News that fintech startup Plaid hired a CFO has kicked off a round of “When will it go public?” chatter. The answer is not soon, something that we can infer from the fact that it only just hired a CFO. Still, hiring C-suite financial talent is a known step on the well-trod path from private startup to public company.
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What’s fun about Plaid is that the company has had an interesting life thus far. Its erstwhile deal to sell itself to Visa back in 2020 affixed a $5.3 billion price tag to the concern (including earn-outs), before that transaction zeroed itself out.
Next, Plaid raised a mountain of capital. Locking in a $425 million Series D in April 2021, Plaid was suddenly worth around $13.4 billion. That’s quite the valuation step-up.
But like many fintech startups that raised big rounds in 2021, Plaid later had to slow down a little. Layoffs of around 20% of its staff in 2022 were enacted, presenting a slimmer Plaid this year. At the time, Plaid CEO Zach Perret wrote the following to his team (emphasis added):
The simple reality is that due to these macroeconomic changes, our pace of cost growth outstripped our pace of revenue growth. I made the decision to hire and invest ahead of revenue growth, and the current economic slowdown has meant that this revenue growth did not materialize as quickly as expected.
That sounds somewhat gloomy, a fitting tone for the moment. But if the company is hiring a CFO today so that it can go public in a few years, surely the company is doing fine?
Seems so, per recent comments that Perret made at TechCrunch Disrupt 2023. From our coverage of his interview:
Less than three months after the deal with Visa was called off, Plaid announced it had raised $425 million, led by Altimeter Capital, at a valuation of $13.4 billion. Perret says that Plaid didn’t need the money because of the failed acquisition. “Fortunately we had a lot of cash going into the deal and exiting the deal. We were a very efficient business, we weren’t burning much.”
Perret adds that Plaid doesn’t plan to raise again for the foreseeable future and has “quite a lot of runway. I don’t know the exact number, but our breakeven target is relatively soon.” But if the company does decide to raise, “we will raise capital at whatever the valuation.”
What we care about in those remarks is the implication that Plaid has both lots of cash on the books — if you didn’t need capital, and then raised more than $400 million, you tend to have some spare change lying around — and is not burning through it at a dizzying pace. That’s good news for folks who are hoping that Plaid’s CFO news means that an IPO is coming on the sooner end of the possible timeline; if you have less work to do to reduce operating losses, you don’t need as much time to course-correct, we reckon.
And Plaid is certainly big enough to go out. Forbes reported the following in mid-2021:
As fintech boomed over the course of 2020, so did Plaid. Its business grew 60% last year, the company says. Annualized revenue reached about $170 million by December 2020, a source tells Forbes; Plaid declined to comment.
That figure would put it on a roughly $14 million monthly revenue pace. Mix in the fact that the company was sitting on a flush checkbook to fund both product and go-to-market efforts, we presume that it posted growth in both 2021 and 2022. Naturally, less growth last year than it anticipated (hence the layoffs), but growth all the same.
If we presume that the company’s growth moderated to 50% in 2021 and 40% in 2022, to pick some numbers from thin air, Plaid closed out last year on an annualized run rate of $357 million. That number is utterly specious and only useful for underscoring that Plaid, with even sequentially decelerating growth, is a massive company that is more than big enough to go public. (For fun, the number drops to $309 million if you presume 40% growth in 2021 and 30% in 2022.)
So what do we have? A CFO, recent notes on limited burn, and enough historical information to indicate that the company is IPO-sized already. That all points with a massive, neon arrow toward an eventual IPO.
When? I refuse to guess. Stripe is still private, so the old rules for going public are clearly on hiatus. I presume that Plaid will try to time the market — as all companies do — so we can perhaps just wait for public fintech companies to recover some value, and then we can start to really count down. For now, what we expected to happen (Plaid eventually going public) is, in fact, happening.
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