The perils of the fintech deal flurry

It was already a big deal when Visa agreed to acquire fintech startup Plaid for $5.3 billion in January—two times the company’s previous private market valuation. But the deal heralded something even larger, helping ignite a flurry of mega fintech deals: Intuit announced plans to acquire Credit Karma for $7.1 billion just a month later, while competitor Mastercard said it planned to acquire Finicity for nearly $1 billion in June.

Now the Department of Justice is scrutinizing all three deals, each involving a startup selling to an older and larger incumbent. In particular, the DoJ could soon decide whether it will sue to block Visa’s planned acquisition of Plaid, according to the Wall Street Journal—and it is also looking into the Finicity and Credit Karma deals. 

Plaid and Visa aren’t direct competitors—Visa focuses on payments while Plaid builds software that helps digitally connect consumers’ various bank and fintech accounts. (Signing into Wells Fargo through Venmo, for instance? Plaid is doing that.). But customers speculated that one day, Plaid could eventually create an entirely cardless payments network that does away with fees that Visa and Mastercard charge to merchants to process the payments.

In most cases, it seems as if the ultimate dream for founders is to go it alone or take your company public rather than combine with another player. So why did Plaid, hugely promising even before the deal with Visa, decide to be acquired by a much larger, and much older business?

“It wasn’t an easy decision by anybody,” Rick Yang, General Partner at NEA and a board member at Plaid, told me in July during a broader conversation about the venture capital environment. “Visa is one of the biggest companies in the world with one of the widest reaches. And while Plaid from a venture and fintech perspective felt like it was making a huge impact, the company’s ambitions ultimately are global in nature. That was probably something the company could have achieved in five or 10 years—but by partnering with Visa, they could do it in the next couple of years.”

But if the DoJ interferes, Plaid may have to go it alone.

FORMER UBER CTO MAKES A MOVE. TO SOUTH KOREA. MID-PANDEMIC: Thuan Pham, who survived as Uber’s top engineer even as the rest of the senior C-suite cleared out following the company’s tumultuous 2017, left the company earlier this year as the pandemic upended its business. Now he has found his next gig as CTO of Coupang, the delivery company with the largest market share in South Korea, which is often compared to Amazon. “Amazon is a trillion-dollar company,” Pham says. “That is part of the aspiration.” Not sure I personally would be able to quarantine for two weeks in a hotel room as Pham did: The newly re-minted executive made it through on mostly cold meals for 14 days in Seoul as part of his onboarding experience. He plans to fly back to San Francisco next week, working from 4 a.m. to 2 p.m. PT to match the time in Asia. Read more.

Lucinda Shen
Twitter: @shenlucinda

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