Friday Letter: Will Plaid sale spark more large exits?

Reflections on the first big VC-backed M&A deal of the decade.

Happy New Year, dear reader.

The new decade has gotten off to an exciting start for the venture capital community with Visa’s announced $5.3 billion acquisition of venture-backed fintech company Plaid.

The purchase represents a big win for investors Spark Capital, New Enterprise Associates, Goldman Sachs, Index Ventures and Kleiner Perkins, among others.

And in my meeting and talking with VCs this past week, the deal for the eight-year-old company is also great news for the rest of the venture community. At least, that’s what many people are telling me.

Don’t get me wrong. The Plaid sale doesn’t surprise me. It’s a stalwart of the financial world, used by a lot of other fintech companies.

Honestly. I never heard so many people talk so confidently about the outlook for exits. One excited fintech VC told me at an after-hours event in San Francisco this week that “absolutely, this is a great deal cause it’s going to pave the way for more outcomes like it this year.”

As Commerce Ventures writes on Medium, the Plaid acquisition “resets the valuation expectations for fintech platforms and could signify the beginning of an arms race to acquire new capabilities.”

I’m more pessimistic than that. We’ve seen large deals in recent years, such as Cisco buying AppDynamics in 2017 for $3.7 billion. Ever larger was SAP’s purchase last year of Qualtrics for $8.1 billion.

I get it. Fundraising has been robust in recent years. The NVCA and PitchBook say that 2020 could be another banner year for funds raised, meaning LPs will want liquidity from older vintage funds. It’s something to watch in 2020.

But if I were to bet on the over/under for the quantity and the pricing on VC-backed acquisitions this year, I’d take the under.

I would love to hear from you about what your outlook is for 2020 and what you think of the Plaid acquisition and other deals. You can reach us on our contact page.

You can also leave us an anonymous tip on our website by clicking here.

I’m based in the San Francisco Bay Area and happy to meet folks in person.