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Visa invested in their Series C[0], so it seems unusual that they'd also acquire the company (why not acquire it back then?). Any ideas why this might have happ

Visa invested in their Series C[0], so it seems unusual that they'd also acquire the company (why not acquire it back then?). Any ideas why this might have happened? Past examples? [0] https://www.crunchbase.com/organization/plaid#section-funding-rounds https://www.crunchbase.com/organization/plaid#section-fundin...

bradstewart 7y ago
They wanted to see what Plaid could accomplish with a little more money (and time) before spending a lot of money on the company. They liked what they saw and wanted full control. Or they realized Plaid was becoming too valuable to its competitors. Or they didn't have the cash available at the time. Or Plaid didn't want to sell at the time. Google Ventures participated in funding a number of companies that Google later acquired.
JakeTheAndroid 7y ago
Make sure it worked. Also, Plaid didn't have any data to buy when it first started. Now, they have tons of data. Had Plaid only been mildly successful, Visa likely would have just continued to let it run and get back its investment. But, now they have a decent amount of transaction data among other things, possibly making it more advantageous to own it outright than hope you can be one of many partners getting access to that data.
erikig 7y ago
It seems like their investment might have been a way to dip their toes into the water. It probably allowed VISA the ability to do their due diligence and assess whether the Plaid team would execute on the stated vision.
thorgaardian 7y ago
I’d speculate this is likely a result of one or both of the following: 1. A de-risking strategy. Investing early effectively discounts a future acquisition, but doesn’t go so far as to bet the farm on the businesses success. They would also gain very early and regular access to financials that would tell them if it’s worth the follow-up plunge or if it is on its way to bust. 2. The founders thought there was more room to grow independently, but wanted to keep Visa friendly and close to home. Best way to do that is to change an acquisition conversation into a partnership/investment conversation.
mbesto 7y ago
> so it seems unusual that they'd also acquire the company (why not acquire it back then?) Not unusual at all. Pretty typical for CVC in fact. Couple of factors: 1. CVC (Corporate Venture Capital) typically tries to invest in similar markets of companies that either are competitive or pseduo-competitive (think of it as a hedge). For example, this would be like PayPal investing in Venmo. 2. It's cheaper in the long run for a CVC to make 10 of these bets to find that one that doesn't kill their core business model (usually a cash cow). That's why you see Ford/GM putting money into self-driving car start-ups. 3. They were probably not at the level of scale ready for Visa to take them on at the time of the Series C. This was basically a down-payment for their eventual acquisition. It basically "you're too risky for us to buy, so here's some money that we can write off if you end up failing, but if you do fail, we don't have to deal with all of the crap that goes with a failing bus unit (layoffs, compliance, etc).
- pilingual 7y ago
  Great points (as well as the other comments). I'm curious to learn more about strategy here since Paul Graham says there probably aren't more Googles because companies are acquired too soon. Facebook is famous for the Yahoo! offer. Stripe would have been a great acquisition (if they would have accepted any). http://paulgraham.com/googles.html http://paulgraham.com/googles.html https://twitter.com/paulg/status/403183731449413632?s=20 https://twitter.com/paulg/status/403183731449413632?s=20

bradstewart 7y ago

They wanted to see what Plaid could accomplish with a little more money (and time) before spending a lot of money on the company. They liked what they saw and wanted full control. Or they realized Plaid was becoming too valuable to its competitors. Or they didn't have the cash available at the time. Or Plaid didn't want to sell at the time. Google Ventures participated in funding a number of companies that Google later acquired.

JakeTheAndroid 7y ago

Make sure it worked. Also, Plaid didn't have any data to buy when it first started. Now, they have tons of data. Had Plaid only been mildly successful, Visa likely would have just continued to let it run and get back its investment. But, now they have a decent amount of transaction data among other things, possibly making it more advantageous to own it outright than hope you can be one of many partners getting access to that data.

erikig 7y ago

It seems like their investment might have been a way to dip their toes into the water. It probably allowed VISA the ability to do their due diligence and assess whether the Plaid team would execute on the stated vision.

thorgaardian 7y ago

I’d speculate this is likely a result of one or both of the following: 1. A de-risking strategy. Investing early effectively discounts a future acquisition, but doesn’t go so far as to bet the farm on the businesses success. They would also gain very early and regular access to financials that would tell them if it’s worth the follow-up plunge or if it is on its way to bust. 2. The founders thought there was more room to grow independently, but wanted to keep Visa friendly and close to home. Best way to do that is to change an acquisition conversation into a partnership/investment conversation.

mbesto 7y ago

> so it seems unusual that they'd also acquire the company (why not acquire it back then?) Not unusual at all. Pretty typical for CVC in fact. Couple of factors: 1. CVC (Corporate Venture Capital) typically tries to invest in similar markets of companies that either are competitive or pseduo-competitive (think of it as a hedge). For example, this would be like PayPal investing in Venmo. 2. It's cheaper in the long run for a CVC to make 10 of these bets to find that one that doesn't kill their core business model (usually a cash cow). That's why you see Ford/GM putting money into self-driving car start-ups. 3. They were probably not at the level of scale ready for Visa to take them on at the time of the Series C. This was basically a down-payment for their eventual acquisition. It basically "you're too risky for us to buy, so here's some money that we can write off if you end up failing, but if you do fail, we don't have to deal with all of the crap that goes with a failing bus unit (layoffs, compliance, etc).

pilingual 7y ago
Great points (as well as the other comments). I'm curious to learn more about strategy here since Paul Graham says there probably aren't more Googles because companies are acquired too soon. Facebook is famous for the Yahoo! offer. Stripe would have been a great acquisition (if they would have accepted any). http://paulgraham.com/googles.html http://paulgraham.com/googles.html https://twitter.com/paulg/status/403183731449413632?s=20 https://twitter.com/paulg/status/403183731449413632?s=20