Plaid’s Zach Perret: ‘Every company is a fintech company’

The fintech revolution is just getting started.

At least that’s the impression we got after a conversation with Plaid co-founder Zach Perret. He appeared on Extra Crunch Live last week to talk about his company’s announced exit to Visa and the larger fintech landscape.

Perret and Plaid announced a deal to sell the company to Visa earlier this year for $5.3 billion, a transaction that highlighted the company’s central position in the fintech world. Plaid provides APIs that link consumer bank accounts to apps and other financial services, making it the connective tissue of the fintech boom.

It’s probably no surprise, then, that Perret is bullish: “You’ve heard it a million times, but the quote of software eating the world [is true], and my corollary to that is [that] every company is a fintech company. And certainly every financial services company should be a fintech company.”

He said there’s lots of room left for fintech and finservices companies to create new products, which is not a bad view of the future if you want to be cheered up. Perret also noted that there are widespread opportunities for fintech companies to help underbanked people in the U.S. and abroad, which indicates a massive, untapped total addressable market.

To make sure you can take your own notes, we’ve included the full session below and excerpted a few passages from the transcript. (You can sign up for Extra Crunch here if you need access.)

Zach Perret

First up, here’s the full call:

Asked by the audience what he would build if he was starting a fintech company today:

That’s a great question. If I were starting a fintech company today, I would be focused on [the] unbanked and underbanked. If you look at the numbers in the U.S., 6% of the population is unbanked, and 16% is underbanked. Six percent of the population is unbanked; that is shocking. That means that they don’t actually have a bank account — underbanked, again, [means] not having the tools and services they need. And that’s a combined 22% of the population for whom they are desperately looking for financial services, desperately looking for tools, they’re desperately looking for help. That is a fantastic starting market. That is a market with people [with] very high demand. And in the market that frankly will have a lot of loyalty and if one is able to solve their very fundamental problems. That’s probably where I’d start.

What changed after Plaid raised $250 million in 2018?

We never consider ourselves to be rich, that would perhaps change the culture in a way that we wouldn’t want. It’s actually an interesting story. We raised in 2016, quite early, and at the very end of 2018. I believe it was announced in December, perhaps. In that period, it was over two and a half years, between when we raised — which is quite a long time for a company, at least these days in Silicon Valley to go between fundraises — after the Series B, which was the $44 million round, and in 2016 we actually built a profitable company. And we were growing quite well and had fantastic compounding growth curves and things looked really, really good. And if I’m totally honest, the round in 2018 was not a necessary round per se, other than the fact that we were planning to buy a company. So if we’re going to deploy a bit of our remaining cash in order to acquire this company, we wanted to be sure we had sufficient buffer. As well as putting, if we were going to do a raise, we’d rather do a raise once and not twice, so putting enough cash in the balance sheet to go forward. And before and after the round, aside from the acquisition, I’m not sure that a great deal changed. Our mindset didn’t shift all that much.

How early did Plaid get acquisition offers?

Acquisition offers come to startups in a variety of formats at a variety of times, whether it’s an off-hand mention, or a serious acquisition offer. We’ve had a number of them throughout the years. And to be frank, though, what I think about whenever these things came up is our mission. So, how can we have the impact that we want to have on consumers and the way that we want to have it. One of our core mantras as a company is make money easier for everyone. And we think about this concept of taking a financial services ecosystem in which you had to walk into a physical bank branch in order to get a loan.

And then moving that to a world where today [ … ] there are hundreds of businesses that will give you a loan on the internet. And though the rates have gone down, the quality of service has gone up, and the communication has gone up. You can do things on your phone, [garnering] all of these these fantastic benefits for consumers. And so for us, that is our mission, right? We want to create an ecosystem where there are many applications available to consumers, and through either competition or just technical innovation the quality of product delivered to consumers goes goes through the roof.

[ … ] And so that that is that is the vision for the company. That is where we want to go and we believe we’ve just scratched the surface. There’s there’s so much more to do. So when the Visa acquisition came along, and our first reaction was “no, we’re focused, go away,” like, “leave us alone, we’ve got stuff to do.” Over time, we kind of dug deeper and realized that there is just this this fantastic kind of long-term vision overlap with what Visa is building and where they’re going and what they’re doing. And frankly, we got along quite well, there was high values overlap. But the most important piece for us was that we believed that we could accomplish our mission in a faster way, by working with Visa. And so for us, that is the only thing that really drives an acquisition conversation, is can we achieve this mission that we hope to achieve in a faster, better way?

You really have to listen to the whole thing. Hit play!

And finally, you may notice that Zach is surrounded by books in this episode. Voracious reader that he is, he was kind enough to share his reading list for entrepreneurs with us: