Credit Karma Has Raised $175M on a Valuation of $3.5B
techcrunch.com
techcrunch.com
A little panicked, I checked all of my accounts under my credit report -- everything looks good, and there aren't any suspicious new accounts... That was really bizarre.
Anyone else have similar problems signing up?
The first phase is to verify your identity by matching it against an authoritative data set, likely a credit file at either Equifax or TransUnion in this case. Once that data is matched, a set of questions from that data is generated. Your identity was likely matched against someone with similar identity information, hence the odd questions.
Do you a similar name to other people in your household? The good news is that the question set verifies you against the information it fetched. If you are not, you should fail the question set.
We at BlockScore provide an identity verification and question set service. Properly tuning the service to match the right person takes a lot of secret sauce because there is a lot of imperfect data. Thankfully we have this working well.
PS - I cannot actually get a credit score as they cannot generate security questions for me because they don't have enough information about me or similar. Plus a lot of places bounce my SSN as the SSA started generating them a different way in 2011, and tons of systems haven't updated to the new format yet (as only post-2011 immigrants and babies have those SSNs).
[0] https://www.ftc.gov/system/files/documents/cases/140328credi...
But the thing is that if not this, then what ? Not everyone can buy a house with cash. Ok, so then don't buy it unless you can pay all cash? Fine. Try renting an apartment without credit. Most of them will not talk to you. Now, What about employment with certain financially sensitive companies ? They check your credit..yes they do. It is a requirement to get an offer at those type of companies. Want to get car insurance ? They may check your credit history too. Of course you can choose not to drive a car. Did I forget to mention cell phone companies ? Yes, here in the US, most people get a post paid plan which involves checking credit. Could you use prepaid ? Sure you can but it is not very lucrative as you cannot get Iphones for $0.99 with prepaid plans.
So the point is that it is technically possible to not have any credit and get by specially if you have a lot of cash, but it is extremely difficult to get a lot of things done without credit in the US.
Your credit score has become a stand-in for a whole bunch of non-credit related things. You get lower insurance rates with a higher credit score and vis-versa. Every landlord nowadays requires a minimum credit score and employers will check your credit report as well. For the last item not having credit won't be a problem, however, they are just looking for negative items. Utility companies (cell phones, internet, electricity) usually require a down payment for those without a credit history (or those not wishing to authorize a credit check). Your credit is pulled when you get a bank account (don't know the consequences of not having a credit report for that one though - if you don't show up they may make you prove your identity more?)
Not accurate, though it may be true for a typical apartment complex.
Not to mention, when I signed up for a Verizon account under an LLC that I have with my dad, we were forced to put down an $800 per phone deposit because the company had no credit history. Same with utilities.
When I was starting a company, the bank wanted to check my credit score to decide whether I was going to get a checking account or not. This has happened twice, once with my previous company and a merchant account for credit cards.
I haven't ever personally, but I've also talked to people who check credit scores as part of employment evaluation.
Also, having a higher credit score gets you a better interest rate if you do need a loan, which can be worth a whole lot of money.
You have every right to make the choice to live without credit, but I would have a hard time arguing that it's the smart play.
Be disciplined and use various financial vehicles for your advantage.
No credit == Bad credit.
This equates to you being seen as more risky which equals you paying more interest for any loan in the future. Having good credit also afford you more opportunities.
I only know b/c I avoided holding a CC and loans for years until it started to hurt. Now I use them with discipline and for my advantage and am 810+
Went to HSBC with proof of salary and they happily gave me a credit card with a decent limit. Got my credit score up rather fast.
If you're in a similar situation it might be worth looking into.
Personally, I wouldn't wait, because credit can take a long time to build (just getting an unsecured card will take a year).
You may also be able to get a card from a bank in your country of origin, some have branches or affiliates in the US.
So when I immigrated to the US, I started with a secured credit card as fast as possible. Mine was free to have, and you could set it up so it was paid automatically, in full, from your checking account every month. That way you just need to charge something to it each month, and you'll slowly build your history.
You don't even have to do that. You can leave it idle for months if you want. The only thing you have to watch out for is the issuer canceling inactive cards. Having an idle credit card shows you aren't maxing out your cards - you have credit available that you are not using. Length of credit history is also a factor in your score.
I'd imagine yes. Those sorts of offers are immensely lucrative.
I think so. That's a huge market.
Honestly, I think it is a win-win. I don't have any loans but if I were to have a big loan like a mortgage I would welcome offers from leaders who could save me a significant amount of money. Many people I know have refinanced their mortgages at some point in the life of the loan.
The problem with using the past to predict the future is that there are often subtleties that can produce wildly diverging outcomes. These app & web 2.0 companies seem to be doing something right to avoid the valuation chopping block that afflicted so many of the earlier internet startups. web 2.0 companies retain value better than a CD lol
One reason why app companies, as opposed to sites that that sell physical stuff, are doing so well is that they have better profit margins and can use network effects for added growth.
From the 590 companies identified by CB Insights in December 2013 as being the "cream of the crop" of VC funded, IPO-ready firms, a total of just $33bn - less than one Uber - was made from actual exits (IPOs and M&A).[1] And 2014 was the best year for tech IPOs since 2000...
[1]OK, so its not a complete list, especially as the figure presumably excludes Alibaba and Whatsapp. And the 67 companies on the list that opted to exit in 2014 rather than hold out a little longer managed a mean exit valuation in the region of $0.5bn, which isn't peanuts. But it does put into perspective that this hyped IPO would be a very significant percentage of the annual revenues realised collectively for tech exits in a good year, which is probably a better metric than the number of unicorn valuations floating around.
The thing that is causing these absurd valuations is that Yagoopplezonsoft are choking out the pipeline too early for the big plays.
Most startups cash at less than $50 million, and LOTS of companies are sitting on huge cash reserves that can buy them there now. To the big companies, that's a big win if they pick up 10+ engineers and something possibly worth money. To the startup, that's also a huge win if you kept your headcount down. So, who's going to oppose the cashout?
After Yagoopplezonsoft vacuums up anything even remotely competitive in their space at the Series A point combined with the fact that VC's hate doing Series A funding because "Waaaaaaah. It's riiiisky."--the problems of getting your $5-10 million funding are well documented here--what's left?
So, the problem is that then number of companies that are willing to rack up a huge valuation is small. Once those companies actually get to the huge valuation, sure, there are a ton of people waiting for them throwing money at them.
The question you have to ask as a founder or employee single digit is, do I want to take the risk to go there?
If your founding bunch are remotely rational, the answer is "Not on your life, take the cash."
So, the only companies that would be willing to go to high valuations are high headcount, resource intensive companies that build real products--like Atheros. And VC's LOATHE those kinds of companies--so Atheros needed to get bought anyway.
The problem is of the VC's own making. Since they won't fund at Series A levels, they have so little to flog at Series C levels that the valuations go astronomical when one appears.
But I am pessimistic about the hardware unicorns (fitbit, skullcandy, jawbone) as opposed to the app/website ones, so It's not like I am emphatically bullish about everything. http://greyenlightenment.com/billion-dollar-startup-club-pic...
Other than that, the credit card/loan offers available on the site are targeted at the lowest common denominator with ridiculous APRs and bad reviews. I get better offers in my postal mail daily.
> “With more than 40 million members, we are excited by Credit Karma’s widespread adoption by people all over the country, giving us insight into $2.3 trillion of America’s household debt. This massive data enables us to deliver top quality insights for everyone looking to improve their personal finances.”
Does CK make more money off of people with large amounts of debt? Are they chasing this demographic? I suppose that demographic might be more susceptible to following through with refinance and credit card offers than people with little/no debt.
As a CK user I am not too worried. It's been clear to me that my information is shared with lenders/creditors, and I know I have enough willpower to only accept those offers if it is fiscally responsible.
Are they sharing any information that creditors don't already have access to, or which banks and creditors are already allowed to share with others without your consent?[0]
[0] State and federal laws allow you to opt out of some forms of sharing, but not all.
FWIW Recently went through a refinancing process. Two of the bureaus had slightly different score. However, both were similar to what CK had.
The crazy thing is that the scales are all different, so your Classic 04 Score could be completely different from your Classic 08 Score.
If anything, Credit Karma ARPU could be higher. Credit card referrals typically range from $50 to $200 dollars. Massive amounts of users come to Credit Karma through Google, sign up for a credit score/card, and then never come back.
This valuation would imply they refer at a rate of ~1-5 million cards a year I guess.
Investors care less about actual profits than the ability to prove profits can be generated. Once it's demonstrated/proven that profits can be attained, investors become extremely patient. As long as potential profits keep rising, the enterprise value will rise, and investors will be happy. This is not the Warren Buffett approach, obviously, but that doesn't make it necessarily wrong or invalid. It's consistent within the theory of rational expectations.
They'd have a $15-$20 billion valuation today if their revenue were that high in the private stage.
LendingClub is growing incredibly fast, is tracking toward $350 million - $400 million in annual revenue, and is valued at $6 billion. The public market is harsher on valuations than the private market as well. Were LendingClub still private, its valuation would probably be twice what its public valuation is.
Credit Karma is more likely in the $50m to $75m range on revenue.
Second, I'm not sure they need to share anything as they're facilitating conversions directly by evaluating your information and then suggesting the most likely convertible products (cards, loans). There's no need for a service like CreditKarma to explicitly hand that data over.
In other words, they have access to data that is available to anyone who can make a soft inquiry. That's a lot of people. It's easy and cheap.