US Fintech Startup Plaid Closes a $575 Million Funding at $6 Billion Downsized Valuation
US fintech startup Plaid has closed a new $575 million funding round, CNBC reported. The latest Plaid funding round was based on a $6 billion valuation, down from the $13.4 billion valuation in 2021.
Substantial Growth
Plaid said its downsized valuation is a reflection of the current market conditions. Although the fintech startup did not provide details, it said that it had experienced substantial growth last year with revenues hitting record levels and operating margins remaining positive.
“The reality is our business is much stronger and revenue has grown quite substantially. The profitability of business has gotten quite a lot better, and yet we are impacted by market multiples, as many companies are,” Plaid CEO Zach Perret said.
Plaid’s latest funding round was led by a team of new investors who included BlackRock, Fidelity, and Franklin Templeton. Current backers of fintech also participated in the funding round. They included Ribbit Capital and NEA.
Plaid said the latest funding round will be the last private fundraise before the company goes public. The company has plans of filing an IPO in future, but it’s still not ready for it.
“An IPO is absolutely on our path for the coming years. We haven’t assigned a specific timeline to it. We still have a lot of internal work to do. We’re not ready, which is why we didn’t consider it right now,” Perret said.
Employee Cashouts
The fintech’s new startup funding paves the way for Plaid employees to cash out restricted stocks that will be expiring at the end of 2025. Plaid joins a group of late-stage private deals that have allowed their staff to cash out stocks in private markets. Previously, startups like Stripe, DataBricks, OpenAI, and Ramp have unveiled secondary financing rounds designed to allow employees to get liquidity.
Some of these companies are still eager to go public. However, the stock volatility witnessed lately and uninspiring performance in IPOs have caused some companies to step back. Perret said that volatility is among the key factors that will influence Plaid’s decision to go public, adding that it’s still early to assess the IPO market conditions.
Plaid plans to use some of the proceeds from secondary financing to facilitate a staff tender offer.
“That’s the motivation for the round. 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,” Perret added.
Plaid’s Growth Curve
Founded about a decade ago, Plaid has had its fair share of challenges in the private market. In 2020, Visa was set to acquire the fintech startup for $5 billion. However, the deal was called off amidst scrutiny by regulatory agencies. In the year that followed, Plaid raised funding from private investors at a $13.4 billion valuation.
The successful fundraise marked a significant growth year for Plaid and boosted its valuation before the Federal Reserve started raising interest rates. Over the years, cybersecurity has remained a key growth area for the fintech startup. Financial fraud has been growing by between 20% and 25% each year as the AI boom continues.
“We’ve been leaning in to try to build tools to combat deep fakes and a lot of AI-driven financial fraud. 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,” Perret said.
Plaid partners with leading banks to connect customer accounts to leading finance applications. By leveraging its API’s, customers link their bank accounts to platforms such as Coinbase and Robinhood. Since its founding, the fintech startup has expanded its services to direct bill payments and data analytics.
