Fintech company Plaid just hit a key Silicon Valley milestone: a multibillion dollar valuation.
The start-up announced a $250 million funding round on Tuesday, led by Kleiner Perkins' partner Mary Meeker, who will also be joining Plaid's board. Andreessen Horowitz and Index Ventures were among the new investors while former backers Goldman Sachs, NEA and Spark Capital also participated.
The cash injection brings Plaid's valuation to $2.65 billion, according to a source familiar with the fundraising, who asked not to be named because negotiations were private. This marks a massive increase from Plaid's previous $44 million Series B round and $225 million valuation, according to data from Pitchbook.
"We've been really fortunate to have incredible growth in the fintech ecosystem and have been a key partner in driving that," Plaid CEO Zach Perret told CNBC in a phone interview.
Plaid's co-founders declined to comment on the valuation.
As of December, the company said 25 percent of people in the United States with bank accounts have connected to Plaid through an app — a 13 percent increase from last year.
"Plaid has built an important underpinning for financial services on the web and mobile," Meeker said. "Plaid allows businesses to rapidly launch innovative products, drive growth and enhance consumer satisfaction. We are excited about the evolution and potential ahead."
Meeker is leaving Kleiner Perkins Caufield & Byers to start a new, unnamed firm. After the move, she will stay on the board of Plaid. She became a household name as a Wall Street analyst during the late 1990s, betting on risky dot-com stocks even as the bubble burst. She has led Kleiner to investments in Facebook, Spotify, Square, Twitter and Snap, and her annual internet trends report is almost required reading for tech investors.
Even though Plaid is well-known among Silicon Valley developers, the average person interacting with it most likely wouldn't recognize the name. Its API software quietly powers such enterprises as the popular peer-to-peer payment app Venmo, the mobile investing app Robinhood and cryptocurrency exchanges Coinbase and Gemini.
Because of that network effect, Plaid has grown steadily with its list of customers. The company says it integrates with more than 10,000 banks and connects to roughly 20 million consumer accounts. While it does not give specific numbers or a full list of companies, Plaid said its customer base doubled from 2017 to 2018.
"There's already been explosive growth — we never could have predicted how fast or how large it was going to be," Perret said. "Financial services will be become increasingly digital."
It's not just start-ups going digital. Perret said banks themselves are "coming around to the idea of fintech." The company announced a deal with J.P. Morgan in October to give the bank's customers more control over their personal data.
Before this latest fundraising, Plaid had attracted investments from the venture arms of Goldman Sachs, Citi, Google and American Express. Plaid joins a growing list of Silicon Valley "unicorns," or private companies with at least a $1 billion valuation. There are now more than 260 with that billion-dollar status globally, according to CB Insights.
Plaid's co-founders — Parret and Chief Technology Officer William Hockey — met as associates at Bain in Atlanta. The two quit their jobs and moved to New York where they spent roughly 18 months working on the idea. The two built an original prototype for Plaid and by 2013, raised enough money to move forward and "build, heads down," in a small Manhattan apartment for 20 hours at a time.
The idea took off after they won the TechCrunch hackathon five years ago, which was the first time a team had built a full-scale financial services application live, in less than 24 hours, they said. After they won, Hockey and Perret moved the company to San Francisco to expand and bring on more engineering talent.
Venmo and other applications rely on Plaid's protocol known as application programming interface, or API. While the software is not unique to the banking sector, Plaid's version does a lot of the heavy lifting on the back end that could otherwise take days. Without a third party like Plaid, start-ups would have to hire their own engineers and create their own ways to sync with banks.
Plaid also adds analysis on top of the bank account so app users are able to do things like budgeting or expense management. It can authenticate bank accounts for payroll deposits and electronic bill payments, verify someone's balance in real time, verify someone's identity and understand income and employment.
The funds from its Series C round will be driven "back into the ecosystem" with new products and new talent, which Perret said they'll need if the fintech ecosystem keeps growing so rapidly.
"We're powering future of financial services," Perret said. "We are really thinking about building fintech as an ecosystem — it's a decades-long time horizon."