Why Visa Is Buying Fintech Startup Plaid For $5.3 Billion

2020/01/14 Innoverview Read

Visa announced it will acquire Plaid—a startup that connects payment apps like Venmo and Square Cash to users' bank accounts to transfer funds—for $5.3 billion. That marks a doubling of Plaid’s value in a year. The eight-year-old San Francisco company last raised funding a year ago at a $2.65 billion valuation. In 2019, Plaid doubled its number of customers to reach 2,600, and it expanded beyond the U.S. to the U.K., Spain, France and Ireland. 

Visa, with its market value of $420 billion and $23 billion in revenue last year, isn’t buying Plaid for its revenue potential. Plaid’s 2019 revenue was between $100 and $200 million, according to a person familiar with the matter. Assuming it was $150 million, Visa would be paying a sky-high price of 35 times sales, one of the highest price-sales multiples in recent history for a private company. 

Visa’s primary reasons for buying Plaid are twofold. First, Plaid works with the vast majority of the largest fintech apps in the U.S., including Venmo, Square Cash, Chime, Acorns, Robinhood, and Coinbase. With the acquisition, Visa gets access to an important, ballooning base of customers that it can sell additional payment services to. Second, Visa has a global network that’s unparalleled in financial technology, with millions of customers across 200 countries. That will make it much easier for Visa to take Plaid global.  

Zach Perret, 32, will stay on as Plaid’s CEO. Perret, Plaid’s cofounder William Hockey, and the two Goldman Sachs bankers on the deal, Brandon Watkins and Troy Wickett, have all been past members of Forbes’ 30 Under 30 list.

Plaid’s customers, like those of $35 billion payments company Stripe, are fintech engineers, so Perret sees the acquisition as validation of their growing importance in financial services. “Our go to market is finding people that are creating innovation inside of enterprises,” he says.  

Visa expects the acquisition will close in three to six months, and it’s paying for the purchase with $4.9 billion in cash and $400 million in stock.

(Source: Forbes https://www.forbes.com/sites/jeffkauflin/2020/01/13/why-visa-is-buying-fintech-startup-plaid-for-53-billion/)