Perret [02:51]: "In January of 2020, we announced that Visa was acquiring Plaid for a big valuation, just above $5 billion."

• Zach Perret [05:17]: "In some meta sense, you could say we produce substitutes, meaning you could pay for something with a bank account or you could pay for something with a credit card, but even those in almost no single transaction would you consider both of those payment methods to be viable."

• David Rosenthal [27:58]: "Financial services has these big cycles that they go through, basically driven by interest rates."

• Zach Perret [33:33]: "We definitely would have [diversified]. Our strategy has always been to build the API for your bank account, but in the long term, we believe we can build a much more valuable Analytics Business."

• Zach Perret [53:24]: "The feeling that we want to create is a sense of, oh, that just worked, or, oh, that was simple, and a sense that, oh, I trust this."

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This episode offers invaluable insights into strategic decision-making, antitrust navigation, and business diversification within the fintech landscape, making it a must-listen for entrepreneurs, investors, and anyone interested in the dynamics of successful tech companies.

Transcript

[Ben Gilbert]

Hello acquired listeners. Today's episode is with Plaid CEO Zach Perret. You are probably familiar with Plaid as the bank linking service that lets you link your bank account to other bank accounts and fintech apps. They have had a pretty insane journey where in 2020 they agreed to be purchased by Visa for $5.3 billion. Plaid then terminated this deal after the US Department of Justice filed an antitrust lawsuit to block it. And the few years since then have been pretty wild too. They were valued as high as 14 billion dol billion than a recent fundraising round of $6 billion. So more than the Visa acquisition, but of course lower than the sky high valuation in between. Today's conversation with Zach is about weathering all of that and about Plaid's actual business they were building along the way, growing, diversifying and finding ways to leverage all the data that they have to build a better and more modern finance ecosystem. Well, one quick announcement before we start. As many of you know, we are doing a massive live show at the 6,000 seat Radio City Music hall in New York City on July 15th with our friends at JP Morgan Payments. There are just a few seats left, so make sure to get yours before they are gone at Acquired FM nyc. The evening is going to be awesome. We can't wait to see you there. July 15th. That's acquired FM NYC. So please enjoy our conversation with Zach Perret, the co founder and CEO of Plaid.

[David Rosenthal]

Zach, welcome to the show.

[Zach Perret]

Thank you so much for having me. I'm honored to get to do this. I'm a big fan of everything acquired, so thank you.

[Ben Gilbert]

Thank you for listening. We've enjoyed following your journey through the wild turns of events that have happened over the last five years or so. You were high flying unicorn and then I saw some news that said you were acquired by Visa and then I saw some news that said you weren't. And then you raised a lot of money at a big valuation and then you raised more money later at a lower valuation, all while growing the business and then starting new business lines that I bet most people are totally not familiar with and they just think of Plaid as isn't that the way that I off my FinTech app to connect to a bank account? Does that seem like a reasonable summary of your life over the last five years?

[Zach Perret]

Yes, very reasonable summary. They say that startups are like a roller coaster. Indeed. The ride, it doesn't end, it just keeps going. The magnitude gets even larger. It's been an awesome journey and a lot of learnings and a lot of fun and a lot of frustration along the way too. You get your fair share of everything.

[David Rosenthal]

Maybe. To start, take us back to January 2020 and your partnership with Visa. Catch us up from there for a.

[Zach Perret]

Podcast that's called Acquired. You don't talk a lot about acquisitions.

[David Rosenthal]

No, this is like a throwback episode for us.

[Ben Gilbert]

Yeah. But this acquisition didn't happen. So ultimately.

[Zach Perret]

That is true. That is very true. All right, so In January of 2020, I think it was January 18th or 19th of 2020, we announced that Visa was acquiring Plaid for a big valuation. It was just above $5 billion. And this was the culmination of a lot of back and forth over the past three to four months. Visa had been an investor. They showed interest in acquiring us. There had been some other acquisition interests as well. We ended up making the very difficult but at the time, very logical decision to sell the Visa. We announced it to our team on January of 2020. And I remember because this is the last big all hands that we did in the office. Our office. It's the ex Atlassian office. And it has these gigantic stairs that people can sit on. And so, you know, it's a two floor staircase. It's super wide, probably like 30, 40ft wide, just filled with people. We were planning this all hands. And I remember right before the all hands, the news leaked. And so all of our news addicted team saw it and the others that were not news as news addicted were like, what's going on? Why is there so much buzz? What's happening?

[Ben Gilbert]

Do you know who leaked it?

[Zach Perret]

You never know. I mean, the investment bankers, maybe like one of the lawyers. And, you know, it wasn't leaked far in advance. It was leaked like 20 minutes in advance. So it was not the worst leak in the world.

[David Rosenthal]

And you're probably already like really nervous about messaging this to the company.

[Zach Perret]

Right?

[David Rosenthal]

This is not helpful.

[Zach Perret]

It's the second hardest all hands that I've ever done. The first hardest I'll tell you about in a minute.

[David Rosenthal]

Yeah, we'll get to that. Coming up.

[Zach Perret]

The second hardest all hands that I've ever done. I go there and I'm in front of everyone and I like really practiced on what I was going to say and how it was going to go. And it went well. And it was amazing. You just, you look at the crowd, we probably had 350 people in this all hands, almost all of them physically there. And there was anger, frustration, surprise, like joy. Some people were crying. I couldn't tell if they were happy or sad when they were crying. It's like this totally weird thing. And then the Visa team came in and they spoke and they talked about how they were all excited about the acquisition. We ended up closing and had tons of team messaging, so on and so forth. And one of the hardest things is explaining this level of change management within the organization. But we got through all that stuff.

[Ben Gilbert]

So it worked just to be like super clear for everyone listening. Up until this point in the company, other than being kind of an investor and a partner, Viso is this company. They represented the existing financial system and you were trying to create this new, faster, more tech friendly fabric, you know, data fabric around the world for finance, is that right?

[Zach Perret]

So this is one of the things that I think is actually most misunderstood about Platinum Visa. We are not direct competitors. We were not direct competitors. We weren't trying to issue cards or like we built a card payment network or things like that. In some meta sense, I guess you could say we produce substitutes, meaning you could pay for something with a bank account or you could pay for something with a credit card, but even those in almost no single transaction would you consider both of those payment methods to be viable. And so despite the fact that the DOJ later investigated this transaction for antitrust and alleged that Visa was a monopolist and buying Plaid was a path to expand their monopoly, I have never thought that our products directly compete. We probably wouldn't have done the transaction if the premise of the transaction was anti competitive.

[David Rosenthal]

So certainly there were many developers who were using Plaid as a core part of building their apps which were intended to be payment networks and, you know, transaction rails outside the Visa system. But yeah, I totally get what you're saying.

[Zach Perret]

Yeah, that's very fair. So like in the meta sense, we were trying to make financial services more efficient, better, we were trying to create new payment methods, we were trying to create a lot of kind of innovation in the system. And so in that sense, if you say Visa is the historical system and you say Plaid is the new system, or Plaid and all of our customers and this fintech ecosystem or the new system, then yes, we were competitive. But specifically on any one product, I can't say that we were directly competitive.

[Ben Gilbert]

Makes total sense. Why did it feel so emotional and why to the extent that there were people crying and it was tears of sadness, why did they feel the sadness?

[Zach Perret]

It's a huge release of pent up emotion or a lot of people when they join a startup. Certainly when you found a startup, like a lot of your identity is wrapped up in that startup itself. A lot of your Identity is wrapped up in work, and people had worked for us for seven, eight, nine years. They had a massive amount of equity that had been issued when plaid was worth $50 million that was now being sold for $5 billion. There's a lot of excitement there. There's also people that had joined us a year before and thought that Plaid was going to go from our current valuation to 100 times that. Some people were excited, some people were disappointed. Some people were saying, this is going to be a great outcome, both financially and product wise. Some people were saying, I'd hoped for more. So there was a mix. But, yeah, definitely reading the faces. It's one of those unique experiences where you see so many different emotions all at once.

[Ben Gilbert]

I bet. Okay, so then, what is life like after that?

[Zach Perret]

Life after that was kind of straightforward. So you go, February 1st, half of March are great. We're doing messaging. We're moving forward with the acquisition process. There's a lot of paperwork we have to file. You have to submit it to all the relevant governments and so forth. And we had no reason to suspect antitrust was going to be an issue because, again, we didn't think that we competed with Visa, and we had no reason to think that anything else was going to change in the world. That was gigantic. And then Covid. Covid happens in March. We're very focused on the team through March and into April. Come mid April, we pulled up and thought about, what does this mean for us? Is this transaction even going to happen still? I called the lawyers that we'd used and said, hey, what's going on with the transaction? And their response was, don't worry, we have a pandemic clause. I said, what in the world could a pandemic clause possibly mean? It turns out there's this thing called a material adverse effect. Like, a pandemic was something that we had contemplated. And I think it's just in the form letter that, like, if a global pandemic happens, you still have to close this transaction, Visa. Okay, great. So we feel like we're geniuses because Visa stock price has crashed. We have a pandemic protection clause that says Visa still has to close the transaction. And we did the math on it and we said, well, we're going to own a large percentage of Visa if this transaction closes tomorrow.

[Ben Gilbert]

Whoa.

[Zach Perret]

It was a stock deal, partially stock and partially cash. It was majority cash, but from the employee side, the employees ended up getting a ton of equity in Visa, which was dollar denominated equity. And so it was based on Visa's most recent share price. The math that we did was, oh, my gosh, we're going to own a big piece of Visa. Fast forward a little bit more. And the world turned around. A few things happened to our business. So one, consumers were stuck at home. They realized they still needed financial services. And so usage of Plaid powered products just caught on fire. Also, then money was free. So startups being founded happened everywhere. All of our customers got funded. All of this growth started happening, and that looked great.

[David Rosenthal]

Crypto is taking off. There's all sorts of on ramps and.

[Ben Gilbert]

On ramps and so many Neo banks. I mean, this is the fintech boom time right here.

[Zach Perret]

Yes, exactly. Man, that was fun. Then we fast forward going a little further and we get our first request from the government, which is the first request of, hey, we want to review this for antitrust. We'd expected that one. Then we get a second request from the government. And that one we didn't expect because any big transaction, a first request, great. They want to take a look. Makes sense. Second request, we thought that we would get through pretty quickly because we're really not competitive with Visa. Certainly that's the narrative that we have. But it turns out there were some bones that the DOJ wanted to pick with Visa about things, and I'm not sure that all of them were really about Plaid. Even so fast forward with that. Our business continues to boom. We get into October, November, everything's continuing to go really well. My exec team, we start looking at each other, saying, what if we hit one year? Because at one year, the exclusivity lapses and we can walk away from the deal.

[David Rosenthal]

It's kind of incredible, too. I mean, most companies that would have found themselves in a situation like yours where there's a pending deal for a large acquisition by a big player, the business kind of just sort of operates on autopilot. Like, it's uncommon that the business grows like a rocket ship during this period. Right?

[Zach Perret]

That is true. I think we made a couple of intelligent, you could also call them lucky decisions at the time where the deal we negotiated with Visa was that we would run fully independently and I would be the CEO of Plaid within Visa. And so my view was great. We're operating the same as a startup. We're going to push as hard as we can, as fast as we can on everything. Some of the things were harder while the acquisition was pending, so hiring execs was harder because people were like, oh, like, how is this going to work? Post close. But we did still hire a Lot of people. Other than that, we were just full speed ahead. And, you know, we had this great tailwind of what was going on with ZIRP and growth rates and such like that. So we get to October, November, thinking that it may lapse. We get into December, January knowing that it is probably going to lapse. And at some point in there, the DOJ signaled that they were going to sue to block. While I actually think we would have won that lawsuit, I think that lawsuit would have taken two years for us to close the deal. And at that point, I believe the plaid was worth more. And frankly, a lot of the concerns that we had about our business, a lot of the impetus for selling was gone. So we then hit January of 2021 and we made the decision to walk away.

[Ben Gilbert]

This is an interesting mental model. I hadn't really contemplated before that if it's going to be that one year plus another two, you're basically locking in a price and almost giving the free option to the acquirer and saying, yeah, we'll sell it to you for the same price two to three years from now. Despite the fact that we're going to keep growing, our business is going to keep improving. Why would you ever give someone that option?

[Zach Perret]

Exactly. In some cases it does make sense because the purchase price is so significant, sometimes the market craters afterwards and you really want to close the deal and so forth. In our case, the market had conspired and the business had conspired the to make it such that our business had grown quite a lot and we didn't feel like the price held anymore. January of 2021, this is the actual hardest all hands that I ever had to do. And this one was over Zoom. I was in the office, I think by myself, and the entire company was on Zoom. And I basically said, hey, all of you people that thought you were going to get a bunch of money from this acquisition, we're now not going to do it. But on the plus side, look at all the amazing things that we did over the last year. Think about all we're going to go build together, and it's going to be an awesome future. And we've had some people approaching us with investment offers around that time. So I had good reason to believe that the valuation would have gone up. But I can't say that to the company. You know, I'm not going to promise something that I'm not yet sure we're going to be able to deliver. Then we had this whole next wave of employee comps, and this one was even Harder because people, despite the fact that you tell them not to spend the money, they spend the money in their heads. So I had to go to everyone and say, hey, look, you can't buy that house anymore, I'm sorry. Or like basically communicating, hey, you're not going to get that cash value at this timeline that you expect. But don't worry, we believe the equity is going to be worth a lot more in the future. We believe that this is an up and to the right story. And then fast forward a little bit more. We did this. This fundraising round is a big step up in valuation. So whereas we sold to visa for about $5 billion, the funding round was at $13 billion. And we were able to do some employee secondary for most employees, which is great. So it was a smaller proportion of their holdings at a higher price. They couldn't maybe buy a house, but they could certainly take something off the table, maybe buy a car or something.

[David Rosenthal]

Like that, relieve some of the pressure.

[Zach Perret]

We felt good about what we were able to offer employees and certainly felt great about the trajectory and the long term prospects for the company independently. That was a journey. I've learned more about antitrust and company governance than I ever expected to in that way. And yeah, I hope I never have to go through that again.

[Ben Gilbert]

How close then were you to the Altimeter financing? Because that was a big step up. What was it, 5 billion to 14 billion at the valuation of that round. That was pretty soon after, if I recall from the deal falling apart with Visa.

[Zach Perret]

Pretty soon. Yeah. So we raised the alternative round. It was about, I think it was about 13 and a half in valuation. And that round was in April and the Visa deal fell apart in January.

[Ben Gilbert]

Okay. So at least this promise or this implication that you've thrown out there to employees of the intrinsic value of our business is higher. Someone's going to recognize that. You're going to be able to recognize some paper value of that. That came true reasonably quickly.

[Zach Perret]

It did. We were able to show some good growth proof points as well. So we constructed a good narrative and frankly, the best narratives come from very hard data on the back end. So we were able to talk employees through it. But still, it's a jarring prospect. You expect you're going to work for Visa, you don't work for Visa and you have a certain expectation the culture you're going to work in. And now it's a very different startup oriented culture. We'd hired people that expected that they were going to work for the startup version of Visa, but as Kind of plaid as a subsidiary and we found that they weren't as much of a cultural fit or they themselves opted out when we were long term independent. So there was definitely some whiplash. We had hired quite a lot of people actually during the one year transition because we were growing so fast and so very hard set of employee comms and then a lot of actions in the back end.

[Ben Gilbert]

So funny. Usually when a big acquisition like this falls apart, I don't want to say company killing, but it's usually so demoralizing that it's hard to ever really recover and hit new all time highs on any metric you want to assign to it, valuation or revenues or anything like that. It's a very rare scenario where a $5 billion acquisition from a big public company falls apart for a startup and then the next two years looks amazing and gangbusters and like nothing but rainbows and sunshine for the company.

[Zach Perret]

I agree, it's rare. I don't think we're alone in this though. One of the most interesting moments of the acquisition for me was actually this call that I got the day after the acquisition went public. So I'd known Scott Cook for a long time. Scott Cook is the founder of Intuit.

[David Rosenthal]

I know the story you're going to tell.

[Zach Perret]

Yeah. He sent me an email more or less the day of the acquisition or the day after the acquisition. He said, hey, call me, we should chat. I called him and he says, hey, Zach, congratulations on the acquisition. I'm really impressed. I'm really happy for you. It seems like it'll be a great landing spot and it'll be great for the company. But I just want you to know that if the acquisition fails, you're going to be fine. And actually you might be great. I said, okay, Interesting. Does this have something to do with your acquisition? And he said, yeah, absolutely. The best thing that ever happened to me is that the acquisition of Intuit by Microsoft was blocked for antitrust. After that, Intuit went on to be multi hundred billion dollar company. Like just amazing growth trajectory and so forth. And so his point was, look, congratulations, but if it doesn't work, you might be better off in some sense. I guess that was foreboding.

[David Rosenthal]

It's amazing that he planted that seed in your mind like the next day.

[Zach Perret]

Exactly. And I think the day that I announced that we were not going to do the acquisition, I sent an email and said, hey, can we get dinner? I'd like to talk to you.

[David Rosenthal]

Thank you for manifesting this.

[Ben Gilbert]

What is your advice to make your idea come True, Exactly.

[Zach Perret]

Yeah, it was. Also, I wanted to ask some advice on how to do employee comms and keep people from revolting and such.

[Ben Gilbert]

Okay, so you entered this period of rainbows and sunshine that ended. What did the end of the fintech boom look like for you guys? And how did that manifest in your business?

[David Rosenthal]

And maybe also to give context to that, what was Plaid during this era? And that'll help ground the end of this and then into the next era.

[Zach Perret]

Perfect. So I'm going to go backwards a little bit and explain kind of a little bit of where we came from. So we started working on Plaid in 2012. At that time, the core thesis was that banking and financial services, broadly, was built for a world that hadn't envisioned the Internet. And despite the fact that in 2012, we all carried smartphones in our pockets, we did a lot of things online. 2012 was the year that Instagram sold to Facebook. Instagram had a gazillion users. People were used to doing things on the web and on mobile devices. Yet financial services required you to walk into a bank branch and talk to a banker for almost everything in your financial life. So you want a new checking account, you want a loan. Oftentimes, if you wanted a replacement debit card, you had to go into the bank branch.

[David Rosenthal]

And Venmo had launched, but was only a couple years old right at this point. And on and off ramps from Venmo, probably still very difficult.

[Zach Perret]

Yeah. So in 2012, Venmo was live, but very few users. And paying someone on Venmo involved linking a debit card or a credit card and paying a 3% fee. You know, it's not that attractive of a proposition to pay the fee. Venmo, I think, for a little while, also gave away free fees, but then they were losing a lot of money, and so they were in this conundrum of free equals good growth. But free is very expensive.

[David Rosenthal]

I imagine for you guys back when you were starting, it's kind of this proof point of like, hey, this is what's possible. And there's so much consumer demand for these experiences that people are willing to eat 3% to make it happen.

[Zach Perret]

There was a very good proof point at the time. There were very few fintech companies. I mean, you look at Intuit, they had Mint at the time. Mint was one of the examples. You look at Venmo, there's PayPal, that's out there. And I guess it's right around that time was when PayPal ended up acquiring.

[Ben Gilbert]

Venmo Braintree for online payments. This was Pre Stripe or pre Stripe growing. Really.

[Zach Perret]

I think Stripe was early at that point. Braintree was early. Even themselves, it was early Fintech. We didn't even have the name Fintech. I think FinTech came in 2016. Anyway, so we actually started prior to Plaid. We were building consumer apps. So we tried to create mobile budgeting tools, recommendations like where to spend, so on and so forth. Turns out all of these apps think of a personal financial management tool. We launched a personal financial management tool. We recommended to people that they spend less money. No one wants to use an app that tells you to spend less money.

[Ben Gilbert]

There are still like 20 or 30 of them out there today, and none of them are Plaid type businesses because ultimately they're telling people to spend less money.

[Zach Perret]

Well, some of them are actually really interesting. As a brief aside, Rocket Money is a really cool one. It's like a budgeting tool that ties into your ability to get a mortgage and that's done super well. And like, Rocket has been able to monetize this thing massively. So I actually believe that personal financial management is a viable market. I'm just not a good enough consumer product builder to come up with the idea of how you do that. And this was before the infrastructure even existed in the way that it does today. So we were spending 90% of our time figuring out how to get the data into the app. And then, you know, at that point we didn't have the time even to build a good app. So we ended up doing this pivot where we dropped the consumer side. We just focused on the infrastructure side. It was actually this conversation with the head of engineering at Venmo where he kind of said, hey, hey, look guys, your apps are pretty dumb and I would like to license the back end to what you do and we'll pay you for that.

[David Rosenthal]

You're like, oh, that sounds better. Yeah, let's do that.

[Ben Gilbert]

Were they your first customer?

[Zach Perret]

They were the first meaningfully sized customer to show significant intent. What then happened was we went and got into this like nine month procurement process because they'd been bought by Braintree, which got bought by PayPal, which got bought by ebay. And so I was dealing with the ebay procurement officer for like nine months. But along the way we sold to a bunch of other other small startups, including Robinhood and Coinbase and, you know, a couple of these other quite meaningfully sized companies now. But yeah, it took a while to get there with Venmo. But anyway, so the theory was we wanted to build an API for Your bank account. We believe that if we create an API for your bank account, that is the missing link in creating great digital financial products. And we got the insight for that from building these consumer financial products ourselves, which were all terrible. But we pivoted to finding this really important niche that allows a consumer to link their bank account to a digital application. Originally that started with consumers linking, let's say, their Wells Fargo account to the Venmo app so that you can actually pay your friends with Venmo or Wells Fargo account with the Robinhood app. So you could fund your Robinhood account or fund your Coinbase account or build budgets or do expense management or bookkeeping or whatever it is. So we worked with basically every fintech company over time. Now it's become the way that you open a city checking account, you need to fund that with an existing checking account. So how do you actually do that connection? And increasingly a lot of the large enterprises are using us. So the way that you pay your bills or the way that you apply for an apartment and pay your apartment rent or something like that.

[Ben Gilbert]

Can I ask a funny question about this era? So these days you formally partner with banks in a bunch of ways. You talk engineering team to engineering team. That was not the case back in 2012 and 13. What code was your team writing to build such an API to a bank account that doesn't necessarily contemplate having an API?

[Zach Perret]

It's a good question. So in the early days, we knew that there was this principle outlined under the Dodd Frank regulations that said that consumers own their financial data and they should be able to permission their financial data in the way that they want to. If you look at the European regulations, there were pretty clear open banking laws in both the UK and Europe that said that consumers are able to get their financial data. And they actually mandated how banks have to build APIs. In the US there was this clear statute written into Dodd Frank, but the rules on how the data would be shared weren't written yet. It was assigned to the cfpb. The CFPB hadn't started working on it. And so in the early days we went and talked to a bunch of lawyers and basically figured out this thesis that consumers own their financial data and banks have to find a way to provide the consumers with that financial data. And if the banks don't have APIs, then we could build kind of outside in integrations to the banks. So we, we built screen scrapers to actually allow a consumer to collect their own financial data. And doing this at scale is very Complex, Yeah.

[Ben Gilbert]

To hundreds of banks with all these different types of.

[David Rosenthal]

Probably also terrifying. 12,000 screen scrapers of banks and financial institutions. I mean, you knew you had the legal air cover to do so, but.

[Ben Gilbert]

Like, sure, their IT teams are having alarm bells going off.

[Zach Perret]

Well, we tried our best to do it in partnership, clearly, with the banks. I don't think every bank, if you ask them, would necessarily agree that they had as much data as they might have wanted. Broadly, our goal was always to partner with the banks. We wanted the banks to be customers, we wanted them to be a participant ecosystem. And many of the banks actually came to us and said, great, we'd like to move to an API. We haven't built it yet. Please just screen scrape us because our consumers really want to use apps like Venmo and Robinhood and Coinbase. But we haven't built these APIs yet. In a lot of senses, very collaborative. In some senses it was a little bit more antagonistic. So in some senses the banks were frustrated with the fact that Robinhood existed because Robinhood was stealing their trading volume. And so they didn't love fintech, so they made it a little harder for us. Eventually it got to the point where the CFPB started to write the rule and take the actions and it became very clear that you can't really tell a consumer they can't have access to their bank transaction data or they're not allowed to see their account routing number. If a consumer wants to open a new investment account, you can't stop the consumer from doing that. Eventually we got to the sense of really strong partnership and collaboration. At this point we have the vast majority of our data comes from API driven integrations because the banks have had the technical sophistication and time to figure out how to build APIs in a good way. We've also partnered with them, we've built API platforms for them, we help them launch APIs and so forth. And so we now are in a much more long term, sustainable technical infrastructure state. But in the early days there was a lot of legwork.

[David Rosenthal]

I'm just imagining your early VC pitches where you're like, yeah, yeah, we're screen scraping the banks now, but don't worry, in the future we'll get to APIs.

[Ben Gilbert]

We're going to get people's usernames and passwords, we're going to store those and then we're going to have a little bot that logs into their account for them and executes a transfer, acting on their behalf as if we're them Logged into the bank. It's got like scary written all over it. But here we are today. This is an amazing tech company story where you envisioned it's going to be ugly getting there, but then the future, when we do get there, is actually the thing that everyone wants and is much better for consumers.

[Zach Perret]

I think a lot of elements are correct individually. When we first thought about building this company, I wasn't sure if anyone was going to use it. When we talked about, all right, great. A user wants to link their bank account with Venmo. One, is anyone going to do that? Two, is the infrastructure going to work? Three, is any consumer going to choose to enter the necessary data, which was at the time a username and password? It turns out people did it in droves. Despite the fact that we felt very, very good about the infrastructure that we built on the back end, the security team that we'd built, the level of oversight, the privacy protections we put in place and so forth, we couldn't guarantee that consumers would feel good about it when we launched it. And so we were skeptical. It turns out the value to consumers is very, very high. The customers that we worked with ended up building amazing products and this ecosystem just took off. And I think despite the fact that we had this theory early on that all the banks should launch APIs, I think if the ecosystem hadn't taken off, we probably wouldn't have seen the banks actually build this. In some sense, it was a chicken. And the other thing where we had to build the less scalable integrations before we could get to the more scalable ones.

[Ben Gilbert]

We interrupted you earlier when you were taking us all the way to the fintech boom and then bust, call it 2022.

[David Rosenthal]

Yeah.

[Zach Perret]

So you asked about what products we were building. So we built bank linking broadly and as we kind of moved forward in the arc of plaid, we started to build things that rely on linking or things that are adjacent to bank linking. So we built out a set of credit oriented products. So asset verification, income verification. Whenever you apply for a mortgage, you need to verify your assets, you need to verify your income. If you're applying for an auto loan, you need to prove that you have verified employment. We can do all that digitally. We acquired an ID verification company. So every time you link your bank account, you oftentimes then have to verify your ID the step before or the step after. If we can tie that together, we can make it so that you can verify your ID once. And then every time you link your bank account, we can pull along a verified identity with it becomes very, very powerful. We built bank payments infrastructure. So not only do we let you collect your account routing number, but we actually let you set up an ACH payment. You could do something like, you know, paying a bill or funding an account or whatever that is. And then on top of that, we've built this big analytics layer, which I'll come back to later. But in 2022, we had this huge variety of products and endpoints, and we're touching a bunch of different markets. And what that meant is in the one side, we were working with most of the fintech, the majority of the fintech companies, to do many things. And we were working with more and more of the banks who were working with more and more of the enterprises. So growth was good. We were also very exposed to the macro cycles of financial services. And as all of you know, and all of your listeners probably know, financial services has these big cycles that they go through, basically driven by interest rates.

[David Rosenthal]

A lot of money was moving when interest rates were zero.

[Zach Perret]

Exactly. A lot of money was moving. In the second half of 2022, we saw this kind of rapid increase in the interest rate. What that meant is that investment markets crashed and lending markets basically froze. Lenders didn't want to lend anymore. Stock prices dropped. Crypto prices dropped. The funny thing is, in our data we see that consumers rapidly sign up for and purchase stocks when stock prices are high. Consumers rapidly sign up for and purchase crypto when crypto prices are high. And when the prices drop, then the usage drops. The exact inverse of what perhaps people should do. But it is the reality of what.

[Ben Gilbert]

People do do get greedy when others are greedy, I think is probably the phrase, Right?

[Zach Perret]

Yeah, something like that.

[David Rosenthal]

And what was your business model at this point in time? Were you getting paid on a per transaction fee, a per token fee?

[Zach Perret]

Behind the scenes, we have a ton of different endpoints. We have more than 100 SKUs. Each of those is priced a little bit differently. But you can think of our business model as making money in three senses. The first is a per action sense, meaning every action a user takes. The second is in a when. When I say actions, that actually breaks into two sides. One is a per user signup fee, and then one is a kind of per payment fee. And then we have a per user per month fee for the different products that we have. So per user per month actually stayed incredibly stable. Per payment stayed fairly stable. And then new user signups kind of fell off a cliff.

[David Rosenthal]

Yeah. So the portion of your business that is tied to essentially Volume and usage within the system was going great during ZIRP and then all of a sudden not.

[Zach Perret]

Yeah, exactly. So that definitely slowed down. For the most part though, the business continued to stay fairly stable. So we didn't see any revenue declines. We saw slower revenue growth because again the per user per month and the users base fees continued to grow, but we saw a decline in relative growth. The best way to think about it is if a lender slows down their lending, they may sign up less new users, but they're not going to stop collecting repayments from the existing users that they have. Our growth may slow, but the absolute amount of revenue that we have didn't. The second half of 2022, the first half of 2023 were much slower for financial services startups generally, but then started to re accelerate in the second half of 23 and into 24 and now into 25. We've seen kind of many quarters of accelerating growth. While I would like to not go through an interest rate cycle like that again, I'm aware that we will as a society and probably as a company, we'll go through another interest rate cycle. And in a lot of senses we came out of that much stronger. We launched major new product in business areas, we fully re platformed our strategy and the business has been doing really great, especially this year.

[Ben Gilbert]

I'm not going to let you get up with a phrase like re platformed our strategy. What does that mean? That's MBA speak right there.

[Zach Perret]

That is fair. I am not an mba.

[David Rosenthal]

You did work at Bain though.

[Zach Perret]

So I worked at Bain. I worked at Bain for 12 months. I think it was 12 months. In one day I earned one bonus check which was $4,000. It was the most money I'd ever seen in my life. And that gave me all of the money that I needed to quit and try to start a startup and lasted me a full two months of rent in New York City until I was out of money again.

[Ben Gilbert]

All right listeners, it is time to talk about one of our favorite companies, statsig. It's funny, David. Statsig has gone from this little startup when we first started working with them a couple years ago to this total powerhouse now.

[David Rosenthal]

I know, it's wild. I was looking it up and they have added all these customers since we started working together. OpenAI, Figma, Atlassian, Vercel notion, tons more. At this point, if there's a growth stage tech company out there, there's a pretty good chance they're using statsig.

[Ben Gilbert]

Yep. So listeners, if you are unfamiliar with statsig, they basically took what was the standard product infrastructure at every big tech company and they built it as a standalone company. This includes advanced experimentation tools, AB testing, feature flags, product analytics, session replays, and more. So if you're building the next great software company, this sort of infrastructure is essential because it allows your product and engineering teams to release things quickly, measure the impact of them and track progress over time.

[Zach Perret]

Totally.

[David Rosenthal]

So, I mean, as we've talked about on the show forever at companies like Facebook or Netflix, data was just a part of how everything was built, which contributed to all the crazy bottoms up organic growth that they had. Now, with statsig, you can get that from day one at your startup. And today they're not only trusted by startups, but also by more mature enterprises like Bloomberg and Microsoft and Electronic Arts. Turns out that a single system for data driven product decisions is useful at any scale.

[Ben Gilbert]

Yeah, and by the way, the scale they're operating at is completely insane. They process over 2 trillion events per day. Now, by the way, David, this is updated. The last I checked it was 1 trillion. And then this morning I pulled it up 2 trillion. And they handle releases to billions of end users. If you're listening to this podcast and you've used software in the last few years, there is a very good chance you've been a part of many experiments orchestrated by statsig.

[David Rosenthal]

Yeah, it's just awesome. And as they've gone up market, they've also started to offer some interesting deployment models, like being able to run the whole thing natively inside your existing data warehouse or just using statsig's fully hosted solution.

[Ben Gilbert]

If you want to leverage statsig to grow your business, there are a bunch of great ways to get started. Statsig has a very generous free tier for small companies. A startup program with a billion free events that's $50,000 in value and significant discounts for enterprise customers. To get started, go to statsig.com acquired and and just tell them that Ben and David sent you.

[David Rosenthal]

Thank you.

[Ben Gilbert]

Statseg, you have a totally different strategy now. You have diversified into three new businesses. I just read your annual letter. Would you have diversified the business away from just bank account linking if it weren't for this bursting of the fintech bubble?

[Zach Perret]

We definitely would have. So the strategy that we've always had is we need to build the API for your bank account, the bank linking functionality. But in the long term, we believe that based on all the data that's coming through the system and the user patterns that we see, we can build a much more valuable Analytics Business that can meaningfully change the way that we do important things in financial services over time. So we'd always had the multi step process of first build the bank linking business, then use the data to go solve fraud or to go solve credit scoring. But we had to get to this certain amount of scale. What I will say really enabled it was actually raising the large round. In 2021, we took that capital, we rapidly kind of ramped our headcount, predominantly in engineering to go re platform basically all of the data back end so that we could now shift to being an analytics business so that we can build great analytics products. And then we allowed revenue to catch up and surpass. And that's what you're supposed to do. When you raise a fundraising round and actually looking retroactively on our financials, it kind of follows the exact right trajectory. So you see the decline in operating margin and then the re acceleration in operating margin. That round really enabled us to go make this big investment. The products that we've been focused on are using the aggregate data set that we see. So using the users that have linked bank accounts through plaid, seeing all the applications they linked to, again, understanding the fact that we own an identity verification platform and we can link that to a government issued id, ingesting a bunch of data exhaust from the actions users are taking ingesting third party fraud signals. We've created kind of three major new product areas. The first one is around anti fraud. So we have some products that we're going to launch very shortly, kind of expansion of the anti fraud product set where we can look at a user's patterns across all of the apps that they're using. And if they commit fraud in one of the apps that can then be reported to us, we can federate out that fraud signal or we can see the fact that they've just signed up for four loans in the last 12 hours. All right, maybe that's a flag. So we can build this kind of algorithmic type of fraud tool, serve that up to all of our customers and they can better protect fraud in the ecosystem. And it's an angle on fraud detection that no one's ever had the data to build. That's one example. The second big example is building a real time credit system. So FICO came out with the way that credit scores are built in the late 80s, early 90s and up until now, most loans have been made based on FICO data. We believe that FICO data is great, but if you augmented that or expanded that by using real time Data, you have a much better picture of a consumer. Ben, if you got a new job tomorrow, don't go get a new job. I really am glad that you're doing the job you're doing. But if you got a new job tomorrow that paid you five times as much, you would be a much better credit risk because you would have more free cash flow available, you'd be able to pay down greater debt service. Yet FICO doesn't include that kind of data very well. And so we have a lot of real time data that can look at changes in jobs, changes in spending levels. If you move into a cheaper apartment but you didn't get a new job, you're actually a better loan risk. So we can understand, like, what is the underlying spend on a given month or quarter or year, and then build a credit score that sits on top of that. And then we've done a bunch of work on payments analytics, helping enable bank payments to be something that can be more reliable, more predictable, so on and so forth. So basically everything that we've launched over the last two years has been a version of an analytics product that leverages the aggregate data set that comes through the rest of the platform.

[David Rosenthal]

And this is really cool because, like, I imagine there's nobody else who sees as much data across consumer finance as you.

[Ben Gilbert]

What's the 50% number? You guys have something like, is it, is it 50% of Americans use Plaid?

[Zach Perret]

Yeah. More than one in two people in the US that has a bank account that has a LinkedIn account through Plaid.

[David Rosenthal]

That's incredible. You know, you could be JP Morgan and be the largest financial institution out there, but the only data you're seeing is JP Morgan walled garden data. Or likewise, you could be Visa and be the largest credit card network out there. But all you're seeing is credit data across the actions that your customers are taking with payment data. With Visa, you're seeing the whole picture of everything everyone is doing.

[Zach Perret]

The way that we think about our data set is that we have a lot of unique elements of our data set. So we don't have anywhere near the depth of customer information that JPMorgan has on JPMorgan customers. The customers upload a lot more data to JPMorgan. The customers use apps a lot more than they would interact with Plaid. So there are a lot of things, things that JP Morgan would see that they can build really wonderful products for J.P. morgan customers. We have a unique data set in as much as it's an aggregation of a bunch of things that hasn't been Aggregated in this way before, meaning we see all the applications that consumers link to, we can see the activity within some of those applications, we can link that to government issued IDs or bank account data, so on and so forth. And so our thesis on product development is not just that we have a large data set, but it is that we have a unique set of things that come together in a way that no one has ever analyzed for fraud before, or no one has ever analyzed in order to build credit scores before. That's the vector that we push on, which is what are the unique things that we can do that haven't been built before.

[Ben Gilbert]

David and I are so interested in these multi hundred billion dollar trillion dollar businesses where their first idea was actually the good idea and then everything else after that has just been like cute. You know, you look at tsmc, tried to get into solar cells and all sorts of things and the right answer was just keep making integrated circuits. Are these new business lines interesting for you guys and working or was it just like actually bank linking is an amazing idea.

[Zach Perret]

Well, bank linking is certainly an amazing idea. And don't get me wrong, we are still investing in that, that is still growing and I think there's a lot of room left for it. The way that we came up with all these, it's based on the things that our customers are trying to do with the data, but they don't have the scale to do themselves. So we had a lot of customers that were trying to build credit scores on top of transaction data that was coming in, or credit analytics that were based on transaction data that's coming in, but they just didn't have the data scale to be able to do the level of analysis that they needed to do. And so they would come to us and they would say things like, hey, can you just do this analysis for me? Or could I send someone to work in your database and just build some queries for us? We didn't do the second one to be clear. We were taking these real time things that exist out there and then just backing into, okay, great, because we have the data set structured in this way then great, we can build a lot of these analytics. I would say on the fraud side it's fairly similar. We're looking a little bit more into the future on the fraud side because not a lot of people have had this kind of data queryable in the way that we have. But I would say for the most part, yes, these products are working. They're still very early. Credit scoring is a gigantic Market, we are a tiny, tiny sliver of it today and we hope that that that is the start of something really large. Same for fraud and frankly, same for bank payments. It is very fun to go in and be able to sit down with customers and hear them say, hey, I really wished I could do this thing with my data, but I think you can do it with your data in a much bigger, better way.

[Ben Gilbert]

Okay. I was expecting you to answer with a stat from your annual letter and I just have to say it because I think it's astonishing. You were very humble there. New products, the three that you just talked about represented over 20% of ARR in 2024, compounding at 93% annually. That's what it's supposed to look like. That is when you have a core business and you're launching new growth businesses. That's the exact profile that you are hoping and dreaming for.

[Zach Perret]

I agree. And we've been pleased with the progress so far. I think there's a lot more room to go.

[Ben Gilbert]

Wow, you are ready to be a public company CEO.

[Zach Perret]

There's a great book and I can't remember who wrote it, but the title of it is Pleased but Not Satisfied. And just the title of that book, I have it on my shelf behind me. Normally I have a bunch of books behind me when I do these. Please But Not Satisfied. I think that that represents a lot of my management philosophy.

[Ben Gilbert]

Okay. I want to shift back to the managing a growing business in a cyclical environment. Both cyclical on your customer side because people are using fintech apps more and less as the or. There's an ebb and flow there. But also on your own funding, your own valuation. You raised a large successful financing round this year at a much lower valuation than your big 2021 round. Can you talk us through how you thought about that, the mechanics of it? And it seems like you were pretty intentional about managing things like employee liquidity in that.

[Zach Perret]

Absolutely. So we signed paperwork to sell the company to visa for about $5 billion in 2020. In 2021, we raised a round of financing at 13 and a half give take billion dollars valuation. We then raised around this year at around $6 billion valuation. So big spike in valuation and then a decline in valuation on the other side. What's happened in that period is largely market multiples have changed. I mean, 2021 was all time high market multiples. And even better, we had just had the best advertising ever for the company happen. Meaning the DOJ wrote this big letter of why Plaid was going to Take over the world.

[David Rosenthal]

So awesome.

[Zach Perret]

Visa shouldn't be able to have it, and so on and so forth. And so that is the best possible environment to raise money in. And then this year we raised money. Very different multiple environment. The business was fundamentally a much stronger business. So great growth, break even, new products growing really quickly, compounding at a great rate, really solid customer base. All of the metrics looked much better in this year than they did in 2021. We were kind of telling the story in 2021 of getting to where we are now. The reality is market multiples change from an internal standpoint. I think we try really hard to consistently have this employee message saying, evaluate our success based on the metrics that we set out, the impact, the progress that we're making along the stretch of goals that we have. And the valuation will fluctuate as multiples fluctuate. Now we can say that until we're blue in the face and employees will still care quite a lot about the valuation. It's not to say that we don't care about the valuation, we do. But ultimately we focus on the things that we can control and try to improve the fundamentals over time. And then we believe in the long term, the market will weigh that accurately.

[Ben Gilbert]

So mechanically, the way that venture capital financing works is someone invests at a valuation, and then as long as that valuation keeps going up, every party is happy. The investors are happy, the employees are happy. Given this whole crazy strike price options thing, the way that employee compensation works in this system, that's just the way it's supposed to work. What things break when your valuation goes down and how did you account for that?

[Zach Perret]

We don't issue options, we issue RSUs. And so because you're issuing RSUs, you don't have the kind of strike price issue. Without getting into too much of the tax detail, it means that that is not as much of a problem for us. We were fortunate that all of our rounds have had very clean terms, meaning that investors may well be disappointed that the price has come down. Actually, I shouldn't say may well be disappointed. I'm sure that we're disappointed that the price has come down, but ultimately they are still along for the ride. We actually had a lot of existing investors reinvest in the most recent round believing that there's a great deal of growth ahead of us.

[David Rosenthal]

I mean, they obviously operate in the same fluctuating market conditions as founders do too.

[Zach Perret]

And I would say that it's not a surprise to any of our investors. We've been Pretty transparent with our investors and our team over time, we've cut the internal valuation multiple times between the 2021 round and now. As much as this is not a fun process to go to to get here, I am excited now to have this behind us and be focused on post valuation reset. Just really laser focused on growth.

[Ben Gilbert]

It must just be maddening when a number that everyone is anchored on is going down. But you are well aware that the business is at the strongest point in.

[David Rosenthal]

History, intrinsically worth more.

[Zach Perret]

Yeah. Yes. Yes.

[David Rosenthal]

I wonder if it's perhaps because your actual operating business is also indexed to the financial markets. You can either fight the cyclicality of your industry or embrace it. And it feels like if you're going to operate in financial services, you just kind of need to embrace it. It feels like you've adopted that mindset.

[Zach Perret]

We do both. We fight the cyclicality in as much as we launch products that are either not cyclical or countercyclical. And over time, as we get bigger, you know, cyclicality should impact us less, but we also embrace it. It is just a reality of our business. I hope that my lending customers grow a ton. And even if I launch products that are countercyclical, I hope that they continue to create cyclicality forever because they've grown so much and they represent such a large portion of our business. But on the flip side, it is something that we have to be aware of. It's something that we write in our shareholder letters so that our investors understand it. Thinking about one day becoming a public company, we want to continue to be very transparent on the drivers of growth for our business. We control a lot of the fundamentals of the business, but we don't necessarily control the way that macro is going to impact us. We can react to it, we can prepare for it, but we can't predict it.

[Ben Gilbert]

Could I ask about your different moments in time of product market fit with banks? Because it seems like you always had product market fit with users being willing to auth so apps can do cool things. When did it start to change with banks? Where it went from feeling like you were pushing a rock up the hill to banks looking and saying, oh, your vision's right and we agree with you about this future. How do we help you?

[Zach Perret]

That's a good question. There were a handful of moments where banks started to understand and really think about technology using technology to serve their customers in a more modern way. The first one was actually GovCloud. I think that was in like 2014, maybe 2015, somewhere around there. I'm not sure actually when it launched, but this is certainly when the bank started talking about it. When the government said, oh my gosh, we can put data in the Cloud. Amazon launched GovCloud behind it. That was a big step forward where the bank said, if the government can put data in the cloud, then maybe I can put data in the cloud. The next one was a series of announcement from JP Morgan saying, you know, this year we spent $2 billion on technology. Next year we spent $4 billion in technology. Recently they're saying like $17 billion in technology. They're the leader, they're the biggest. But every, every other bank looked at that and said, you're spending $17 billion in technology. I should be spending on technology. And you know, what will I get for it? The third big thing that happened is that the fintechs did really well. These companies, Robinhood grew a lot. And in growing that much, they started to steal customers. They started to have high valuations. A lot of the financial services players either had to react to them. So you saw Schwab cutting their fees, cutting their trading fees. You basically don't find flat trading fees anymore in the industry because Robinhood said, no, no, no, no, it's free. And everybody had to react to it. Or you find them copying. You oftentimes find both so reacting and then copying. And as the bank started to lean in and build great financial technology products, they were using it to better acquire customers, to serve customers more cheaply, things that are less visible. They started to use tools to avoid fraud, to make better underwriting decisions, to improve efficiency of their teams, so on and so forth. So the reality is just the value is there. But it took a handful of these proof points. The expansion of FinTech, the GovCloud launch, JP Morgan just announcing these gigantic numbers in terms of how much they spend for the industry to follow along.

[David Rosenthal]

In a lot of ways, you guys are kind of like Microsoft or maybe Microsoft in the late 90s, early 2000s in that it's important that you have a great brand, both with consumers and with large enterprises and financial institutions. And usually those things are not the same playbooks. How do you think about Plaid's brand and building trust with consumers and trust with, like, you know, J.P. morgan?

[Zach Perret]

Well, first I have to acknowledge any sentence that compares Plaid to Microsoft is the greatest compliment that you could ever say about our business. So thank you, but you're welcome. We think quite a lot about how to build a brand on three sides. We want to build a brand for developers regardless of where they Work, but for developers. So we started. We started with developer roots. We want to build a brand that financial institutions know and understand because they are. They are key partners to us. Yes. They're oftentimes customers. They're also data sources and partners in a lot of ways. And then we want to build a brand that consumers understand and trust. And actually, I think the consumer one is the hardest because we build a very, very thin user experience. Our user experience is embedded in every Plaid powered product. And it says, hey, you're linking an account via Plaid in order to do this thing. And this is what Plaid does. But we don't have a lot of real estate there. In a lot of senses, we think about a brand that's like the card networks, but the card networks have the cards with the logo on the back of it. We have just this, this 15, 30 second user experience that a consumer sees and goes through.

[Ben Gilbert]

And your goal is to actually minimize that, to make that experience as short as possible.

[Zach Perret]

Yes. And so it's hard to take credit there, but the feeling that we want to create is a sense of, oh, that just worked, or, oh, that was simple, and a sense that, oh, I trust this. Like, I feel like I have resources and tools. And so we've built a handful of tools that you could interact with either via that linkage or asynchronously to see, where's my data going, how is it working? We're working on a handful of things that are related to kind of increasing security and privacy protections for consumers. So ultimately, we think we want to create the brand that is steeped in trust, steeped in clarity and understanding for consumers. But ultimately, it's an ingredient brand. It's a thing that you interact with for only a few seconds that supports the brand of the customer that you're going to go use. So, you know, Plaid's brand should support Venmo in some sense. It should create a little bit more trust or a little bit more simplicity for Venmo. But we never want to usurp the brand that Venmo has created with their own customers.

[Ben Gilbert]

All right, I know you're close with Hamilton Helmer. Also, give me your own seven Powers analysis. Why can I not just wander out there tomorrow? Now all these banks have these nice APIs, and I'll just build something that looks a lot like Plaid.

[Zach Perret]

I think a lot of it comes back to network effects. I think it's probably the easiest place to start. So the thing that matters most to our customers is how many users that try to sign up, end up signing up. You know, in some sense, you could say we're onboarding as a service. If a user wants to sign up for Robinhood and that user fails to sign up for Robinhood, Robinhood is frustrated. If the user signs up for Robinhood successfully, they're very happy, and we provide a lot of lift there. So for users that we've seen before, we can do a lot of things to make the user experience faster and easier. If you verified your identity once, we can automatically pull that identity through in a better way. So first and foremost, we get onboarding right, and we do that a lot of that through network effects. Second is that there are data network effects on the backend as well. So because we see all this data coming from all of these users and all these places, we can now build products that are differentially useful to our customers. So we can build a fraud analytic that no one else can build. We can build a credit product that no one else can build. And so that's probably the foundation of it. I would like to think that in the long term, we'll have some brand differentiation, but I don't want to kid myself because even Hamilton says that brands are the weakest form perhaps of power.

[David Rosenthal]

That's funny. We disagree with him on that. But no, I think brand is actually super important. That's why I asked the question a minute ago. Like, you've kind of, to my view, done this amazing job of. You started by powering this new wave of fintech apps that felt almost sort of like, dangerous to use. It was millennials who were young at the time who were like, using Venmo and being like, yeah, why not? You know, sure, I'm going to give my bank credentials to Venmo, taking things.

[Ben Gilbert]

Into my own hands, even if it's a little risky.

[David Rosenthal]

And over time, you've now become, oh, no, this is actually the safer way to do this. That's a very difficult thing to do.

[Zach Perret]

The big shift for us was my mom a couple years ago, and she was in her late 60s at the time. She called me and she said, hey, my friend recommended this Rocket Money product, and it helps me manage my bills. Is that safe? And I said, yeah, mom, it says powered by plaid the middle of the signup. Don't you recognize that? And she said, I guess so. Okay. And she's like, I'm going to tell all my friends. And she did. She told all her friends. And we saw this mass number of signups from people that we never thought would be interacting with, with Finisher technology.

[Ben Gilbert]

Not just from your mom spreading the word.

[Zach Perret]

Not just from my mom, no, no, in a lot of different areas. The one other thing, while we're talking about power, the thing that I know might not fall into the seven powers framework, but I think is really important is also just a willingness to move fast and build products faster than others in the market. And I know that it is not what Hamilton might call a durable competitive advantage, but I think it matters quite a lot. And so that for us is one of the things that we also push on, is we should be move fast as a company value. We push quite a lot on trying to be the first, the best, the highest quality, the fastest moving and so forth.

[Ben Gilbert]

My pretend mba, which I don't have, putting that hat on, I would say that's just operational excellence. That's not strategy. Everybody wants to be the fastest and everybody wants to have the culture that ships the most product. And you just believe you're very good at it.

[Zach Perret]

Exactly. And Hamilton would call the best companies process power. And he would also say that tech companies are not allowed to consider themselves as having process power. But I should say we should also aspire to have that one.

[Ben Gilbert]

Okay, so you talked about how you started as a developer focused company and how important it is to build trust with developers and make their lives easier. The whole notion of being a software developer is extremely different today than it was a year ago with the advent of AI. How are you thinking about being a company with developers as sort of your primary stakeholder?

[Zach Perret]

We started out building products for developers. We thought that developers would be the change maker within the organization. When I say it today, it's really boring and people probably roll their eyes. But when you started saying this in 2013, it was unique. Twilio was the one you and Twilio?

[Ben Gilbert]

Yes, exactly. Ask your developer.

[Zach Perret]

Exactly. When we went to financial services, the developers were like, oh my gosh, you're building things for us. How do I even do this? At the time, our competitors made it really hard to access the docs. We just put the docs online. That seemed very easy and simple, but it generated a lot of excitement. And there are a bunch of these examples on things that we did. We built in a REST architecture. Our competitors built in soap. We tried to stay what I would call just making normal decisions along the way. But it turns out that was more on the cutting edge.

[Ben Gilbert]

Building modern software.

[Zach Perret]

Exactly. Modern software. These days, the nature of development has changed massively. So so many more people can consider themselves to be developers or vibe Coders or whatever they want to call themselves. The way that we think about writing software has changed and I think will change much more over the coming years. For example, we've shifted to launching a Plaid MTP server so that developers can very easily build Plaid integrations directly within Cursor or Windsurf or whatever it is that they want to build in. We're continuing to push down this path. I think that the way that people not only build products, but potentially even discover products is going to change hugely as they. In the Cursor chat, they just type in like, hey, what should I use to set up an ACH payment? Or what should I use to set up a bank linkage? We need to make sure that CHRISR both says, hey, you should use Plaid, but also then when it says, hey, you should use Plaid, they might say, and do these two or three things, or tell me these two or three things and I'll set it up for you. We're continuing to push quickly down that path, and I think we have a lot more to do.

[Ben Gilbert]

Interesting. All right, what is something that you used to believe that you have completely changed your mind on?

[Zach Perret]

You know, I think we're in an interesting period of work wherein the returns on hard work are not as obvious as they used to be. So in the early days of Plaid, one of the things that we were able to differentiate on was what I called grinding projects or grinder problems, where if we just went and did the work more efficiently, oftentimes through brute force, than any of our competitors, we would end up with a better product. So we built 12,000 bank integrations. How did we build 12,000 bank integrations? There's nothing hard about building 12,000 bank integrations. We just did it. We set up incentives, we set up teams, we set up structures, we set up a culture where we just said, we're just going to go brute force, do all the stuff that we need to do. In today's software development environment, that is no longer a differentiator. It's not about the pure volume of work that can be done necessarily, because agents will do much, if not most of that work for you. There are increasingly the decisions that you make as a developer or as a product manager or as a designer or whatever it is. The quality of those decisions matters quite a lot more. And so I think there are increasing returns to strategy, there are increasing returns to thoughtful decisions, but there's a decreasing return on just pure volume of work. And that may change in the future. Again, so it may get to the Point where we've all evolved to use the new tools and then volume of work actually matters again. But right now, I don't think pure volume of work matters as much.

[David Rosenthal]

That's good news for our friend Hamilton.

[Ben Gilbert]

Yeah, that's interesting because in theory, once everyone learns to use the new tools, and this is making an assumption that the amplification of new AI tools are static, which is wrong, but let's just go with it for a minute. Then theoretically, everyone just has the same hundred x multiplier on their, you know, their work.

[Zach Perret]

Exactly. And I think we're in a unique period of time where we're not there yet. It hasn't happened yet. Yeah, no. No one is using the tools at maximum efficiency yet. Like, we're not at the next kind of efficient frontier. And until we get there, use of tools effectively will matter perhaps more than volume of work.

[David Rosenthal]

I think Hamilton would probably say, okay, you have to assume in the future that people will learn how to use tools effectively. That'll be evenly diffused throughout society. Yeah. Your point that strategy is going to matter a lot more in the current coming world is a really interesting one.

[Ben Gilbert]

I'm so glad that I came up in a different era. I feel like I just worked extremely hard for 80 plus hours a week for a decade starting at age 18. And that's the only way that I achieved anything in the world was by working harder. I was not a good strategist in my 20s.

[Zach Perret]

My co founder and I were having dinner with a friend a week or two ago. My former co founder, he's now off to starting a new company, and we were having dinner with a friend a week or two ago, and the conversation was basically, we all wasted our 20s. We all did work in our 20s that at the time was really valuable. But today a software tool could do in an instant.

[Ben Gilbert]

Except that it turned into you becoming a large owner of a company called Plaid. You converted that labor into capital for sure.

[Zach Perret]

Sorry. I'm not saying I'm unhappy with the results of the work that we did at the time. It's just the inefficient way that we did it.

[David Rosenthal]

We're seeing it with new AI companies now. Companies are getting started and in a matter of months, hitting 100 million in ARR. You know, that's because, like, the barrier of to get to that scale, you needed to grind, that existed before just kind of doesn't exist anymore. It's gone.

[Ben Gilbert]

Well, Zach, that's a great place to end it. Where would you like to point listeners if they want to learn more about you or Plaid or follow you anywhere in the world.

[Zach Perret]

So to find plaid is just plaid.com or lad on X. If you want to find me, I'm Zachpere Z A C H P E R R E T on X and if you have thoughts or feedback on Plaid products, I hope that you'll reach out to me. I would love to hear it. As always, awesome.

[Ben Gilbert]

All right listeners, that is a wrap on our conversation with Zach. If you want to come to Radio City Music hall on July 15th, we would love, love love to see you there. That is acquired FM NYC to get one of the last few tickets before it is sold out. If you want to know every time a new episode drops, check out our email list. It's also the place where we show little hints at what our next episode will be, share corrections, updates and little tidbits that we learned from previous episodes. That's Acquired FM Email. If you want to chat about this conversation that we had with Zach or anything else, go to Acquired FM Slack to hang out with the entire Slack community. So with that listeners, we'll see you next time.

[David Rosenthal]

We'll see you next time.