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Jun 20, 2016

Goldman Sachs Leads Funding for Plaid Technologies, by July Verhage: Bloomberg | Technology - June 20, 2016

Julie Verhage
Plaid Technologies, a builder of infrastructure for financial services companies, just raised $44 million led by Goldman Sachs Investment Partners, continuing the trend of Wall Street banks investing in fintech startups.

Goldman’s investment doesn't come from the bank—it comes from a $1.25 billion fund it raised last year. This is the third investment New York-based Goldman has made from that fund in 2016, having made nine investments in 2015. The latest funding efforts by the bank benefited Spotify Ltd., Pinterest Inc., and thredUP Inc. Plaid’s previous investors before this Series-B round included Google Ventures, New Enterprise Associates Inc., Spark Capital, and BoxGroup. Those firms also participated in this funding effort.
Plaid allows customers to send their financial data to other companies, such as Betterment LLC, Acorns Advisers LLC, Venmo Inc., and Robinhood Financial LLC. Those firms are then able to know client balances and authenticate accounts. So if a customer wants to set up an investment account at Betterment, they can connect their bank account within Betterment's website or app, so Plaid's technology can make it more seamless for both parties.
This arena has been a hot one of late as privacy concerns intensify with other firms requesting financial information about their customers. In his annual shareholder letter, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon dedicated an entire page to customer data. “One item that I think warrants special attention is when our customers want to allow outside parties to have access to their bank accounts and their bank account information,” Dimon wrote. “We want to be helpful, but we have a responsibility to each of our customers, and we are extremely concerned.”The team at Goldman said these concerns haven't gone unnoticed. “We spent a great deal of time around this [data privacy] issue,” said Christopher Dawe, co-head of the bank's venture capital and growth equity team. “There is a tremendous focus on consumer privacy and data, but we came away from meetings [with Plaid management] feeling good about what they’re doing in terms of privacy.”
While the broader startup world has continued to struggle, with little in the way of initial public offerings and a number of financings at lower valuations, fintech has generally been a bright spot. According to a report from KPMG International Cooperative and research firm CB Insights, funding to this market is poised to hit a record this year.
Fintech has seen its fair share of bad news, however, with the abrupt firing of LendingClub Corp. CEO Renaud Laplanche, the ensuing 50 percent fall in the company’s shares, and poor stock performance from On Deck Capital Inc. This hasn’t stopped the likes of Goldman and other investors from continuing to look into the arena, though. They just might have to look a bit more carefully.