Zach Perret, CEO and co-founder of Plaid, speaks during the Silicon Slopes Tech Summit in Salt Lake City, Utah, U.S., on Jan. 31, 2020.
George Frey | Bloomberg via Getty Images
Plaid on Thursday announced a new funding round that values the fintech startup at $6 billion, down from $13.4 billion in 2021. The new funding will give some employees a way to cash out.
The $575 million round was led by a batch of new investors including Franklin Templeton, Fidelity and BlackRock. Existing backers NEA and Ribbit Capital also participated, Plaid said.
Plaid CEO Zach Perret said the startup saw a “substantial” growth year with record revenue and positive operating margins, though he did not provide specifics. The downsized valuation is a reflection of market conditions, he said.
“The reality is our business is much stronger and revenue has grown quite substantially,” Perret told CNBC. “The profitability of business has gotten quite a lot better, and yet we are impacted by market multiples, as many companies are.”
Plaid is “not ready” for an IPO quite yet, but this round will be the last private fundraise until the company lists on public markets, he said.
“An IPO is absolutely on our path for the coming years. We haven’t assigned a specific timeline to it,” Perret said. “We still have a lot of internal work to do. We’re not ready, which is why we didn’t consider it right now.”
Rise of secondary rounds
Plaid’s new funding allows employees to cash out of restricted stock units that expire at the end of the year. The startup will also use a portion of the proceeds to enable an employee tender offer.
“That’s the motivation for the round,” Perret said. “We think it’s important to give our employees options to sell and the ability to have liquidity, especially given that Plaid has been private for so long.”
Plaid is the latest in a string of late-stage, private deals designed to enable employees to cash out in private markets. Ramp, DataBricks, OpenAI and Stripe have all announced secondary financings that were designed to let some employees get liquidity. Few of those companies seem eager to wade into public markets. Recent volatility around stocks and lackluster performance of recent IPOs, including CoreWeave’s last week, has kept some companies on the sidelines.
“Volatility is definitely going to be one of the key factors,” Perret said, adding that it was too early to assess IPO market conditions for Plaid.
The startup has been on a roller coaster in private markets since it was founded a decade ago. Plaid was set to be bought by Visa for $5 billion in 2020 in a deal that was eventually called off amid regulatory scrutiny. The following year, it raised money at a $13.4 billion valuation. That also marked the peak for growth and technology valuations before the Federal Reserve began raising interest rates.
Plaid provides the plumbing to connect consumer bank accounts to popular finance apps. Its APIs let consumers link their bank accounts to services like Venmo, Robinhood and Coinbase. Since then, it’s expanded into direct bill pay, cyber security and data analytics. It also partners with major banks.
Cybersecurity is one of Plaid’s largest growth areas, Perret said. He pointed to financial fraud growing at 20% to 25% per year as a result of the boom in artificial intelligence.
“We’ve been leaning in to try to build tools to combat deep fakes and a lot of AI-driven financial fraud,” he said. “Unfortunately, this is a large market opportunity. It’s something that we’d actually like to be smaller. But it’s been an area of growth.”
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