20VC Plaid's Zach Perret on Why You Have To Hire For Spikes and What That Really Means, Fintech Predictions From Incumbent Entrants To The Rise of Europe & The 2 Big Questions That CEOs Should Ask Themselves

In this episode of "20 Minutes VC," host Harry Stebbings interviews Zach Perret, the CEO and founder of Plaid, a fintech company that simplifies bank account connectivity for applications. Plaid has raised over $300 million and scaled to over 300 employees and three international offices. Perret discusses his journey from consulting at Bain to founding Plaid, highlighting the importance of persistence, the company's focus on infrastructure for fintech, and maintaining its mission to make money easier for everyone. He also talks about the importance of hiring for excellence and "spikes" in talent, the company's capital efficiency, and the exciting growth of fintech globally. The episode also features promotional segments for Front, Culture Amp, and Hippo insurance services.

• Harry Stebbings introduces the podcast "20 minutes vc" and invites feedback on Instagram.
• Harry announces the guest, Zach Perret, founder and CEO of Plaid.
• Plaid is a startup that simplifies the connection of bank accounts to apps for transactions, identity, or authentication.
• Zach Perret has raised over $300 million for Plaid from top investors.
• Plaid has grown to over 300 employees, three international offices, and analyzed over 10 billion transactions.
• Zach Perret was previously a consultant at Bain.
• Harry thanks Afton and Rick for their question suggestions.

We are back and you are listening to the 20 minutes vc with me, Harry Stebings and I would love to hear what you think we can improve on the show.

This quote is Harry Stebbings opening the podcast episode and inviting listener feedback.

Now, Plaid is the startup providing the easiest way for users to connect their bank accounts to an app, whether it be transactions, identity or authentication.

Harry Stebbings provides a brief description of Plaid's services.

• Harry promotes Front, an email platform aimed at improving team collaboration and efficiency.
• Culture Amp is introduced as a platform to enhance company culture and performance.
• Harry also promotes Hippo, a modern home insurance provider focused on customer experience and efficiency.

It's time we spend less time managing our inboxes and more time getting work done with front, the email platform that's helping teams respond faster to close more deals, delight more customers, and grow their businesses.

Harry Stebbings discusses the benefits of using Front for team email management.

• Zach Perret is welcomed to the podcast.
• Harry mentions hearing positive feedback from Rick at NEA.

You have now arrived at your destination, Zach. I mean, what can I say? I've heard so many great things from Rick at NEA.

Harry welcomes Zach Perret to the podcast, referencing a commendation from Rick at NEA.

• Zach Perret describes founding Plaid as a series of accidents with a focus on solving consumer financial stress.
• He and his co-founder left Bain with the intention to build financial service products but pivoted to infrastructure due to connectivity challenges.
• Plaid's growth aligned with the rapid expansion of the fintech market.

Founding Plaid in the early days was a series of accidents and a focus on one specific problem, but a series of accidents that actually took us there.

Zach Perret explains the unexpected journey of founding Plaid and the initial focus on a specific financial problem.

• Zach emphasizes that Plaid's mission to make money easier for people has remained consistent despite changes in market approach.
• Plaid now builds infrastructure to support various financial applications, contributing to a competitive market that benefits consumers.

We didn't change our mission ever, really. From the earliest days, we had this thesis that we wanted to make money easier for people.

Zach Perret discusses how Plaid's mission has remained the same even though their approach to achieving it has evolved.

• Zach Perret reflects on his time at Bain and the learning experience it provided.
• He suggests that joining a mid to late-stage company offers a broad scope of work and learning opportunities.
• Zach shares that operating within a company can be more fulfilling than investing due to the ability to actively contribute.

The path seems to be joining a mid to late stage company and learning a great deal, then kind of having your pick of what you want to do after that.

Zach Perret offers advice to emerging graduates on the benefits of joining a growing company for a broad learning experience.

• Zach Perret acknowledges the growth he and his co-founder have experienced as operators.
• He describes his role as CEO as constantly evolving, with a focus on executing the mission and building a self-sustaining, high-growth company.

So my job changes all the time. Probably every six to twelve months. I have a completely new job and what ultimately I try to measure both myself by and the company by is first and foremost execution on a mission.

Zach Perret explains how his role as CEO and the metrics he uses for self-evaluation are centered around mission execution and company sustainability.

• Harry Stebbings is focusing on delegating day-to-day tactical decisions and empowering individuals within the organization to make decisions at the lowest level possible.
• The company culture emphasizes high ownership, transparency, and providing the necessary frameworks for decision-making.

"Right now, my current thesis is that I'm trying to get myself out of most of the day to day tactical decisions, just focusing on the longer term or larger ones, and really push down the decision making in the organization to the lowest level we possibly can."

This quote highlights Harry Stebbings' current approach to leadership, which is to remove himself from everyday decisions and enable others in the organization to take on those responsibilities.

• Zach Perret has experienced significant evolution as a leader, with changes in his mindset and the scope of his role.
• His responsibilities have shifted from hands-on tasks such as writing code to high-level functions like hiring leaders and building an executive team.
• Despite changes, some aspects remain consistent, such as discussing the mission, vision, and raising funds.

"I think not only have I changed in the way that I work with the company, but I've changed continually in my mindset."

This quote reflects Zach Perret's personal growth and adaptability as a leader within the company, as well as his evolving role and responsibilities.

• One of the recurring challenges for Zach Perret is allowing imperfections and prioritizing tasks.
• He emphasizes the importance of accepting that not everything can be perfect and focusing on the most critical issues.
• The concept of "everything's always broken" is embraced as part of the startup environment, which requires ruthless prioritization.

"One of the hardest things for me is letting something be unfinished or letting something not be great."

This quote conveys the difficulty Zach Perret faces in accepting imperfections and the need to prioritize tasks effectively within a fast-paced startup environment.

• Zach Perret discusses the complexity of prioritization at multiple levels within the company.
• Personal and company-wide goals are set quarterly and annually, with a tiered structure down to individual team members.
• Systems and tools are implemented to track focus and execution, balancing trust with accountability.

"So I think that the difficulty in prioritization lies in doing so at many levels."

This quote underscores the layered approach to prioritization that Zach Perret employs, from personal objectives to company-wide goals, emphasizing the importance of structure and tracking.

• Zach Perret finds managing the board to be a positive experience, particularly with high-profile board members like Mary Meeker.
• Transparency and clear expectation setting are key strategies in board management.
• Sharing a range of outcomes with the board provides flexibility and helps manage expectations.

"We tend to be pretty transparent and open with our board."

This quote reveals Zach Perret's approach to board management, which involves openness and transparency, setting the stage for a constructive relationship with board members.

• Zach Perret believes that professional relationships with investors and board members can be friendly and that the line between professional and personal is blurred.
• The importance of context is acknowledged, recognizing when interactions are work-related or not.

"I tend to think that all of the people that we work with at plaid could be friends, could be professional relationships, and the line there is really quite blurred."

This quote reflects Zach Perret's view on the dynamic between founders and investors, suggesting that friendly relationships are possible and even beneficial within a professional context.

• Zach Perret prioritizes recruiting and spends a significant amount of time on it.
• The recruitment process is constantly evolving, with a focus on hiring for "spikes" or areas of exceptional talent rather than well-roundedness.
• Upholding company values is non-negotiable, but strengths are prioritized in the hiring process.

"In the earliest days, we knew that we as a company would only grow if we hired great people."

This quote emphasizes the importance of recruitment in the growth and success of the company, highlighting Zach Perret's commitment to attracting top talent.

• Zach Perret emphasizes the importance of maintaining a high hiring bar and hiring for leverage.
• Plat does not require scaling the number of employees directly with revenue, allowing for selective hiring.
• Hiring decisions are based on the potential impact a new hire could have on the team or on significant projects.
• There is a willingness to hire slowly to maintain a high-quality talent pool, despite it being a source of frustration.

"It's incredibly hard to balance the need to hire people with a very high hiring bar."

This quote highlights the difficulty of maintaining high hiring standards while needing to grow the team.

"We're fortunate to be in a business where our revenue doesn't scale directly with the number of people that we have."

Zach Perret explains that Plat's business model allows them to grow without proportionally increasing their headcount, which is a luxury in their industry.

"We think about, is this person going to come in and be able to truly increase the quality of the team or drive a meaningful piece of work forward?"

The focus is on the potential impact a new hire could have, rather than just filling a position.

• Plat experiences less executive churn but emphasizes the importance of hiring exceptional leaders.
• External search firms can add leverage to the hiring process for executive positions.
• There's a consensus among rapidly scaling companies that building an executive leadership team faster is crucial.
• Zach Perret acknowledges the challenges and past mistakes in senior recruiting, aiming to improve the pace of hiring leadership.

"We're fortunate not to have a great deal of executive churn applied today, but what we've always focused on is continuing to hire really incredible leaders."

Zach Perret notes that while Plat has stable executive retention, they prioritize hiring outstanding leaders.

"I do think that it's important to constantly be building your executive team for every company that scales quickly."

The importance of continuously strengthening the executive team is emphasized, especially for fast-growing companies.

"Our hope is that we can continue to hire at the leadership level as fast as we possibly can."

The goal is to accelerate hiring at the leadership level to support the company's growth.

• Zach Perret identifies hiring for new, previously nonexistent roles as a particular challenge.
• The process involves reaching out to experts currently in the role, gathering information, and integrating insights into job descriptions.
• This approach helps refine the hiring process but does not entirely eliminate the difficulty of defining what "great" looks like for new positions.

"One of the areas that I'm perpetually frustrated with is trying to hire for new roles that haven't existed before."

Zach Perret expresses frustration with the complexity of hiring for entirely new roles within the company.

"I'll create a list of the top five people that anyone will recommend that are currently doing the job... that will actually go into our job description and our hiring goals."

He describes a proactive strategy of consulting with industry experts to inform the hiring process for new roles.

• Plat is characterized as a capital-efficient business with controlled overhead and a focus on high-quality, slow hiring.
• Growth has been achieved through networks and the developer community, leading to rational sales and marketing spending.
• The recent funding round was aimed at expanding go-to-market strategies.
• The decision to raise capital was partly opportunistic, based on meeting great investors, a need to scale sales and marketing, and timing since the last funding round.

"Plaid has actually always been quite a capital efficient business."

Zach Perret describes Plat's approach to managing finances and resources effectively.

"The reason that we raised that capital was actually just to lean into that a little bit."

The recent funding is intended to bolster go-to-market efforts, indicating a strategic shift in spending.

• Zach Perret advises founders to ensure investors will be net positive or at least neutral in their influence.
• Building a relationship with investors based on trust and problem-solving is crucial.
• It's beneficial to have investors who are a source of learning and with whom founders enjoy spending time.

"Investors first and foremost should do no harm."

This advice from Zach Perret suggests that investors should not interfere negatively with the founder's vision and operations.

"We tend to have a lot of trust in our investors, and we want to spend time both sharing with them exactly what's going on."

He emphasizes the importance of open communication and a trust-based relationship with investors for effective problem-solving.

• Zach Perret is excited about the growth in the number of fintech products available to consumers.
• Fintech innovation is observed not only in startups but also within traditional banks.
• The growth of European fintechs and their expansion to the US market is a point of interest.
• Increased competition in the fintech space is seen as beneficial for consumer choice and product quality.

"The thing that I'm really excited to see thus far this year is a lot of growth of the total fintech population."

Zach Perret expresses enthusiasm for the increasing number of fintech options for consumers, indicating a healthy and expanding market.

"We also have seen an immense growth of fintechs coming out of Europe, and those companies are starting to think about coming to the US."

The international expansion of fintech companies, particularly from Europe to the US, is highlighted as a notable trend.

• The UK's regulatory environment allows easier acquisition of banking licenses compared to the US.
• UK neobanks are innovating at the edges of what's possible in the US.
• There is an anticipation of neobanks expanding from the UK to the US and vice versa.
• The UK serves as an innovation lab for the US in fintech.

"For example, getting a banking license in the UK is doable, and getting a banking license in the US is very hard, takes quite a lot of time."

This quote highlights the regulatory differences between the UK and US, emphasizing the ease of obtaining a banking license in the UK, which fosters innovation in fintech.

• Difficulty in choosing one impactful book due to reading a variety of management and business history books.
• Skimming for key points is a common reading strategy.
• Business history books provide context and preparation for decision-making.

"I found a book recent called Hard Drive about the early days of Microsoft. I think it's out of print now, but it's worth a read if you can find it."

The speaker shares a specific example of a business history book that has made an impact, suggesting its value in understanding business context.

• Persistence is crucial for overcoming challenges and ensuring company survival.
• The importance of not letting the company die, as conveyed by a friend's advice.
• The speaker used to reassure others of the company's growth and existence humorously.

"One of the things that one of my friends told me was just to say, hey, don't let the company die. You will become a much larger company if it doesn't die."

This quote emphasizes the advice given to the speaker on the importance of persistence and the simple yet profound concept of ensuring the company survives to achieve growth.

• Acknowledges the difficulty of testing a founder's persistence in a short timeframe.
• The hiring process at the speaker's company looks for a history of excellence and persistence.
• Suggests that investors could look for similar signs of excellence in founders.

"But one of the things that we actually have in our interview process is that we look for a history of someone both showing persistence, but more importantly, being absolutely incredible at something."

The speaker explains their approach to evaluating persistence and excellence during their hiring process, which could be adapted by investors when assessing founders.

• Attempts at using various tools to organize life have been unsuccessful.
• The speaker finds a simple app, Captio, effective for managing thoughts and tasks using email.

"It's an app called Captio on the iPhone, and I'm sure that there are some other ones for Android, but it's spelled C-A-P-T-I-O."

The speaker shares a personal life hack, an app that simplifies task management by integrating with their email, which is a central part of their organizational system.

• The speaker is intrigued by Facebook's foray into cryptocurrency.
• Recognizes the high caliber of talent being hired for the project.
• Finds it challenging to predict the outcome but is excited to observe the developments.

"I'm fascinated to watch it. It's hard for me to guess as to where exactly they're going."

This quote reflects the speaker's interest in Facebook's cryptocurrency project and acknowledges the uncertainty surrounding its future direction.

• Introductions to key decision-makers and potential hires are valuable.
• Investors challenging founders to think about accelerating processes can be beneficial.

"The second one is actually just an easy thing. It's to ask consistently, could you do this twice as fast? Or how might you do this twice as fast?"

The speaker suggests that investors can provide value by encouraging founders to consider ways to expedite their operations, fostering a mindset geared toward efficiency.

• The speaker sees no limit to Plaid's growth potential.
• Fintech is expanding beyond traditional banking to all companies with financial interactions.
• The speaker looks forward to the company's growth and personal role evolution.

"Hopefully no ceiling. I see a great deal of growth ahead for the company."

This quote captures the speaker's optimism about Plaid's future growth and the limitless opportunities in the expanding fintech ecosystem.

• Plaid has recently become available in the UK for developers.
• The expansion is seen as a significant milestone for Plaid.

"And I have to say, zach really is a truly special founder and I couldn't be more excited to see that plaid have now expanded to the UK."

The host expresses excitement about Plaid's expansion to the UK, highlighting the importance of this development for the company and its founder.

• Front is an email platform that improves team response time and efficiency.
• Culture Amp is a platform that enhances company culture and employee performance.
• Hippo is redefining home insurance with customer-focused policies and technology.

"Front's shared inbox and workflows route emails to the right people right away, keeping everyone in the loop from start to finish."

This quote describes the functionality of Front, an email platform designed to streamline communication and enhance productivity for teams.