September 19, 2013
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.
July 17, 2013
At Homebrew we believe in the Bottom Up Economy, the idea that as technology keeps getting cheaper, more flexible, more accessible, it can be increasingly leveraged by customers and industries that historically haven’t been able to take advantage of it. And it’s clear this adoption of technology is happening faster and more broadly than ever before.
Our investment philosophy draws us towards products and platforms are supporting the Bottom Up Economy. This includes, for example, new types of commerce, productivity tools, financial services, labor marketplaces and the future of work. The Bottom Up Economy holds great promise for industries old and new. We’ve made investments in companies that are representative of this trend. They operate across a diverse set of markets, including financial technology, AI-driven software, marketplaces, autonomy, agriculture and aerospace. The common thread is the Bottom Up Economy - technology democratizing access to information, products and service, customers and revenue without requiring the specialized skills, substantial resources and significant time needed in the past. These companies also have key characteristics that we look for in our investments: strong network effects, rich data assets, scalable go-to-market strategies and long-term defensibility.
Homebrew’s Focus
Why does Homebrew have a focus on the Bottom Up Economy? It’s a combination of our personal experiences, a conviction about the investment potential of the theme and the nature of Bottom Up founders.
- Personal Experience: We’ve each spent nearly 25 years working on and investing in these concepts. For Hunter, Second Life, AdSense and YouTube were all about putting tools in the hands of people to help them build audience, community and economic returns from their creativity. And as both an operator and venture capitalist, Satya helped bring products that empowered individuals and small businesses to the mainstream, including AdSense and Twitter. We voted with our feet even before we started voting with Homebrew dollars.
- Investment Thesis: Growing, profitable companies control their own destinies, and that’s what we hope to help founders build. The transition from a Top Down to Bottom Up Economy will create many innovative companies that will lead their industries for years to come. We also believe that as software eats the world, leaders in every business vertical find themselves facing “buy, build or partner” decisions with innovative upstarts. This dynamic creates fantastic strategic opportunities for founders in countless industries - retail, financial services, transportation, business software, media, etc. - as every leader and company will be paying attention to new companies disrupting their markets.
- Founder Mentality: We’ve observed that Bottom Up founders are disproportionately mission-driven in their work. Their business models rely on creating real, tangible value for their customers. They believe the problems they solve are empowering people. We believe that being mission-driven is a competitive advantage for an entrepreneur. Mission-driven founders are better recruiters - they can explain the “why” not just the “what” and “how” of their vision. Their convictions make them better leaders, and their employees more loyal, through the ups and downs of startup life. Their passion adds energy to every room and every team and carries them through the ups and downs of building a company. And we just plain like hanging out with them.
Come Talk to Us
If you’re building a startup for the Bottom Up Economy please come chat with us. If you want to work at a Bottom Up Economy, let us know. Want to discuss how the Bottom Up Economy is going to change your existing successful company? Yup, contact us. Interested in debating our thinking - actually, especially if you want to debate - please get a hold of us.
Homebrew is open for business.
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