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These Plaid investors wont get paydays now that Visa deal is dead – Business Insider

  • The $5.3 billion acquisition of fintech startup Plaid by Visa was officially called off this week after the Department of Justice sued in November to stop the deal.
  • Plaid CEO Zach Perret said the company which experienced massive growth in 2020 isn’t looking for another buyer, although there’s still plenty of speculation that another one, especially a SPAC, could come calling.
  • Plaid’s investors tell us that because of its growth, the excitement among investors is “10 out of 10” that Plaid will one day command a payday even bigger than $5.3 billion.
  • Plaid raised $309 million in four rounds from about two dozen venture investors. Here are the major ones who will have to wait to cash out, excitement or not.
  • Visit Business Insider’s homepage for more stories.

Things have not gone according to plan for fintech startup Plaid. But its investors now say that may be for the best.

In January, Visa agreed to purchase the fintech unicorn for $5.3 billion, giving Plaid’s backers a sweet return on their investment — roughly seven years after the company raised its first round of venture capital.

But the deal fell apart on Tuesday, after regulators refused to approve it and instead sued to stop it, saying it was anti-competitive. In the face of that, both parties agreed to walk, they said in a statement.

That’s the official story. But people familiar with the situation are saying that Plaid had “buyer’s remorse,” because the company believes it’s worth much more now, and used the lawsuit as an excuse to scuttle the sale, according to Axios.

Read more: Plaid pulled the plug on the Visa deal over price, not antitrust concerns

Plaid’s cofounder and CEO Zach Perret now says he’s in no rush to find a new buyer and is instead focused on growing the business. Still, there’s plenty of speculation that a special purpose acquisition company, or SPAC, will come calling.

In any case, Plaid’s current slate of investors will have to wait before they can cash out their shares. And there’s plenty of them. Plaid raised $309 million in four rounds from about two dozen investors and had an estimated valuation of around $2.65 billion before the Visa deal, according to deals database PitchBook.

Plaid’s software pipes data between consumer finance apps and banks. The acquisition would have been a critical move for Visa, one of the world’s largest payments platforms already, to own that pipe as well.

The price tag on its potential sale to Visa would have made it one of the largest deals in fintech history, which invited a higher level of scrutiny from the Department of Justice. The department sued in November to stop the acquisition alleging that it was anticompetitive, after learning that Plaid was building a tool intended to directly challenge Visa. 

“Continuing to pursue the transaction with Visa would have meant that we continued to litigate with the DOJ. And that process could have taken, minimally, many many months. More likely, more than a year,” Perret told Insider.

Investors tell us they’re happy 

Plaid may have reason to celebrate staying independent. Early investors say they’re convinced that the company will have an even better outcome as the pandemic accelerates adoption of its tools and other fintech services.

In 2020, Plaid said it saw a 60% increase in customer growth and has added “hundreds” of banks to its customer base.

“The world has changed a lot in the past year, and has created even bigger opportunities for Plaid to help consumers interact with the financial system with ease,” said David Tisch, a cofounder of BoxGroup, an early Plaid investor.

 Some of its venture capitalists think Plaid is well positioned to maintain that growth in 2021 and beyond, they say.

Read more: Plaid’s CEO says the fintech isn’t looking for new exit opportunities after its $5.3 billion Visa deal imploded

“The upside from here is massive,” said Tisch, who invested in Plaid at the seed stage in 2013.

Hunter Walk, a cofounder of Homebrew, another early Plaid investor, said in an email that he’s “thrilled for the team who can continue to grow the value of the company to their benefit (as well as investors).”

Of course, venture capitalists are eager for exits because they’re on the clock to give returns to their own investors, like pension funds, university endowments, foundations, and high-net-worth individuals. Mark Goldberg, a general partner at Index Ventures, also a Plaid investor, said he’s fortunate his backers “have a long-term view of the funds.”

“The timing is less important than the size of the outcomes,” Goldberg said. “Our view is that while we had a bird in hand with Visa, a little patience will really pay off in the long run.”

Even so, instead of a massive, immediate multi-billion payday, here are the major Plaid investors that will have to wait.

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