To celebrate 10 years of SaaStr, we’re revisiting some classic podcast episodes. Up today: Plaid co-founder and CEO, Zach Perret. This interview with CNBC’s Ari Levy took place in February 2019, shortly after Plaid raised a Series C round at a $2.7B valuation. In 2021, Plaid raised $425 million in Series D funding that boosted the company to decacorn status at a $13.4 billion valuation.
In this episode, Perret shared highlights from Plaid’s journey and his thoughts on building a thriving platform-driven business.
The Early Days
Plaid builds the infrastructure that empowers consumers to digitally interact with and manage their bank accounts. In the backend, they’ve integrated with over 11,000 banks and financial institutions. In 2019, they also acquired Quovo, a company that focused on investment accounts, to make it easier for consumers to manage their investments.
When asked about the acquisition, Perret commented, “People asked if we had an acquisition strategy. We definitely don’t. We have a product strategy and a company strategy, and it happens that this acquisition was a fantastic fit there.”
That product strategy has served the company well, but it wasn’t always easy in the early days. Perret describes Plaid as a wartime company from the start because there were plenty of obstacles to overcome.
For one thing, they had a hard time winning banks over for integration. As Perret says, “We’ve had lots of difficulties [in] the earliest days trying to integrate with the banks when the banks didn’t like us so much, and we were enabling an industry that was competing with them.”
In Series A and B fundraising stages, Plaid prioritized finding investors who believed in the long-term vision. Perret reflected on how fortunate the company was to find investors who shared the passion for the future of FinTech: “In our first and second rounds, we went to raise, and we said, ‘Hey, FinTech is going to be a really important market, and then we’re going to build some of the foundational infrastructure, and we think we’re going to have one percent to do with the fact that FinTech is going to grow’…some investors were willing to go on that journey with us.”
Plaid’s Current Relationship With Banks
Over time, Plaid worked with banks to build their business and improve them. But it took lots of effort, time, and patience to get there. Historically, the banks were hesitant to work with Plaid because they were bringing change. Change can be intimidating when it disrupts a deeply entrenched way of making profit. But over time, the perspective changed.
“What we’ve actually seen is a sea change in the way that banks think about FinTech and technology in general. They’re starting to say, ‘FinTech is my innovation lab,’” says Perret.
Financial institutions everywhere are even creating their own tech solutions, partnering with vendors and other companies to distribute their products to customers. Banks now see the value of Plaid (and Fintech overall) and leverage it to grow their businesses.
Building the Platform, Scaling the Business, and Fostering Financial Inclusion
The Plaid API allows engineers to build their own financial solutions, which is the core of how Plaid operates. While, in certain ways, Plaid could technically be considered SaaS, Perret views the company as more of a platform to support engineers, financial institutions, and ultimately, the consumer.
Their typical target is developers, and they sell up through the organization. They get paid on a usage basis for the amount of data or utility a customer gets from the application. Perret speaks of it this way: “We grow very much as a flywheel. Little by little, doing work, getting more installs, then that pays off years down the line. That allows us to have a very different go-to-market strategy. It allows us to think about where we enter the organization and how we interact with the organization and allows us to spend a lot of time in account management.”
Ultimately, scaling the business means that Plaid can help more consumers live the financial life they wish to lead. The core principle behind Plaid is to make money easier for everyone. Creating a dynamic ecosystem of financial technology products generates more options for consumers who can choose what works best for them based on ease of use, quality, price, and more.
Zach Perret’s Key Takeaways on Building a Platform:
- Go slow at the beginning, and make sure you get it right. It’s tough to modify how a platform is built over time. (Pro Tip: When launching an API, consider versioning before you have to version.)
- Be truly authentic to the community. Your users will be your best evangelists.
- Realize that the things you do now will pay off in several years. Having a patient outlook is crucial, so find investors and employees who also take this view.