Homebrew has made several investments since the fund’s inception earlier this year and we’re excited that Plaid.io is the first to publicly announce its financing. Software/service as an API is a key component of the Bottom Up Economy, our fund’s focus. Putting data or unbundled functionality in the hands of developers results in new types of services, faster innovation and more affordable applications. We’ve seen this firsthand via Jeff Lawson, CEO and founder of Twilio, who is an active advisor to Homebrew and its companies. Here’s an overview of our investment thesis for Plaid:
Who: Plaid founders Zach Perret and William Hockey kicked off our first meeting with a question: “What is a transaction?” They then proceeded to dissect this seemingly simple inquiry into a number of arcane and nuanced components. Working together at Bain, both founders spent time in the plumbing of financial services systems. Today, those experiences help them navigate the mishmash of financial data upon which they have developed Plaid.
What: Plaid is the first modern API for banking and credit card data, providing developers with a clean, categorized view of user transactions and account balances. Simple, right? Only in the final output. The input is a hodgepodge of siloed data, bank-specific data formats and a host of other legacy structural issues that make data inputs messy.
A world without Plaid leaves merchants, consumers and marketers fumbling around in the dark to access, structure and match financial data from many different sources.
A world with Plaid enables:
- A B2B lending application that helps identify early spending indicators for when businesses may default on their loans.
- Accounting software that does a business’s books for them ‘on-the-fly’ as expenses and income are generated.
- A nonprofit marketing tool that allows donors to track and understand where their donations go.
- A tax application that scans historical purchases to identify deductible expenses.
How: Plaid works with banks and other transaction data providers to support consumer-authenticated access to spending data. Next they perform *magic* - scrubbing, standardizing, and adding contextual metadata to the transaction. Data can’t be big or valuable if it’s dirty and siloed. Clean data is then made accessible to developers via a simple RESTful API.
Why: The story of Plaid began with the founders brainstorming a new type of local consumer app. At the design stage, they realized that the data they wanted wasn’t readily accessible. So after acquiring and cleaning up the data that is now contained within Plaid they thought that it might also be exceptionally valuable to other companies. They asked other startups. They asked the largest social local apps. They asked financial services companies. Everyone said “Yes, but where do we get that data? We’d absolutely love to use it.” So Zach and William decided to turn Plaid from an app into an API.
At Homebrew we love companies where the Who, What, How and Why all tell a cogent story. We are thrilled to be a part of the Plaid story and look forward to helping William and Zach build the company that they envision.