My First 16

My First 16: Creating a Supportive Builder Community with Plaid’s Zach Perret

Seema Amble

Posted December 5, 2023
ABOUT MY FIRST 16 Our new video podcast series My First 16 features interviews with founders and CEOs of fintech companies about how they acquired their initial customers and the hard lessons they learned along the way. Subscribe to the a16z channel on YouTube and follow this show on our podcast feed so you don't miss an episode. In this episode, a16z partner Seema Amble talks with Zach Perret, the co-founder and CEO of Plaid, about how Plaid built a community in the early days to acquire customers, how they tracked “free radicals,” and how to orient your first customers around speed.

Episode Transcript

This transcript has been condensed and edited for readability and clarity.

Seema Amble: Zach thanks so much for joining me. If you could start off by just telling us a little bit about the founding story of Plaid and where you guys started off.

Zach Perret: Well, first off, thank you so much for having me. It’s an honor to be here and chatting about the early Plaid story is always fun for me. So Plaid had a bit of a rocky early start. So when my co founder William and I first founded Plaid, we had this vision that we wanted to create, tools to help consumers better analyze their finances. This was in 2012, and we were based in New York City. So we had this little tiny office about a block off of Union Square.

And in 2012, if you’ll remember, that was when they kicked all the Zuccotti Park protestors outta Zuccotti Park . They all moved up to Union Square and so we walked through the Occupy Wall Street protests a couple times a week as we were on the way to the office. And setting the politics of all that aside, the thing that we could really tell is that consumers were frustrated with their financial products.

They were not able to get the financial tools that they needed. They didn’t feel that there was a lot of trust in the financial system. They didn’t feel like the banks were looking out for them, and being these kind of naive, early 20-year-olds thinking about how we could go help people, we said, “Hey, well, we want to build better tools to help people analyze their finances.”

Now, we weren’t so sanguine and thoughtful to figure out the right kind of product to build. So we just started building any product that we could imagine. And we ended up creating basically tools to help consumers look at their money. We ended up building actually like 6 or 7 of these in different permutations. Some were focused on helping consumers analyze their spending. Some were focused on recommending places where you could spend less money as a consumer. And some were just fun tools and I could have analyzing your spend and putting a spotlight on all the places that you spend money and all of this is with with the intent of helping consumers better understand, how they were spending and maybe save more.

But as I said, we didn’t have a huge plan for what we’re going to build. We just wanted to build something to help people, the biggest shortcoming that we found is that if you build a consumer facing product that largely tells a consumer to stop doing some behavior that they want to do, it doesn’t go very well.

So we would oftentimes build a budget and say, “Hey, consumers, you’re spending too much on restaurants. You should spend less.” That’s not a very effective way to create behavior change. Now there are a lot of really smart, amazing entrepreneurs that have built much better products than we could have built, but what we found is that if we told the consumer to spend less money on restaurants, they would just delete our app.

They would stop using it. They would never show up again. And, I think they were right. It wasn’t an excellent product. We hadn’t thought through all the implications of how to create behavior change and we certainly weren’t giving them a lot of better options. But along the way we found that the tool that we’d built was really interesting to a lot of other developers.

So, myself and my co founder, we were kind of software developers, like kind of engineers by background. And, we were talking to a lot of our friends that were in the early fintech community. Now this was before fintech had a name, but these were friends that wanted to build financial products for consumers, and they were really intrigued by the way that we were able to collect the data on the consumer’s behalf and structure the data on the consumer’s behalf. And so we ended up making a pivot in the business to say, we’re not going to go direct to  consumer because we’ve learned concretely that we are not only bad at building things for consumers, but we don’t even know what consumers want, and we pivoted and decided to go direct to businesses.

And so that’s where we ended up finding the sweet spot. It turns out the challenge that we’ve solved — how do you take bank data and structure it, and then put it into an application — was a really, really hard challenge. And we’ve been solving that to build our consumer product. That was kind of the early story.

Seema: A common theme in fintech has been that you can’t just go out with something that’s kind of half baked, but a lot of times people have pivoted into infrastructure from having built a consumer B2B facing application level product. How did you guys think about the API that you wanted to launch with for other developers to build on?

Zach: So I find that in financial services, it’s not often sufficient to solve part of a problem for a person, but what is sufficient is to solve a complete problem for a very narrow set of people.

So we were fortunate that we had built integrations into a couple banks. I think our first one was America Express and we built into a couple more in order to allow people to connect their bank account and use our budgeting tool. And when we made the B2B shift, we found that for many of the people that were initially interested in using Plaid, they were doing, let’s say expense management.

And so one of our very first customers was someone that was doing expense management and all they needed to do was collect all of the transactions, that you spent on your corporate card. And it turns out corporate cards are American Express cards. So we had this connection and could build a product that only works for corporate American Express customers, but it solved the entire problem for any corporate American Express customer.

So we actually were able to kind of launch Plaid initially, again, only with one bank account that we connected to one bank type, one financial institution, that we connected to, and found a couple of customers that needed this very narrow use case. And we were able to launch with them, and then eventually we added more and more connections.

Once we got to about 15 or so connections, we then started having very serious conversations with Venmo, and that was the first kind of big customer that ended up really scaling with us. It was a really wonderful story for us, but yeah, we had a very incomplete product at first.

Seema: One of my favorite things about the Plaid story is how you guys build community. Would love to touch on how you guys thought about who to target, and who you wanted to be your first customers.

Zach: So our early go-to-market was really just about talking to people. So, as I said, we founded Plaid in New York City and there were a lot of people in the New York community that were interested in building software for financial services. Obviously a lot of people coming out of the banks themselves that wanted to create better products and a lot of people that were thinking of new ideas. The reality is software in financial services at the time, the mindshare, was dominated by Mint, which had this phenomenal success story, and by a small handful of other very early stage companies. When you thought of financial software, it was Mint, PayPal, and then like a few people hadn’t heard of, and that was it.

And so, in New York, we ended up just going to a lot of meetups, talking to a lot of entrepreneurs, talking to a lot of people that were thinking about building startups generally. The 2012 New York startup community was very small, and it was very tight. And so you could kind of like go to a meetup and you’d meet half the companies in New York.

And so we did that a lot. Eventually we found a couple of early customers that were thinking about, as I said, expense management was the first real use case, where our product was the complete thing that you needed to serve a user, and that became our first customer or two. But one of the things that we did was just try to really deeply understand the people that we were talking to, initially, instead of doing contracts and sales and accounts management and things like that.

We said, “Hey, we’ll publish an API. You don’t have to sign any contract, just use it. And the only ask is that you give me your phone number so that I can text you.” And what I would do is I would just, text these people that said they would use the API, I would text them like every week, and say like, “Hey, what can we do better? Like, what, what feedback do you have? How’s this working?”

And the amazing thing is this concept of texting your customers, turned a lot of these people that were kind of like loose acquaintances in the startup ecosystem into really good friends. And this is something that persisted for a really long time. So, I was probably on text with our first 100, 200 customers, just directly.

And many of those have become lifelong friends for me. They’ve given great feedback. This concept of not being too formal about it, and being really genuine to the community and then like really deeply caring to the point of, maybe even annoying our first customers with too many texts to ask for feedback was very, very helpful.

Seema: How did you think about spending time with customers?

Zach: Well, the short answer is we did as much to spend time with them as we possibly could. I ended up just flying a lot back and forth between anywhere that our customers were. Our key would be we wanted to go spend time in their office. We want to build a personal relationship with them. We wanted them to tell us what was going on.

The first time we got an office, we started doing this thing called a Plaid Out. It’s a terrible name because it was actually in our office. But what we would do is we would invite anyone that we possibly knew in the startup community doing fintech, to come to our office and have a beer with us and talk to us about things. Initially it was me, William and an intern. Eventually, we had 4 or 5 other engineers and people come in and none of us were particularly social, all kind of introverted and none of us particularly drank very much.

So it would always be this like little bit of an awkward thing where we just invited a bunch of people to come to our office. And it was like hard to start the conversation. But you do it and you eventually meet customers and they would tell you things or you’d meet potential recruits and they would tell you things and little by little, we were able to build a community around just this fact that we would say, Hey, we’re always going to be there talking to you.

Like, we’re going to be texting you and we’re going to have you into our office whenever you want to come in. The interesting thing is it built an early kernel for a very genuine brand in the community, and it meant that people, just liked talking to the Plaid team when we first started hiring go-to-market people.

We didn’t call them account managers because we found that the people we were selling to were engineers, and we hired people that had some engineering background that really kind of like new financial services. And we called them growth, which was a very confusing name, but it kind of worked. We found that engineers and product managers didn’t want to talk to salespeople. They want to talk to growth people. And that was a much more interesting conversation. For all these people that we hired, we made a huge focus on building a relationship first and then selling the product, or account managing the product or whatever it is.

Seema: The one question that comes up a ton is, “How do I think about pricing in the early days?” I need to get feedback, but I also want to validate that there’s a market here. How did you guys think about pricing and how much time did you spend on that in the early days? 

Zach: So, we thought that having people build on the product that would eventually pay us was very important. We always had a pricing model. If we basically just like looked at what other players in the industry did, we did the same thing. We had approximately the same prices. It wasn’t too hard. Like maybe we’re a little less and eventually now we’re more than the average price in the market, but we didn’t over-engineer the model.

We did go to customers and say, “Hey, look, you’ll get X amount of time free if you launch within Y timeframe.” So again, the goal was to get to usage to get to traction. And so, we would even say you’ll get a year free if you launch in the next 4 weeks. Like, it would be just these crazy deals, which would oftentimes encourage them to do it.

But, behind that we did say, “Here is the likely pricing model when we start charging you. Here is the pricing sheet.” And we’d actually even give them the opportunity to renegotiate the pricing before they got charged.

I remember, there was this period of time where we’d signed a bunch of fairly decently sized companies, I think, including Venmo and Robinhood under free trials. And their usage was super high. And our revenue was $500 a month from the collective revenue from all the rest of our customers, because those 2 were paying us. And then, one day we went into a board meeting, and the revenue finally came in. Like, you see this huge jump in our metrics, and it feels good. But yeah, it was a long time before we got real revenue.

Seema: It sounds like you were very focused on getting people using it quickly and prioritizing the feedback, and all aligned from a company building perspective. How did you think about size of customer? You guys were at a really interesting time when fintech was sort of starting to really take off. And so your customers obviously grew up over time, but did you spend time thinking it’s better to just get smaller customers on board early, or to also chase some larger customers?

Zach: I think who you take as customers and who you talk to as customers are slightly different things. Our filters for who we take as customers was, “Are you going to launch fast? And can I have your phone?” and we apply that to everybody.

So if they weren’t going to launch fast and weren’t willing to talk to us a lot, then we didn’t really pursue it, which meant that we ended up pursuing a lot of smaller customers as opposed to bigger ones. That was who we ended up having go live.

We talked to companies from PayPal on down to, two-person companies in the garage. Getting that direct customer feedback was incredibly valuable. So, I would say we, we kind of bifurcated that we ended up with a lot of small customers that were using it initially, and then having a bunch of big conversations. And then once we knew that the product worked, that was when we started to say, all right, we need, we need lighthouse customers. We need one or two customers that have a big name. At the time, big name was a little relative, so we wanted a startup that had really good investors and, we were able to get Robinhood and Venmo early on. And like those, those were the two lighthouse names where we could say, “Hey, these two are using us, everybody else, we can now use those as examples.”

Seema: When did you think about your first go-to-market hire and what that might be like? You mentioned the growth folks. Is that what would think of as your go-to-market engine for the early days?

Zach: Our thesis was, we wanted to hire all engineers that would talk to engineers, and we never really needed to hire anyone else. We had a couple of early folks that were basically designers, that were not engineers, but almost everyone of the company was engineers. And, it quickly became apparent that I was the worst engineer in the room, and so I needed to go out and drive up business if I was to prove my value to the company. So, initially all of the go-to-market was me, and it was nice because I could sit with our customer engineers and help them do implementations and so forth.

Then at some point, I didn’t have time to do it all. , and so we took, another early engineer who was amazing at so many things, but also particularly gregarious and we said, “All right, you’re going to come do all the go to market stuff with me.” He and I worked together for 7 years and he was an amazing leader for the company. And then little by little, we hired another person and another person.

And we ran with this really small pod for 2, 3 years. We didn’t hire a sales leader until we were probably 4 years into the company. Nobody had a title of sales until we probably were even like 6 or 7 years into the company. We wouldn’t even let our sales leader call our sales team “sales.”

Then eventually we ended up splitting out of camp management and, we built a support team. So it ended up bifurcating later, but it basically was, it was founder driven sales with people that could effectively clone the founder-driven sales process and just create like a 3-person army to go chase down all the customers.

Seema: As you scaled up go-to-market, did you change the way you thought about the strategy of the customers you acquire and going after bigger ones, or was it more of a continuous transition over time.

Zach: For a long time, we really didn’t chase true enterprises. We didn’t chase anyone that made us do an RFP. I think we started doing RFPs like 18 months ago. Because we would say if we’re doing an RFP, then we haven’t built the relationship that we want with the customer. They’re putting us up against all these other competitors, which means they don’t really understand the value of the product.

That was perhaps short-sighted, and we should have done this sooner. But, for a very long time, we would really only focus on, kind of like high velocity, tech driven organizations. Those high velocity, tech-driven organizations could exist inside of the big banks, so eventually we did get a big contract signed with American Express, where they had a tech team that was moving quickly and we found it and we were happy to work with them.

As I said, we hired a really wonderful head of sales, even though we didn’t let him call his team sales, and then he kind of trained us on how sales could work. And you have these phases of sales and you have these different types of customers that you can sell to.

So, he was really helpful in transforming our business from one that almost treated sales as an afterthought into something that said, all right, well, it turns out a revenue team can be incredibly valuable for the company. We just have to do it correctly. I would say, we have become much, much more mature on this front.

But in terms of chasing those giant logos, we’re still wary. 

Seema: Did messaging and your positioning change as you went after this set of larger customers?

Zach: Yeah, we had a very odd set of initial messaging. So when we first launched the company, it was myself and a co-founder. We were in our early twenties, and we were building something in financial services where we wanted people to take us seriously. And so our initial website design was designed to be boring. It was designed to look like a bank. It was designed to look like something that someone would get to and they would sort of understand and they would sort of be intrigued and they’d say, “Yeah, but the color scheme, I trust that color scheme.” Or, “that logo is a solid logo.”

We wanted to do the exact opposite of what everyone in Silicon Valley was doing, which was being really consumer friendly and talking about their tech and all this stuff. We wanted to not do any of that because we thought that financial services might be scared. And I think we were probably right.

So we initially created a really boring page and we also had a initial philosophy, other than doing one fundraising announcement which was purely focused on hiring engineers, we had a philosophy that we would never do press. So we never wanted to do press. We never wanted to do marketing. We never wanted to do publicity because we wanted to build a one-to-one relationship with our customer. And we wanted our brand to be, what our customers understood about us, not what someone else told about our story.

And so boring website, no press and just high degree of hustle. It was actually very effective and it worked for quite a long time. And the best marketing that we did was having Robinhood use our product and then having someone use Robinhood and say, “How did you do that to Robinhood?” And Robinhood would send it to us. And so there was this, this kind of like amazing, referral engine.

Over time we’ve, we’ve kind of thawed a little bit. So we’ve made our website a little bit more friendly and appealing. It is still, kind of a little bit more bank-y, traditional trust inducing. And, we started to do some more press because we realized we needed to tell our story and avoiding press was not a great long term strategy.

But, I would say, for the first, even like 4 or 5 years, it was a kind of boring website and very minimal press, really letting the product itself shine through excellent docs and letting our relationships shine through.

Seema: Last topic, do you have any advice that you would want to give your former self or future founders on acquiring their first set of customers?

Zach: Text your customers, get really close to them, optimize for velocity because the velocity matters matters a lot. Don’t pursue the big contracts with an expectation that they’ll close, but pursue them for learning, maybe almost exclusively.

And then, I think a lot about the product itself enabling distribution. One of our philosophies is that the products should have the distribution built in, or as best you can. In the early phases, that was doing something that was slightly different, which is publishing our docs online. Which our competitors didn’t do, which seems commonplace now, and also giving an online signup page for someone to come in to come and use the product.

Now, we think about building things like viral loops and such into the product itself. But really thinking about your distribution as a product strategy, as opposed to, distribution as being the sales team’s job, I think that’s a really crucial thing. And when talking with small companies, that’s something that I advise them to do.

Seema: It seems like you guys also built this network of a lot of folks who then went and started more companies and ended up being evangelists. For the product, which may not have been intentional at the time, but, also ended up driving, it seems like, a lot of the distribution, or at least the reputation.

Zach: Oh, it was totally intentional. We wanted to be friends with everyone. We want everyone to know us because we believe that the engineers that we’re working on plotted this company, were going to go start the next company.

And so, for us, when someone left a company, when one of our champions left a company, that was like a moment of sprint. So we would go in and say, “Who’s the new champion? And where is the other person going?” There’s this one engineer who installed Plaid at 5 companies. And when he went from the first company to the next company, we said, “All right, great. What’s your next company doing? How can we help?” And, he eventually became founder and built a product on top of Plaid. 

It’s been this wonderful story, we call them “free radicals.”

Like the person that was the champion, where are they going and what are they doing next and how do we kind of follow this free radical around? It was nice that we happened to be working with startups that had a lot of startup people, that then went to the next startup or started their own startup.

Seema: Yeah, I love that term free radical.  Well, this has been a really fun conversation. Zach, thank you so much for, for joining me.

Zach: Thank you for having me.



More About This Podcast

a16z partner Seema Amble interviews founders and CEOs of fintech companies about how they acquired their initial customers and the hard lessons they learned along the way. The series explores how B2B fintech founders should think about targeting their first set of customers and how to engender trust in a new startup.

Learn More