What We Can Learn From the Rise of Plaid

Plaid is all the buzz right now—and we’re not talking about streetwear. Whether you’re a financial company with a lot of data or a consumer with a bank account, there’s a good chance you’ve heard of Plaid. 

However, that doesn’t necessarily mean you’ve had the time to track what’s been going on with the fintech world. Here’s a brief history of where Plaid has been, what it’s achieved, and what that might mean for businesses like yours in the future.

What Is Plaid? A Brief History 

Here’s the simplest answer: Plaid is a platform that connects users and their bank accounts to financial applications. Have you ever used Venmo to send money to your friends? Then you’ve utilized Plaid’s technology integrations already—and it’s possible you didn’t even know it.

Founded in 2013, Plaid connects to a lot of other well-known names in the fintech world. Robinhood, Venmo, Transferwise, American Express, Coinbase—all of these powerful financial names have worked with Plaid. 

Through those partnerships, the company creates the digital infrastructure to make transactions and investments convenient. Plaid’s aim? To maximize the transparency and control that customers can exercise over their money.

Plaid is making waves partly because its solutions are successful. So successful, in fact, that in January of 2020, Plaid nearly sold to Visa for a price of $5.3 billion. The merger ultimately didn’t go through after a thumbs-down from financial regulators. But even so, the deal highlighted just how important the Plaid name has become in the world of financial services.

Plaid’s Popularity in Financial Technology

If you want to gauge how popular Plaid has become, follow the money. Even though the $5.3 billion sale to Visa didn’t go through, Plaid found more funding elsewhere. Barron’s reported a recent funding round placing Plaid’s value anywhere from $10 billion to $15 billion. 

Previously, Plaid raised hundreds of millions in funding, including investments from both Visa and Mastercard. The latter took part in Plaid’s 2018 Series C round, which raised $250 million for the company. Recently, a Series D round brought in hundreds of millions more.

But it’s not just the funding that makes Plaid popular in fintech. While other companies were floundering during the COVID-19 pandemic, Plaid was flourishing. It increased its customer count by 60% in 2020, highlighting just how entrenched the service has become in the world of fintech. And given the popularity of its partners—Coinbase recently went public as the largest cryptocurrency exchange—it looks like that growth won’t be slowing down any time soon.

Plaid’s Role in Helping Businesses Grow

What does this have to do with growing businesses? Plaid is moving into the space of “business accelerator,” piquing the interest of entrepreneurs across the country. They’ve created a new accelerator program named FinRise, with a goal of providing funding and support to underrepresented tech company founders.

FinRise is technically a “business incubator” that lasts 9 months for every accepted business. The program aims to find Black, Indigenous, and people of color (BIPOC) founders of tech companies in need of support. Those businesses that apply and receive acceptance won’t get funding from Plaid, but they will get the following:

• A 3-day business boot camp focusing on how founders can navigate the complex regulatory environment that Plaid has already mastered. In particular, founders who struggle with information security and the legal complications of working through fintech will find much-needed support. 
• Mentorships from Plaid’s leaders, including lessons on how to handle the challenges above, especially from the point of view of a founder.
• Introductions to Plaid’s network of VC firms. Though this doesn’t include a promise of a check, it does mean businesses chosen for FinRise will have access to a network of venture capitalists.

It’s not just FinRise, either. As of early 2021, more than 4,000 businesses were using Plaid’s platform to support their financial infrastructure—a list that includes Fortune 500 companies. 

Plaid’s list of financial services includes business finances, such as bookkeeping and payroll. With its API integrations, businesses can enter what’s essentially a choose-your-own-adventure platform for managing every aspect of their financial picture.

What Can Business Owners Learn From the Rise of Plaid?

Plaid’s road to success may look like a meteoric rise, but that doesn’t mean it’s been a smooth path. In fact, it’s experienced both failures and successes along the way that any business can learn from. 

One Partnership Failure Isn’t the End of the Road

Plaid initially agreed to a massive merger with Visa. But even after that fell through, Plaid found plenty of success with new styles of funding that didn’t require a merger of this size. As it happened, their valuation just about doubled after the Visa merger failed to go through.

Maintain Your Independence When It Matters

Though Plaid would have been happy with the $5 billion deal with Visa, it also found success in securing funding through multiple rounds of seeding. This illustrates that companies seeking funding don’t always have to find one “whale” to write the big check: if your business generates enough enthusiasm, there may be multiple partners you can work with to achieve the same results.

Regulatory Challenges Don’t Have to Spell the End

The deal with Visa was squashed. But Plaid used that learning experience to help fuel its future growth—it also used its regulatory experience to create FinRise. Now it helps other business owners navigate the same minefield. While these hurdles can be frustrating, business owners should keep their eyes on the prize and recognize when some failures don’t spell disaster. In some cases, a failure may represent another learning opportunity.

There Are Opportunities, Even When the World Seems Scary

The COVID-19 pandemic has been a frightening proposition for any company looking for funding. Yet even in venture capital funding, Plaid shows that there have been opportunities. In fact, total venture capital funding went up by 14% in 2020.

Plaid’s success in securing funding highlights how companies can choose their own path when carving out their slice of the market. 

Ready to do the same for your small business? Lendio puts you in a more powerful position to determine your own destiny.