SPEAKER_00: We tried to have you on the program back in 2020 for a little history lesson here. Visa was going to acquire a plug. We sent you a quick email and you responded, hey, let's wait until the deal closes. But that deal never closed.

SPEAKER_02: Well, first off, apologies if I pushed you off for so long.

SPEAKER_06: It's reasonable, I think. This Week in Startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC 2 report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. Embroker's startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at embroker.com slash twist. And while you're there, get an extra 10% off using offer code twist. And Fount. Do you want access to the performance protocols that pro athletes and special ops use? With Fount, an elite military operator supercharges your focus, sleep, recovery, and longevity. All powered by your unique data. Want a true edge in work and life?

SPEAKER_07: Go to Fount.bio slash twist for $500 off.

SPEAKER_00: All right, everybody. I can't believe it, but the all-star summer continues.

David Friedberg: It's ridiculous. The guests who are coming on this week in Startups, 1800 episodes in, we just decided, let's get all the greatest founders on. Folks who have really defined their categories, built huge, enduring companies, faced multiple crucible moments, as my friend Roloff at Sequoia talks about. And let's just chat them up because, you know, they feel at home here on this week in Startups. It's a founder-to-founder, capital-allocated-to-founder talk. We try to keep it 100. We keep it a buck here. And, you know, a lot of the value in the technology ecosystem is becoming the platform, the backbone, and helping other people build businesses.

SPEAKER_10: We've seen this over and over and over again. Is it a sexy business to be in? Maybe some people would rather touch the consumer directly. But these foundational companies are so important. One of the greatest ways to build a big, enduring company is to help other people build companies, small to medium-sized businesses like HubSpot, who came on the program recently. NVIDIA, that's the backbone for this whole movement right now in AI. And then, of course, OpenAI with their chat CPT4. That's a backbone for a lot of apps. And Plaid is a company that, if you're in the technology space, if you're an entrepreneur, you know because it's the backbone for so many consumer banking applications. Fintech has had a complete revolution thanks to companies like Plaid. Now, you don't know you're using it, but they do a lot of the back-end for people like Shopify, SoFi, Venmo, the things that do touch consumers. And I'm really excited to have Zach Perret on the program today.

SPEAKER_12: He's the CEO and co-founder of Plaid. How are you doing, Zach? I'm doing well. Thank you so much for having me. I've long loved the program. I'm happy to be here.

SPEAKER_15: Aw, thanks, pal. I appreciate that. And you started, what, 2012 with Plaid? So it's been a 10-year journey now.

SPEAKER_17: I did. I started in 2012.

SPEAKER_19: It's been a little bit over 11 years now. Wow. And it still feels like we're just getting started.

SPEAKER_00: Yeah, that is the crazy thing about when you find a great, uh, when you find great product market fit and you delight customers, you know, you, it does feel like even in the second decade, you're just getting started. I hear that over and over again, even when people, I was talking to Stanley Tang, the, the co-founder of DoorDash, and, uh, somebody asked him what it's like to, to be a public company now. And he said, you know, being a public company is like, you're a great team, you know, playing in college, and then you get into the NBA and it's just, oh, different league. Uh, and like the game starts over again, if you will. Now we tried to have you on the program back in 2020, uh, for a little history lesson here for people who, uh, don't know. Visa was going to acquire a plan. And, uh, we sent you a quick email and you responded, Hey, let's wait until the deal closes, but that deal never closed.

SPEAKER_22: Tell us a little bit about that crucible moment to Kreb Ruloff's term, uh, for the visa transaction and it not closing. Cause that must've been in the short term, I'm guessing absolutely crushing. And in the longterm it's turned out to be absolutely one of the great trades of your life. I think.

SPEAKER_02: Well, um, first off, apologies if I, uh, if I pushed you off for so long, but you know, we reasonable, I think we, we, we, we decided

SPEAKER_26: in, uh, kind of the end of 2019, um, very early now 2020, uh, to sell the company to visa.

SPEAKER_28: And this was for a wide variety of reasons, but, um, largely because we felt like we could accelerate the business, um, much more inside of visa than from the outside. So I think you and your listeners probably know what plaid does. Um, but we build the infrastructure that enables fintech companies to interact with bank accounts. So the way that your chase checking account talks to your Venmo app and the conversation between, uh, your, your, your, your checking account and the Venmo app, that's, that's the infrastructure that we build and apply that across almost every application that your bank account touches. Um, uh, so chances are most of the people listening and probably use plaid in one format or another, and the decision to sell the visa while a very hard decision was one that we thought could really accelerate the business. On the other side, having access to a lot of visas technology, having access to their distribution, um, you know, we were, we were pushing on internationalization at the time, and obviously they're a large international company. So having that, that access we thought would really accelerate the business. Now, um, we made the decision kind of end of 2019. We signed the paperwork in, I think January, I think it was January 15th or so, uh, of 2020, um, to sell, to sell the business. I guess you reached out to me sometime thereafter. I don't remember the exact date. So some of these times are a little bit of a blur. I wasn't sleeping all that much those days, it's pretty nerve wracking. I'm sure. Exactly. And kind of fast forward, uh, fast forward a couple of months and then begins COVID and, you know, you have this, this very difficult decision to make to sell your business. And I think it's the hardest decision that a founder ever makes if, if, if they make it and, you know, I was conflicted about it at the time. It was a 51 49 decision when we decided to sell, then, then it's COVID in the markets crash. And all of a sudden we have this all cash transaction that is locked in. Um, interestingly in our docs, there was a clause that says, even in the case of a pandemic, uh, visa cannot walk away from this transaction, uh, which was a bit funny for me. And so you look like a genius at first, and then little by little, the market turns and so forth. But along the way, the regulators came in and said, Hey, we want to investigate visa for antitrust and nothing to do with plaid. Um, and this, this regulatory investigation continued, but, um, kind of, as we went through COVID, you know, we went from having the markets crash, the bottom fall out of the markets to all of a sudden consumers came around and started saying. Um, I don't want to go to the bank, but I need to do things in financial services. I don't want to go to the bank, but I need a loan. Um, I need to apply for a mortgage. I need to do all of these different things that a consumer needs to do in their day to day life. And so we saw this massive increase in adoption of digital finance. Um, so it was the banks building things. It was the, the non-banks, the, the traditional fintech startups building things. Um, it was retailers jumping in saying, Hey, I want to build this entire product too. So we had this huge acceleration of our business, uh, kind of going through COVID and, you know, I joke that if I'd written a Hollywood scripts to accelerate our business, I might've written a script like this, except realistically, I am not creative enough to write any Hollywood script ever. Yeah. But we had a visa brand moment, huge acceleration of the business. Um, the DOJ investigation, the antitrust investigation took so long that we actually lapsed exclusivity on the other side. Um, so a year after we'd signed the deal to, to sell the company, we got to the end of it, um, and had the opportunity to say, you know, do we want to stick in this, in this deal or do we not? And at that point we made the decision to go on the independent path, um, for many reasons, but mostly, you know, our business had transformed, the market had transformed and, you know, looking back, I, I think it's one of the most formative, best, most interesting experiences that I've ever gone through. And I think we were lucky to have the outcome that we did. Um, I'm, I couldn't be more thrilled for the, the independent path that we're on now, but man.

SPEAKER_17: Did I sleep so little that was so stressful.

SPEAKER_44: I mean, I'm assuming visa was bummed.

David Friedberg: Uh, and then my friend, Brad Gersner from Altimeter led your funding round in 2021. If, uh, my research is correct. And that was at like a $13 billion valuation. So, you know, essentially the price of the deal more than doubled or the value of the company more than doubled. And, uh, visa must've been bummed, uh, to not have you in the fold, but these things are very hard in today's day and era today's day and age.

SPEAKER_47: You just, it's hard to get through regulators here in America. I'm, I'm wondering what you learned in that process.

SPEAKER_50: For me, the thing I learned, and I'll tell us to all, all the entrepreneurs that are listening is, um, if there's regulatory risk, you should get a, a substantial breakup fee put into your deal.

SPEAKER_52: I think we, um, uh, did you have one or no, cause that's like a lesson, uh, after, uh, we did not have one, uh, so less, less, less, less than after.

SPEAKER_28: Uh, but it is, you know, it was interesting because the, the regulatory climate shifted right around the time that our transaction is going through. So, um, uh, we kind of sold, uh, kind of like end of the, end of the, the Trump administration shifted into the new administration. The climate for antitrust regulation got much stricter, um, plaid was one of the, the deals that, um, despite the fact that we didn't get kind of final, finally blocks nor, nor did we finally close the deal. We decided to walk away before we got to the final steps, but it was one of the deals that caught a lot of headlines and in some sense kind of set a precedent for, um, uh, for, for, for, for, for future antitrust. Now, obviously the antitrust climate has changed, uh, in, in, in the economy over the past 10 years.

SPEAKER_26: Um, and for me, I think the big learning is, uh, try, try to, try to do what you can to, to understand exactly what's going on regulatory, but also protect yourself on, on, on the back end.

SPEAKER_57: Yeah. The breakup fee is become kind of standard.

David Friedberg: I had one of these when I sold my blogging company to AOL, we negotiated like, and this is a small transaction, $30 million transaction, but we, because we were in the thick of this deal, you know, it's obviously a distraction for management and so I think they had a, uh, $500,000, not breakup fee, but the way they did it was we'll buy $500,000 worth of advertising on your blog network in advance.

SPEAKER_00: If we hit the state. And so we hit that date and I said, okay, ship it. And they're like, we're like four days away. And I was like, okay, ship it. And they wrote back and they're like, okay, can we ship you half of it?

David Friedberg: And then you give us a one, uh, you know, whatever, two week extension. And my attorney's like, yeah, that's totally reasonable.

SPEAKER_00: So they wound up giving us like half of it or whatever, took the edge off. And then we didn't seem like we were compete, complete jerks. But yeah, I think, and I think a lot of the acquirers are happy to do this knowing that, you know, that, that gives them the room to complete the deal.

David Friedberg: But yeah, you have to know the game on the field and the game on the field right now is, uh, tech equals bad. Tech has too much power. Therefore it doesn't matter what the acquisition is, uh, even if it's a creative to consumers, even if it increases consumer choice, even like in the case of Activision and Microsoft,

SPEAKER_47: even if it lowers prices, yeah, we're, we're just going to block it because capitalism equals bad, uh, according to the current administration and Amina Khan, uh, or the EU, you know, and I, I can understand it for some of the larger companies, but I'm not sure if I understand it for this size acquisition. I think we need some rules of the road.

SPEAKER_68: If you're a SaaS or services company that stores customer data in the cloud, then you need to be, uh, SOC 2 compliant. You knew that from a third party and you need that third party to close big deals. And if you want to get compliant easier and faster, you need to use Vanta, V-A-N-T-A. Vanta makes it so easy for you to get and renew your SOC 2. On average, Vanta customers are SOC 2 compliant in just two to four weeks, compare that to three to five months without Vanta and Vanta can save you hundreds of hours of manual work and up to 85% of compliance costs. This is a total no brainer.

SPEAKER_70: And Vanta does more than just SOC 2 compliance. They also automate up to 90% compliance for GDPR, HIPAA, and more. You can't afford to lose out on major customers. We all know that. Listen, it's a hard year. Last year was hard. You can't lose those major customers because you don't have your compliance dialed in. Just work with Vanta, get your compliance automated and tight and tight is right. Lock down those big deals. Here's the best part. Vanta is going to give you a thousand dollars off. That's 10 hundies. Get $1,000 off at vanta.com slash twist. That's vanta.com slash twist for a thousand dollars off your SOC 2.

SPEAKER_47: So just explain to the audience what Plaid does, who your biggest customers are and essentially why they don't do this themselves, right? Because, uh, being able to, you know, if you're spending a lot of money with Plaid or Stripe, you know, there's always this buy versus, uh, build, um, conundrum.

SPEAKER_15: So maybe you could discuss that. Definitely.

SPEAKER_39: So the core thesis of Plaid, and this is, this is, um, kind of coming out of our own personal

SPEAKER_28: experience in 2012, myself, my co-founder, we tried to build a bunch of consumer fintech products and it learned a bunch of things along the way.

SPEAKER_50: The most important one was that, um, the infrastructure to connect with a bank account between your consumer fintech products and bank account.

SPEAKER_28: It didn't really exist. And, uh, so we decided to go out and build it and, and, and I can come back and tell that, that founding story if it's interested. But what we build is basically the ability to link your bank account to an application. This could be anything from a budgeting tool that you use to an application that you're using to make an investment. Or pay a friend on the investing side. We work with companies like Robin hood and many others on, on, on the peer to peer side.

SPEAKER_75: We work with cash app and Venmo and all sorts of other peer to peer companies.

SPEAKER_50: The, the connection between a bank account and application historically, um, really didn't exist.

SPEAKER_28: So in a budgeting application, you'd have to upload documents or type in, uh, type in transactions manually. Now it's digital. You just get a feed of transactions that occur in the bank, um, so that you can get your budget updated automatically. In the case of a peer to peer payments application, um, you either had to use a credit or debit card, uh, which is relatively expensive, or you could try to do an ACH transaction, which is a bank to bank transaction. But those are relatively clunky and the onboarding is difficult.

SPEAKER_29: And so we created kind of this digital linkage that enabled a much more seamless, uh, uh, uh, bank to bank payments experience.

SPEAKER_31: And these days the products have expanded a lot. So we've gone from just doing bank account linking to now we have an identity verification product.

SPEAKER_28: Um, we have a risk and fraud product suite we enable, uh, kind of bank like payments more broadly. And then we do, uh, kind of credit analytics. So if you're applying for a loan, chances are you might've used plaid to kind of upload your, um, uh, employment data or verify your asset data. If you're applying for a mortgage or something like that, so it's now become very broad.

SPEAKER_57: And you guys dip your toe into crypto or jumped all the way in the pool.

David Friedberg: And maybe your experience there, because a lot of the crypto products were trying to build these bridges. I assume that they, they tried to use plaid to do that.

SPEAKER_15: And obviously that's created regulatory, uh, friction, I would say kind of way to say.

SPEAKER_32: Well, I don't think the regulatory friction had anything to do with plaid, but yeah. Um, what I'll say is we, we work with crypto companies in two formats.

SPEAKER_28: Um, first is there are customers, we help them do account funding.

SPEAKER_29: Um, so let's take Coinbase, for example, how do you transfer money from your chase account into your Coinbase account? And what we help set up the transaction and make sure it lands. And then we do a bunch of fraud analytics that sit on top of it as well.

SPEAKER_28: Um, so that's, that's, that's part one is they're, they're just a standard customer of ours. Part two of working with crypto companies is we found that a lot of our budgeting customers, um, or our wealth management customers, and they wanted to be able to see crypto assets as well. Um, so, uh, for example, if, if, if I'm using a wealth management tool, um, to see all of my assets, um, I don't just want to see my traditional assets. I also want to see my Bitcoin or, or, or my other coins that I have. So we integrated into a bunch of the exchanges. We integrated directly into a bunch of the blockchains so that you can connect your crypto data into your wealth management or your budgeting application as well. We haven't gone a lot further in crypto. Yeah.

SPEAKER_86: Maybe we will eventually. Um, but those are the two ways that, that we do now.

David Friedberg: Yeah, I think a little more regulatory clarity would be great. And, but you're actually in the good guys in all of this, because you're making sure like not nothing you do is on the crypto side in terms of anonymity or permissionless. Everything you do is filled with permissions and know your customer, obviously, and a lot of regulation. Exactly.

SPEAKER_28: And, and actually I mentioned that we do identity verification previously for the companies that are using plaid to do account funding. We're also in many cases doing their identity verification, doing their KYC checks that kind of identity verification and risk and fraud analytics business for us has been one of the most rapidly growing ones over the past couple of years.

SPEAKER_26: Uh, it's been really fascinating to get a lot of exposure to that market and see kind of all of the things that are going on.

David Friedberg: What, what was the origin story? How did you come up with the idea? Uh, and then how did you know you had. Any kind of product market fit? That's always like a very interesting thing I think for the audience here is that triangulation and then knowing if you have light product market fit or you medium.

SPEAKER_22: Strong or even market pull, right? Um, maybe you could take us through that journey.

SPEAKER_17: Our founding journey was, um, circuitous.

SPEAKER_28: Uh, yeah, it was, it was a bit messy and certainly required a lot of hustle. Yeah, exactly. This is, this seems to be standard these days. My co-founder and I had the idea to start a, a company that helped consumers live better financial lives, um, in kind of 2012. And, uh, we were fortunate that, um, some friends let us, let us, let us squat in an office, um, in New York City, just off of Union Square. And if you remember in 2012, that was kind of towards the tail end of Occupy Wall Street. Yeah. And they, in 2012, they kicked all of the Zuccotti park protesters out of Zuccotti park. They all moved up to Union Square and so it was almost every day that we were walking to the office that we would walk through these, uh, these protests and setting the politics of all that aside. The fact is consumers were really frustrated with financial services. They felt like banks weren't serving them. They felt like banks weren't putting their best interest first, and they wanted better access, cheaper rates, so on and so forth. And so being kind of naive kind of entrepreneurs in our early twenties, we said, great, let's go build an app to help consumers, you know, solve this problem. We can, we can solve it ourselves. So we set out to build a consumer budgeting application. We ended up building, um, six or seven different versions of kind of consumer spin analytics tools. And through that process, we realized, um, two important things. First is all of the applications that we were building didn't work. Um, and they didn't work because we would tell consumers, Hey, you're spending this much money and you should spend less money. It turns out when you tell a consumer, like, Hey, you're doing this thing that you want to do, and you should stop doing that thing that you want to do. The natural reaction is just to delete your app. So pretty quickly, we realized that the products we were building just weren't getting any traction.

SPEAKER_31: The second important thing was that getting the data from the bank was immensely hard. So we wanted to build a budget that updated every time you swipe your credit card. Now that was really hard to get that bank data feed.

SPEAKER_28: And so we ended up kind of talking to the banks and then kind of building these integrations to, to, to, to their systems in order to collect that data, um, and structure it really well. And that was what we spent like 80% of our time on. We never thought that this could be a B2B business until one of my friends actually came to me and said, as this was, he worked at another fintech company at the time. He came to me and said, Hey, Zach, your app's really dumb, but I'd like to license your backend. Um, can I, can I just pay you money to license your backend? And that was the first inclination for us that maybe we should make a pivot. And, um, so little by little, we started working on, Hey, could we turn this into an API at the time? We only had one bank that worked for this. So we literally building a budgeting app for one bank, which bank did you get first?

SPEAKER_104: And how did you get them? They must've thought you were crazy when you came in there and said what you wanted to do.

SPEAKER_28: Well, yeah, that was, that was a whole, a whole other story. Uh, but the, the first one that we actually worked with was American express.

SPEAKER_39: So not technically a bank, but, but a car provider.

SPEAKER_28: And, uh, yeah, when we went and first talked to them, they said, an API for what, like, how does this work? And then we showed them the demo and we ended up building it in, in, in, in a, uh, relatively like brittle way. So, you know, we, we integrated through the website to collect the data, um, and kind of structure it.

SPEAKER_75: That was the first, first version of the API, uh, and API would put in, would put in air quotes there because obviously scraper.

SPEAKER_26: And eventually like, you know, we have to place where they understood what we're doing. They, they, um, built an API for us.

SPEAKER_28: We, we did this kind of like big, uh, enterprise agreement with them. This took, took years, uh, American express actually an investor in the company. So like, we ended up getting to a really good place with Amex and all the other banks, but, and at first it was really brittle as, as you'd imagine. So our friend had come to us and said, Hey, can I, can I license your backend? And we kind of sputtered because we weren't ready for that. We couldn't do it. Um, but we did realize that that was a much better business model. And so little by little along the way, we ended up making this shift to saying, all right, well, we're now going to build an API. And then all of our apps that were out there, we think we, we put them on top of the API and we got to this thing where we had our first customer and we were, we were super happy. The first customer that was using it was, uh, they were basically building a corporate expense management tool. And so they said, all I need is American express cards. It turns out like you do all your corporate expresses on American express and it works, but we got to like five customers and that was it. We couldn't find anyone else to use this thing. Um, so strong, I don't even know if you could call that product market fit, but five customers that were happy. Um, and then we, um, did this thing where we said, all right, we don't know if this is a business, but we've got to try. So, um, we went to the TechCrunch Disrupt hackathon, uh, we built this API. Um, we went and talked to every single company at the TechCrunch Disrupt hackathon and said, Hey, you want to win this hackathon? This is a new financial services API. No one can ever build financial services products at this hackathon use our API and a few of them did. And then we also built a product on top of our API in like 24 hours that ended up winning the hackathon and the publicity for that.

SPEAKER_26: Then we made it so that we, um, it was a spotlight on all of your spending. So literally like it was, uh, um, we had this, uh, I remember building this little icon of a, um, a magnifying glass and it would just zoom around the map. Every time you spent somewhere and it was like tally up all of the money that you spent over like a six month period.

SPEAKER_57: It was like, including GPS and doing an API call. Yeah. That's good. Uh, catnip for a hackathon. Yeah. For the judges.

David Friedberg: Yeah. Especially like anything that had a GPS or a map in that time period, you know, and when the iPhone started supporting maps and GPS became a thing where, uh, yeah.

SPEAKER_22: Really exciting for everybody to, to use. Yeah.

SPEAKER_29: So that was really early, early 2013. It was like, yeah, it was, it was a, it was a fun thing.

SPEAKER_121: Yeah.

David Friedberg: Hackathons are, uh, undervalued in terms of, you know, tools to, to, to find customers, to find investors. We used to throw a lot of them. And the only problem with throwing hackathons was you'd have like a thousand people for 72 hours in one location. And then we would buy them burritos and pizza and every type of food and they wouldn't stop eating. They'd just be like, bring us more food. And it would cost us like $50,000 in food just to keep people fed constantly. How funny. Uh, it's a terrible, it's a terrible business, but a great fun thing to do. Uh, and so highly recommend those, those hackathons just as a way to meet people, you know, like you can meet people who are actual builders, uh, and it's nice to see them coming back now. Right. Like, uh, after these, like two or three years off. So when do you get to market pull? Is it just waiting around for more people to start building startups and apps and for you to have more support, uh, in the system for a greater, you know, number of banks and financial services?

SPEAKER_124: Is those two things kind of built up over time slowly?

SPEAKER_28: Yeah. So there, there, there, there were two things that needed to happen. So this was 2012, um, uh, 2013, uh, and, um, like if you talk to any VC in that timeframe, they would say, we don't invest in financial services. Like we don't invest in fintech or they didn't say fintech. What was your reason to not do that 2016 because they said the banks, so a few things they said, the banks are too big. They're going to do everything. They said that, uh, financial services is too highly regulated, that you can't build anything in a regulated space. And they said, no, one's doing it. Like, I can't think of any good ideas that the banks aren't just going to do. And that was the common, common thing that all of the, uh, all the investors that we talked to were saying, and we knew there were a few people that were trying to build these things. There was an expense management tool. Um, obviously you'd seen mint and PayPal before, but if you thought of what fintech was, you literally just thought it's mint. It's PayPal. That's it. There's really not much else. There were some payments companies that were starting to exist. Um, but you know, even that wasn't quite core fintech.

SPEAKER_31: And, uh, so for us, it was slow. It was about building community. Um, we would do this thing where, um, early on we would, uh, we had this little tiny office.

SPEAKER_50: We would invite everyone that we knew into our office and it would be like, point of privilege.

SPEAKER_22: My first office was right off of the theater on 15th and union square on the east side. That was literally my first office. Well, my second office for Silicon Island reporter. Where was your office on union square?

SPEAKER_29: Uh, we were just a little bit south, just, uh, just like north of Astor place. Yep. Um, so you can like Southeast, Southeast corner. Yep. Amazing.

SPEAKER_00: Yeah. Yeah. It was a great area. We were there for that area that park, uh, got better and better over time. But that, that was crazy that you need to remember operation wall street. It's a very interesting moment of time. That is kind of forgotten to history where people after the great recession, the great financial crisis, rather, um, they were fed up with the banks and a bunch of young people. I think it was mostly gen Xers, uh, in their thirties, maybe late twenties decided we're going to protest in a park and we're not leaving.

David Friedberg: We're going to bang drums to protest wall street. And they were down in that park where they play chess, like you're saying, then they moved them up to union square.

SPEAKER_72: But, but it was like, yeah, maybe your recollections on that, that went on for a year. I think it was a long time, more than a year.

SPEAKER_28: It was, it was a very long time. Um, and, and it really captured the public consciousness at the time because people were looking for, it was supposed to do as an eight, um, Occupy Wall Street, not operation, which occupied, um, people were mad. People were frustrated with the banks. They wanted to find a way to vent and kind of express that.

SPEAKER_29: And, um, this is, this is one of the things that, that people gravitated towards and the media picked up on it in a big way.

SPEAKER_47: Yeah, but, and it was out here in Oakland too. They had an, a version of it here. Um, Zuccotti park, my God, that was 2011.

SPEAKER_68: So, so interesting that that happened. All right, listen, we work with super early stage companies at my investment firm. It's called launch. I'm talking pre series a, right? We're talking seed stage, friends and family. And you know what, at that stage, maybe they don't have insurance yet. In fact, just recently, we have an amazing startup. They didn't have D and O insurance. Uh, if you don't know what D and O means that basically protects your directors and officers, directors, board of directors, officers, the people who run the company, your management team. So what do we do? We sent them right over to in broker in broker is business insurance built specifically for startups in broker single application helps startups get four

SPEAKER_70: quotes for four lines of coverage in 15 minutes. They connect you with one of their expert brokers for unmatched service. And that goes beyond your policy. Okay. We use this, uh, at all of our companies it's easy peasy lemon squeezy. And if you're not getting insurance, you know, at some point you're going to have to get it. So let's make that point today, right now, this weekend, tonight, just go to in broker today with the code twist and you'll get 10% off their startup package. How do you get the startup package in broker.com slash twist? That's E M B R O K E R.com slash twist. Make sure you use that code twist for 10% off.

SPEAKER_47: That also more importantly than getting the 10% off that shows them that you're listening to this week in startups. So we love in broker, uh, they've been amazing in terms of supporting our founders for years. And of course, this very podcast, great job in broker.

SPEAKER_155: So you support more platforms. You build community. What worked in building a community?

SPEAKER_47: If you look back on how you get the community jumpstart, a cold start problem. As we say in the business, you're, you're trying to start the car. I mean, once the car is running, you're, you're in good shape.

SPEAKER_22: Uh, but how do you get the car running? How do you turn that engine over? What did you learn about community building in tech?

SPEAKER_17: I think the honest answer is there's, there is no trick. You have to do the hard work and the hard work is, is whatever you can figure out.

SPEAKER_28: So for us, what worked was, um, we, so we started in, in New York. We eventually moved to San Francisco, um, because there were, there were more people, there were more developers there. We thought there'd be more customers there. And in both places kind of before and after we moved, we would just literally talk to everybody. So I'd go to every meetup at my, my co-founder and I were basically building this company.

SPEAKER_29: It was two of us for the first, like two and a half years. We had an intern along the way. He was an amazing intern. Um, uh, there was two of us for the first, like two and a half years. And pretty quickly it became obvious that, you know, I needed to spend my time on, on, on getting customers and my co-founder was a much better engineer than me. So, yeah, so he would, he would kind of like hold things together and I would go to every single meetup that I could, I would talk to every single customer that I could. I would fly all over the country to find people where they are. So we had people that were building in Chicago, um, uh, why people were interested in fintech

SPEAKER_15: in Chicago, I don't know, but it was a thing. So we, we went there and spent. Chicago's got a big financial, you know, industry there. That's probably their top industry, right? Real estate and finance. So yeah, exactly. Yeah.

SPEAKER_28: So then we started doing these things. We called them plat outs. It was a terrible name because it was actually a plant in. So in our office, we would just invite everyone.

SPEAKER_26: We knew in financial services just to come, Hey, have a beer on Friday. And it would do this like weekend week out and people would just swing by and like, you know, all of our friends and our team didn't really drink very much. So it wasn't the most social of environments, but we would talk to people about the company. We talked to people about what we do. And, um, you know, we'd invite all the people that we were trying to recruit and to work for us there and little by little, the community grows.

SPEAKER_28: One of the best things that we did though, was we gave everybody our personal cell phone number and we said, Hey, um, if, if, if you have feedback on, uh, on, on the product and we want you to text us. And I also want your phone number because I'm going to text you and ask for feedback on the product all the time. Yeah. And the fascinating thing is, um, through this, we became like close personal friends with a lot of our early customers, um, even to the point that now many of my good friends, uh, were early by customers or are still buying customers. And this, this, this kind of genuine relationship with the community, um, it's something that we still deeply, deeply value at plaid and something that, you know, when we think about the brand we want to build with our customers, it is this like, Hey, you have a problem.

SPEAKER_29: Call me, like, I'm going to be there to help you solve it, that kind of thing.

SPEAKER_67: People really underestimate, uh, the personal touch and making a business personal.

David Friedberg: When I started the magazine Silicon Alley reporter in New York at the same location, and you are union square, I too would host small, you know, pizza and beer and just invite anybody in the industry. And my friend, Nicholas Butterworth had a website called Sonic net, which is the first music website, uh, on the internet. And we would just go to the ATM. We'd each take out the max, which was two or 300 bucks at the time. We'd go to the deli. We'd order some pizza and we just invited, Hey, anybody working in tech, come by. And then we just, I give him a copy of the magazine and he'd show them what's on the website and do a little demo on his projector and that's it.

SPEAKER_10: And then all of a sudden momentum, momentum, momentum, and everybody brings a

David Friedberg: friend and you know, if every 10th friend winds up consuming your product, you know, that builds like really strong embers, really hot coals, those personal relationships, right? So then when you put on bigger marketing efforts, you got this really hot coals in the bottom of your grill, right? And that's, that's how I always envisioned that one to one, one to few marketing kind of efforts and they pay off. How did going from New York to San Francisco change things? Cause at that time, New York, Silicon alley, you know, it's always had a really strong presence, but nothing like San Francisco in terms of developers.

SPEAKER_169: Yeah. I think the move to San Francisco was a really good one for the company.

SPEAKER_29: It was, it was, uh, you know, a bomber personally, I love New York and, um, we're fortunate to have opened an office in New York and, uh, still, still, still get to go

SPEAKER_39: there a good amount these days, but we ended up in San Francisco where it was just, uh, you know, the Mecca of developers, obviously at the time, good for two things.

SPEAKER_50: Um, first is, um, we were, I think at the time, maybe 23 and 24, um, and our entire professional network was on the East coast and we needed to figure out how to hire people because there's just two of us at the time. So we had to get really, really good at just cold outreach, cold recruiting.

SPEAKER_28: Second is, uh, and in doing that in this market, like San Francisco is way better than a market like New York. Um, in New York, there were, you know, not very many big tech companies in San Francisco. There were a ton to recruit from. So that made a big difference for us. The second big thing, um, is that many of our customers were in San Francisco. So, um, you know, you can go down and sit with them at the time. Wealthfront was getting started.

SPEAKER_29: So we could, could go spend a bunch of time with Wealthfront. Um, we got a company, a bunch of time with, um, Robinhood, which is, I think we started working with Robin, investors in both of those companies.

SPEAKER_28: There you go. Yeah. I think we started working with Robinhood when there were five people. And that way we could go sit down in their office. You're really early. We can talk about the integration. We can talk about, uh, you know, the pros and cons. Your, um, your team has a problem. We can come sit there and bug fix with you. We can do your integration for you, for some customers, not Robinhood. They didn't need that, but some other customers needed some more help. And so just being, being really close to your customers in physical proximity mattered a lot. And the fintech community in New York is really big now, um, but it didn't grow as fast. It took a lot longer. And so the move to San Francisco was a good one for us. Funny enough, we were also in the middle of our seed fundraise, which. I mean, our seed fundraise was like a horrible process. We pitched more than a hundred investors and now finally we got a yes after that. Um, but when we moved from the east coast to the west coast, everybody, all the investors, no matter where they were, they took us more seriously because we were in San Francisco.

SPEAKER_29: Fascinating.

SPEAKER_183: Yeah.

SPEAKER_29: And so. Yeah.

David Friedberg: You're in the big leagues, right? You went to the NBA, right? I mean, listen, I got love for New York. It's my hometown, but I do advise people, you know, if it's your first company and you're here in the Bay area, yes, you will get taken a little seriously. And if you throw a rock, you're going to hit like three VCs before the rock hits the ground.

SPEAKER_00: It's just going to bing, bing, bing. And it's, it's just the, the lost numbers. There's so many of them here, but how fortuitous is that, that Robin Hood and Wealthfront, Vlad and Andy Ratcliffe were both building a service that needs you at that time. And both of those services got incredibly well funded and had unbelievable product market fit. So now you're the infrastructure, you're the AWS in the minds of the investment community,

David Friedberg: incorrectly. So that's helping them build these very large businesses. That must've been a great pitch.

SPEAKER_26: So we got, we got, um, incredibly lucky to be at the earliest formation of this market.

SPEAKER_28: So, um, we were working with, I mean, Venmo is another one that, um, even before those two, um, that was the, you know, first emergent digital finance company, uh, aside from, as I said, PayPal and mint, um, that really captured consumer attention. And, um, we were fortunate to start working with them when they were very, very small. And that was, you know, that was the big logo for us. Um, the interesting thing is one of the early ways that we grew is that people would, uh, use Venmo. They would say, Hey, that bank connection experience. I've never seen that before. How did you do it? And they would literally email the engineers at Venmo. Ah, and then we, we, because again, uh, we make good friends. We, we give, give people our phone numbers. We like try to be as close as we possibly can to our customers. The engineers at Venmo would just say, Hey, it's my friend, Zach. Like, here's his number or like, here's his, you can go do it. And that led to basically like that, that was when we really started feeling the market pull is you get the one big logo and biggest relative term. Venmo was 20 people at the time. Yeah. But, and people start seeing it. They start emailing Venmo engineers and engineers started sending them to us. Um, and then that, that started to compound fascinating how that all came out.

David Friedberg: And then this is where catching a wave, right. And being part of a movement really can drive scale and product market fit. You were part of something very big and you were enabling a whole group of people to do these things and, but a lot's changed since then. And the financial giants, I think. Did they see you? When did they start to see us competitors? Because I think a lot of them have APIs, maybe they want to provide the APIs directly to people and maybe they don't want them going through plat or am I wrong? And when you, when they start to see you power so many things, are they stoked? Or are they like, huh? Who is this intermediary here starting to get big and, and, um, mitigate people's use of our service?

SPEAKER_28: It's a, it's a, it's a good question. Um, you know, we're, we're fortunate applied to have exceedingly few competitors. Like we have a couple of direct competitors that do, um, very similar things to what we do, but we've been able to make almost everyone in the ecosystem into our customer or our partner. Um, and we like that we, we really want to be focused on creating an ecosystem of, of companies, of, of, of banks, of digital finance products. Um, uh, because that's, that's, that's what's good for consumers. So the way that we do all this is first and foremost, we say that we start with our mission. So our mission is unlock financial freedom for everyone. We're focused on helping consumers, but better financial us.

SPEAKER_50: We're a B2B company that talks about consumers in our mission because it's incontrovertible.

SPEAKER_28: Um, all of our customers, they want to help consumers live better financial lives. The banks, they want to help consumers live better financial lives. And that deeply resonates with us. And so, yeah, we work with the banks, uh, we've integrated now with, um, uh, you know, 12,000 financial institutions, maybe, maybe more than that by now.

SPEAKER_113: Those integrations are hard, complex, and that's a whole lot of legwork to get there. Um, but those integrations.

SPEAKER_86: Yeah, that's very true.

SPEAKER_28: Um, those integrations allow us to, to, to let our customers, which are seven or 8,000, uh, digital finance companies, uh, connect bank accounts in. The interesting thing is that a lot of the banks, most of the biggest banks are our customers,

SPEAKER_31: um, as well. So they build fintech products themselves. Let's take Citibank. For example, Citibank has an online account opening process.

SPEAKER_50: We help them open accounts online. So when you open a new Citibank account, you need to fund it with your existing bank account. And so you have to connect the two together. So city city is a customer there. Likewise, many of the fintechs are, are, are data sources. They become large enough that they become banks themselves, um, or they, they, for us,

SPEAKER_28: and they're not technically banks for us, they become data sources. So you might want to understand, you know, how many dollars are in your chime account in

SPEAKER_50: your budgeting app. So we connect chime to the budgeting app. So it's become this multi-sided ecosystem, which is getting in on the game too, right?

David Friedberg: Like I know it's a bank of America or something has Zelle and then other people are making quick pay. Like they're all trying to make their own Venmo kind of product.

SPEAKER_39: Exactly. Everybody's building everything.

SPEAKER_28: Um, Zelle, Zelle is a big consortium, uh, but bank of America is a part owner of it. But in my opinion, that's great. Like more innovation equals more options for consumers, more option. Consumers for, for consumers means that consumers get to pick and choose the best one and they get better financial outcomes. Um, and so from our perspective, we want all of this to exist. We want it to be a big, vibrant ecosystem. Now we put a huge burden of, of, of trust, of security, of privacy on top of it. We have to be very careful about who we let use our platform, who we let connect on the other side. And we partner really deeply with the banks and with the regulators to make sure that, um, you know, the applications that are using cloud, the applications we enable, the use cases we enable are, are, are good. But once we get through that burden, and that's, that's why we do so much of this partnership, um, uh, with the banks. And once we get through that, then it tends to be a fairly open ecosystem.

SPEAKER_50: And there's a lot of, uh, really amazing new companies that are being built.

SPEAKER_31: And, you know, I think we're, as I said, we're still in the early innings of, of financial services.

SPEAKER_26: I think, uh, one of the things I have is that every company is a fintech company. It's a question if they just know it yet. So anyone that accepts a payment, they have a fintech team internally, whether they call

SPEAKER_39: that a fintech team or not, I don't know.

SPEAKER_68: You see these blue light glasses I'm wearing, I, I, that I'm not wearing for style,

SPEAKER_10: although they are very stylish. They've totally changed my life. Why? I started having headaches, right? And had eye strain. So I got these blue light blocking glasses that do a little magnification. Cause I need readers. Yeah. I look nuts, but my eye strains gone down. My headaches have gone away and I'm sleeping better. Do you know how I got on this? I got on it because I now have a health coach who is my health coach. It's found F O U N T. It's a health company that's created custom health and performance programs that are tailored to your body, obviously also your goals. And, uh, they take into account your lifestyle. My coach is incredible. I text with them all the time. They did a blood work for me. They check out my wearable data and we do weekly calls to see if I'm on track and getting results I want. They also told me about some supplements I should be taking based on the blood work and they do it at a fraction of the cost. We upgraded my diet. I'm doing a little more protein. We've optimized my sleep. That's great. I got the supplement packs. I feel great. I feel like I'm in control of my destiny. If you want to be like me and you're, you're concerned about your health and you want to just try to do better, have some experts on your team. Build your own program. Go to found dot bio slash twist. That's F O U N T dot B I O slash twist. Get your free consultation. Mention twist. You get $500 off your first month and get your own personal health coach. Health is well. And if you're running a startup, if you're a CEO, if you're a capital allocator, take it seriously.

SPEAKER_68: I love this service found dot bio slash twist.

David Friedberg: There were a couple of major events that have gone on. I'm curious your take on them. We have fed now, right? Like, and India's got their UPI. People seem to be trying to make faster payments and transfers and everything like that. What's the state of these next generation? I don't know if they're next generation ACH or rails. How is the industry doing in speeding things up? The fact that, you know, here in America, you send a wire transfer, it feels like you're trying to get to the international space station. And the number of, you know, the complexity and the time and the phone calls is just absurd. And of course, we have crazy insane fraud going on. And cybersecurity has become super important. So maybe the those two things like how is the industry evolving here to get faster and

SPEAKER_47: tighter in the United States in the Western world?

SPEAKER_29: Well, one of the most interesting examples, and your listeners may know this, but there are

SPEAKER_28: most of the bank payments that are made in the United States run on the system called the ACH system as the automated clearinghouse system. And it started out as a way to process checks.

SPEAKER_29: So I write you a check, then you take to the bank, the bank then sends all those physical checks in a bag to the central place and they process them.

SPEAKER_28: And now it's, of course, electronic, and it allows that allows you to do bank to bank transfers. But this bank to bank transfer system, it generally takes three days. It only runs, I think it's, I don't remember the exact hours, but it used to run something like 8am to 6pm, it didn't run overnight. And it was just very, very slow.

SPEAKER_98: Now, the ACH system has done some things to modernize, but it's still not fast.

SPEAKER_31: And what happened, you know, ACH in the US was early to being this automated digital system, it was great. So we did a bunch of innovation up front.

SPEAKER_28: But then the rest of the world invaded and got a lot faster than us. So in India, they've created a system called UPI. And UPI allows for instant bank to bank transfer. So if I want to move money from my bank account to your bank account, I'm, let's say that we're in a bookstore and I'm buying a book from you. If I want to move money from my bank account to your bank account, I can do it instantly with UPI.

SPEAKER_50: And a lot of commerce started going over UPI in India, I think it's something like 73% of payments in India are now on UPI. The rest are on cards and other types. And that's pretty amazing. In Europe, they have a bunch of these bank to bank payment rails as well.

SPEAKER_28: In the US, we do have a lot of bank to bank payments. They're for things like invoices or utility bill payments, or a lot of B2B payments are bank to bank, but they're still really slow. And that leads to a lot of counterparty risk on both sides.

SPEAKER_98: I might pay you for that book that those funds will be in limbo. Are you going to give me that book? Or are you going to wait until the funds land? What's going to happen there? There's a lot of a lot of these questions. And so in the US, the Federal Reserve launched a new system called FedNow, which allows for instant bank to bank payments. Now only between the banks that are a part of FedNow, it's very few banks so far. And then another bank consortium, we were talking about bank consortiums,

SPEAKER_28: the bank consortium launched a standard called real time payments, RTP. And that's the big banks. And so little by little, we're going to start to see a real time, very fast bank to bank payment mechanism in the US. And for me, it's a fascinating question. Because, you know, this could be something that,

SPEAKER_50: you know, it modernizes wire transfers. And if we modernize wire transfers, that's nice. That'll be a win and people will be a little happier. But it could be something that's much bigger than that. It could be something that, you know,

SPEAKER_29: maybe you can piece with the card networks,

SPEAKER_15: in terms of payment volume, this would be crazy when you think about a FedNow.

David Friedberg: And obviously in India, am I correct that people will use the Indian system to transact my bank account to the bookstore's bank account or the restaurant's bank account? So it's a mobile phone app in most iterations. And so that means you're not having a credit card company in the middle of it,

SPEAKER_15: which means no fees or less fees. How does that all sort itself out, do you think?

SPEAKER_29: The biggest advantages are speed and then kind of ensuring the funds actually get there on the other side. So it's a safety of funds.

SPEAKER_28: But then fees, that's a huge one. In India, UPI is very cheap. I think the standard itself is free and the banks charge just a little bit to do it. And then there's, of course, like processors on top of the charge a little bit, but it's, you know, basis points to pay. In the US, the RTP and FedNow standards are very cheap. They're cents to pay for a transaction.

SPEAKER_50: And that means that, you know,

SPEAKER_28: we could start to see a massive reduction in the price of sending money. We actually have bank link payments that we've enabled with a small handful of early customers.

SPEAKER_50: Now, this is still traditional ACH, it's the faster versions of ACH. But for example, if you buy a Rivian or Tesla,

SPEAKER_29: there's a good chance that you'll see Plaid actually executing that bank to bank transfer. And that kind of eventually we hope that this will go from the really expensive high value

SPEAKER_75: items down to many more time.

SPEAKER_211: So FedNow is not a digital currency.

David Friedberg: It's not a federal, you know, version of Bitcoin, but it is run by the Federal Reserve. Correct? Am I correct? And it just launched in July of this year. So we're in month two of it. Is that right?

SPEAKER_15: Something like that. Yeah. Yeah.

SPEAKER_86: It's very early. Yeah. It's very early. It's one of those things that I suspect it's going to have a long tail.

SPEAKER_216: How so? It's going to be a slow rollout, you mean?

SPEAKER_28: Slow rollout. Yeah, but it'll it'll inch by inch. And I think you'll start to see more and more and more usage over time. And the fact that the bank consortium that's built RTP is the top banks, I think we'll start to see these two compete for volume over time, which which means that you'll likely see faster implementation.

David Friedberg: People seem to believe incorrectly, there's like a conspiracy theory that FedNow is like, this is going to be the central bank digital currency, like China's pursuing. And that this is part of the Illuminati, you know, new world orders way of controlling you, because they can be press a button. And if they don't like what you said on Twitter, or they x, or they don't like who you are, they can just freeze your funds, you know, like we do with Russia or, you know, other people who invade other countries, we can do kind of sanctions, but this would create a level of control. Do you and that's not the case, right? There's no indication that there's a this is going to be a digital reserve currency. But to do you worry that the government's going to have too much control and then eventually paper money goes away and you know, every transaction is stored? Just does the I'm assuming you have some libertarian like most of us folks in tech and some privacy concerns about this stuff.

SPEAKER_218: And so just maybe your thoughts on that writ large, take it wherever you want to take it.

SPEAKER_17: Look, we have no indication that this is an attempt to create more government control.

SPEAKER_29: And frankly, the Federal Reserve, there's two entities that run the ACH system, the way that all the bank to bank and your invoices move as it is, the Federal Reserve controls one of those, so they control half of the ACH system. So, you know, the reality is, this is not a lot different, it's accelerating, it's making faster a thing that already exists, and as opposed to, you know,

SPEAKER_28: creating a huge amount more control. And, you know, I think the concept of the CBDC

SPEAKER_29: is fascinating. And I have to admit, I won't be able to go all the way down that rabbit hole with you. And I'm probably not that smart in that area. But what I will say is, we're very far from doing

SPEAKER_28: that in the US, the promise of crypto, though, is that you have fast, instant, easy, verifiable transactions. In a lot of senses, that can be accomplished by instant bank to bank transfers, or it could be accomplished by instant debit card transfers, or whatever it is. So we're

David Friedberg: going to be better served to do that with a central authority, because you could have insurance, you can reverse transactions, you can have more protections. So arguably, consumers probably don't want to decentralize it sounds like a feature decentralized. But you know, anybody who's ever had money stolen from them really does like their FDIC insurance, or the fact that the credit card

SPEAKER_60: companies like don't worry about the fact that somebody ordered tires with your credit card, which

SPEAKER_117: happened to me. I'm a crypto optimist. So so my answer is yes. And let's do both. Let's make

SPEAKER_28: both. Okay, yeah. But my general take is that, you know, I think I think that now is a step forward in terms of speed. I don't think it's a step back in terms of a lot of things. And CBDC is, in my opinion,

David Friedberg: are pretty far away, at least pretty less. Yeah, I think it's going to become like one of the major presidents, I think it's good. I think the the CBDC movement is going to become like the Second Amendment, and the right to bear arms, I think we're going to see a large number of Americans, it's going to just make them feel really concerned about government overreach when they're asked to, you know, be or, or if God forbid, they were forced to use a CBDC, and the government was watching every transaction and then like, you know, putting it onto your tax return, there's something about you know, I report my taxes, I, you know, have cash, if I want to, and I don't want to be tracked through Manhattan, I can buy a cup of coffee for five bucks and, you know, just use a good old piece of paper. And so I'm fascinated with how that's good. It's so science fiction, right? It's like some crazy

SPEAKER_22: dystopian possibility that the government could control every transaction. It'll be fascinating to

SPEAKER_18: watch. And like, I'm right there with you. I prefer more privacy. But we'll see how it all plays out.

David Friedberg: Talk just briefly about what happened with Silicon Valley Bank, the banking crisis, and how maybe that 60 days was for you, because SVB, I'm certain was, you know, hooked into Plaid, and you must have had people who were checking their balances, you know, through services that were

SPEAKER_15: enabled by Plaid. What was that fire drill like that weekend?

SPEAKER_233: Well, that was a it was another sleepless weekend. More than a weekend was a few days in the week

SPEAKER_28: before. But, you know, I think the interesting thing is, it, it was this huge potential fire that ended smoothly, as you could imagine. I mean, given all the inputs, the outcome was, was pretty good. I agree. And I think for us, like initially, as things were starting to happen, I mean, you know, you go through the checklist of things you need to do. Number one for us is ensure that Plaid's cash is safe. So, you know, we looked where our bank accounts were, we felt like the cash is safe, we ended up moving past that. Second is start to talk to our customers, figure out what they need. And the number one thing that all our customers needed was connections to all the new bank accounts

SPEAKER_50: that people were moving money into. So what happened is a bunch of banks popped up and said,

SPEAKER_28: Hey, I'll open a bank account for you over the weekend. I'll let you do a wire transfer. And these were good banks. But we didn't always have connections in the way that they needed to. So maybe your connections weren't scalable enough to that new bank, or we actually saw a bunch of neo banks starting to pop up, saying, Hey, you know, I mostly did consumer accounts, but I can turn on business accounts for all these businesses that need them over the weekend. And so we said, All right, great. Well, now we got to integrate to your business side. So basically, what happened

SPEAKER_50: is our team stayed up for most of the weekend, integrating to something like 2030 new banks, and by Monday, and we were able to reset everything, the most important of that was all of the employees

SPEAKER_28: of basically all of the people that had checking accounts at Silicon Valley Bank, where they were getting their, you know, primary checks deposited into that, they all needed to switch their payroll

SPEAKER_29: immediately. So we needed to be ready for Monday, when they all switched their payroll over, Yeah, so that they can end up getting their checks on time, not having any delays with it.

SPEAKER_28: And granted, a lot of these were tech employees. So it was like, kind of easier for us to work

SPEAKER_29: with them. And they give us good feedback, and so forth. But that was a very busy time. Yeah.

SPEAKER_15: Also scary, you know, you just think about it, like, as an entrepreneur, you never thought you

SPEAKER_47: need to get $10 million, or your $3 million seed round, or your, whatever you did series D, whatever, you got $100 million at a bank. And you're like, Oh, I can't access it. Like that didn't cross anybody's mind. Now I had a lunatic, Elliot Cook, who worked for me and still does back in the day, and he would always put our money into four bank accounts. And, you know, two accounts, you know, three or four accounts at four or five institutions, whatever, and had to split up all over the place. And he's like, why is why are you doing this? So much work? He's like, well, if anything ever happens, you know, we have a bank run or whatever. And I'm like, are you living in the 20s or 30s, like bank run? And then here we are, you know, you things that you don't think can happen, can happen, right? Speaking of that, 2022, what a disastrous year, brutal, you too had to go through the layoffs, maybe you talk a little bit about how you responded to the market conditions, and you let go of 20% of people, that's one in five, that's got to be pretty difficult as a founder. And then what's happened since because we're six quarters, we're in the seventh quarter of this down market. I always thought six quarters plus or minus two would be the range of this chaos. And seems like it's directionally correct, maybe on the longer side of chaos in our industry,

SPEAKER_218: green shoots in 2023. And then remembrances of your very difficult 2022.

SPEAKER_17: Yeah, 2022 was a was a hard year, I think a hard year for a lot of startups. And I said before that

SPEAKER_29: the hardest decision ever made was to sell the company right up there, with that decision was to do the rift and the reduction force to let go of a handful of people at Plaid, more than a handful

SPEAKER_28: of people at Plaid. And, you know, I think the reality is the decisions that we made in 2021, in early 2022, ended up changing directions pretty quickly. So the biggest thing for us was, our customers came to us in 2021 and 2022 and said, we need to go international right now, international expansion is our number one priority, and get us into all these new countries. And so,

SPEAKER_29: we did, we scaled up, we built a team to go do it. We started working on a bunch of new countries, we pushed heavily in Europe, and we're looking at a bunch of other places. And then as 2022 turned,

SPEAKER_50: our customers came back to us and said, Hey, our number one priority is cash preservation, we are not going international anymore. And we ended up with a really large international team that was built relative to the feedback that we heard from customers, but it was not built in a way that we needed to maintain going forward. Now, we are still international, but we didn't need to

SPEAKER_33: bring as many customers as fast, which just means we didn't need to build for as much scale

SPEAKER_28: as fast as we thought. And so we had to take a turn, we made the decision to reduce the size of that team, we still deeply value our European expansion, our UK expansion, and we have a great team that's still there, but it's much smaller than it was before, you know, we did everything we could

SPEAKER_17: to make sure that we were clear with the team and messaging, we were taking care of the people

SPEAKER_28: that were leaving, doing everything we could to help them find the next role. And we got a lot of great feedback, both in inside and from people that, that we unfortunately had to let go, that they appreciated the effort that we made. No one's happy about it, to be really clear.

SPEAKER_17: It'll be a thing that I look back on and frustrated with and regret for a very long time, but we tried

David Friedberg: to do everything that we could. It's not easy to be the leader, right? And you know, doing what is necessary is hard, you know, and it's people that you hired and that yeah, part of the team sucks. I mean, this is no other way to say it sucks for everybody. The good news is, hey, you know, tech workers, these are elite workers, they got the best chance of anyone of finding the next gig. So let's fast forward now, we're sitting here, September 2023, some green shoots, we're taping this right after the arm IPO. And before the Instacart IPO arm had a big booming IPO earlier this week. And Instacart looking pretty good, maybe going to price above that and stock

SPEAKER_00: market doing relatively well, looks like inflation is not out of control, it feels like it's in control, but still some work to be done. What are you seeing, given your unique perspective? And how

David Friedberg: are you looking towards 2024 and 2025, just in terms of strategy, as somebody who has a very unique

SPEAKER_86: insight into financial markets? Yeah, so this year has been a surprisingly predictable year.

SPEAKER_29: And that comes from us at Plaid, it comes from our customers that we talked to, it comes from what

SPEAKER_28: we're seeing in a lot of the data. But despite a high degree of uncertainty, when you enter the year, what's the Fed going to do? Are rates going to go up? Are they going to go down? Is the market going

SPEAKER_17: to do a market going to go up? Are they going to go down? And surprisingly, a lot of companies are right on plan, us included. And that is, I think, a very good thing. Now, I can't speak for everyone,

SPEAKER_29: I understand my industry fairly well, I understand all of them. And to your point, I like to say I'm not a macro economist, my job is not to predict the future, but to react very quickly when the

SPEAKER_28: situation changes. And I think our team has been really resilient in that process. So I'll say that to our team, our team has been very quick to react to things that need to happen. We're starting to see a lot more stabilization of our FinTech customers and financial services customers. And we're starting to see, I can't tell if it's confidence picking up within them. But it's certainly a

SPEAKER_31: recognition that the world has not fallen apart. Which is it, which is a very good thing. Interestingly, we saw a lot of financial services retool for a higher interest rate environment. And so

SPEAKER_28: what you saw was a lot of the FinTech companies were only focused on deposits. So how do I get deposits into my system? How do I issue cards? How do I make money on debit interchange or whatever it is? Over the past year and a half, we've seen people really shift to Oh my gosh, I need to figure out how to make loans. And you know, I need my customers are asking me for loans. That's the thing that I need to do. And so you're starting to see a lot of retooling in terms of the types of products that are being offered to consumers. I don't think we're seeing massive consumer adoption on the back of this. I think people are looking at the loans saying over this rates are really high.

SPEAKER_50: But that is preparing all of FinTech very, very well for a decreasing interest rate environment,

SPEAKER_28: where all of a sudden they build this mousetrap and this mousetrap is going to be very effective. And as rates start to come down. And so that's been that's been great to watch. And it's a good evolution for the FinTech ecosystem. The second major change that we've seen is people are super laser focused on fraud. And in 2020, when money is, I won't say free, but cheap.

SPEAKER_49: Zerp. Yeah, we were in the syrup. Exactly. People were just focused on top line. And

SPEAKER_28: you know, a dollar of fraud against your top line, you were just focused on on your growth. Yeah, yeah, exactly. You try to minimize the fraud, but but it's not your top priority. These days, when you're focused on profit, the dollar of fraud, that's a dollar less of profit that you have. And so people are getting laser focused on it. And I think that's amazing for consumers,

SPEAKER_29: because the fraud tools are getting better, the focus on is getting better. And I think we're

David Friedberg: starting to evolve a lot as an industry. Yeah, it certainly feels like your experience parallels mine across a number of different verticals where people are running their companies at a much higher

SPEAKER_22: operational level, and looking at their margins, looking at fraud, just looking at efficiencies.

David Friedberg: And as Brad Gersner, you know, who led your last round says, you know, just being fit, right, and just, hey, do we have the right number of people for the opportunity? And do we have the

SPEAKER_22: right products for the customers? I feel like it's another year sideways. But I liked your metaphor,

David Friedberg: our job isn't to like create the weather, and we have to be humble that we even as smart as we are, can't predict perfectly the weather. Therefore, we must focus on reacting to the weather and flying the plane as safely and efficiently as possible. Zach, it's a great hour. Thanks for coming on the pod.

SPEAKER_15: I really appreciate it. Thank you so much for having me. This is great. All right, and we'll see you all next time on This Week in Startups. Bye bye.