Perfect Timing
Congratulations to Plaid!
“There are folks within the startup world who know this secret as obvious, but it is not as widely accepted. How could Twilio become a public company with an API-driven business model? Could Stripe grow that big with its architecture? As we have too many browser tabs open and are inundated with more SaaS applications, it would only make sense that going a bit deeper in the stack and empowering developers to build the next suite of solutions, as well as doing the heavy lifting of building thousands of integrations to help add value (much like Slack did for its platform). Plaid fit into this category broadly, and timed things perfectly as more and more FinTech companies would use their services to help onboard their own users.
I saw a tweet lamenting the acquisition price of Plaid as ‘crazy’ because it was 35x revenue. What the journalist doesn’t appreciate is that as the private markets have expanded and given companies like Plaid more runway to stay private longer, it affords these companies the chance to maximize their value in this manner. The value of Plaid is totally different: consider a platform that connects FinTech developers, financial institutions, and consumers. That’s valuable. Visa values Plaid more (or to keep out of the hands of competitors) than public market investors might, and startups and their investors have and will continue to take advantage of that dynamic. For a company like Visa, owning Plaid gives them even more surface area to tap into new transaction streams.”
There are sure to be more successful FinTech exits through acquisitions or IPOs or direct listings in the next few years.
One of my bigger regrets in investing in the public markets in the past decade was never becoming a shareholder in Visa ($V) or Mastercard ($MA).
Any first-world citizen/consumer is likely to have at least one of the above credit cards in a wallet or purse every single day.
Ben Thompson at Stretechery summarizes the duopolies role as follows:
“Everyone benefits from each other:
Customers and Banks:
– Customers want to have always-available credit
– Banks want to provide credit with high fees and interest rates
Customers and Merchants:
– Customers want to have a card that works everywhere
– Merchants want to be able to accept payments from anyone
Merchants and Banks:
– Merchants want to be able to sell on credit while still getting their money immediately
– Banks want to collect a fee on every purchase in exchange for managing credit and pooling risk
Visa and Mastercard, the other major credit card network, sit in the middle of each of these relationships, across billions of customers, millions of merchants, and thousands of banks, collecting a network fee — on top of the interchange fee paid to banks — on every purchase (about 0.05%). The total revenue collected — $20.6 billion in 2018 — is rather small, particularly relative to Visa’s market cap of $420 billion, but that multiple is a testament to just how durable Visa’s position is in the network it has created.”
What are other financial names that have been on my radar that are still private?
- Acorns
- Affirm
- Brex
- Chime
- Credit Karma
- Gemini
- NerdWallet
- Robinhood
- Stripe
I have a high degree of favoritism toward Stripe, Robinhood, and Credit Karma.
But by the end of the year, I might end up ghosting my banks and using Chime:
At least, I will buy some shares in Visa and Mastercard for sure.
