The great fintech startup boom just minted itself a new poster child.

Plaid, whose software links a wide range of consumer finance apps with banks and other platforms, said Monday it would be acquired by Visa for more than $5 billion in a landmark exit for venture-backed fintech startups.

San Francisco-based Plaid's $5.3 billion price tag dwarfs the previous record, set when mobile-payments specialist iZettle was acquired by PayPal for $2.2 billion in 2018.

The purchase price underscores the rapid rise in fortunes for the fintech market broadly and in particular for Plaid, which was co-founded in 2012 by CEO Zach Perret, a former Bain consultant.

Investors poured roughly $150 billion into venture-backed fintech companies over the past five years, more than half that including deals involving corporate players like Visa, according to PitchBook.
 

In 2016, investors valued Plaid at just $225 million in a Series B that included backers like Citi Ventures, American Express and Goldman Sachs. All told, Plaid has raised more than $300 million to date.

Plaid also counts several other marquee venture backers such as Andreessen Horowitz, Index Ventures and NEA.

Just over two years ago, Plaid secured a $2.65 billion valuation in a $250 million venture funding deal led by Kleiner Perkins. Now Visa, also based in San Francisco, is paying a hefty premium well above that.

Visa Chairman Al Kelly said the deal made sense because Plaid's technology, which last year powered banking connections of more than 200 million accounts, fills several holes in Visa's ambitions as leading a "network of networks in money movement" around the world. As part of that strategy, Visa last year acquired a controlling interest in Earthport, a company that provides cross-border payment services. Last fall, Visa and MasterCard both took strategic stakes in Plaid, according to the startup.

In a conference call with analysts after the deal was announced, Kelly declared that the combination with Plaid was a strategic move that would pay off "for at least a decade" into the future. Visa's revenue growth stemming from the deal is expected to rise 0.8% to 1% by 2021, the companies said.

Developers for financial apps like Venmo use Plaid's software to allow customers to link the app to their bank accounts. According to Plaid, one in four people with a US bank account has used the software for such connections covering about 11,000 financial institutions.

Featured image via Leon Neal/Getty Images News

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