Background checks pay for Checkr, which just rang up $100 million in new funding
Criminal records, driving records, employment verifications. Companies that use on-demand employees need to know that all the boxes have been checked before they send workers into the world on their behalf, and they often need those boxes checked quickly.
A growing number of them use Checkr, a San Francisco-based company that says it currently runs one million background checks per month for more than 10,000 customers, including, most newly, the car-share company Lyft, the services marketplace Thumbtack, and eyewear seller Warby Parker.
Investors are betting many more customers will come aboard, too. This morning, Checkr is announcing $100 million in Series C funding led by T. Rowe Price, which was joined by earlier backers Accel and Y Combinator.
The round brings the company’s total funding to roughly $150 million altogether, which is a lot of capital in not a lot of time. Yet Checkr is very well-positioned considering the changing nature of work. The company was born when software engineers Daniel Yanisse and Jonathan Perichon worked together at same-day delivery service startup Deliv and together eyed the chance to build a faster, more efficient background check. The number of flexible workers has only exploded in the four years since.
So-called alternative employment arrangements, in the parlance of the Bureau of Labor Statistics, including gig economy jobs, have grown from representing 10.1 percent of U.S. employees in 2005 to 15.8 percent of employees in 2015. And that percentage looks to rise further still as more digital platforms provide direct connections between people needing a service and workers willing to provide it.
Meanwhile, Checkr, which has been capitalizing on this race for talent, has its sights on much more than the on-demand workforce, says Yanisse, who is Checkr’s CEO. While the 180-person company counts Uber, Instacart, and GrubHub among its base of customers, Checkr is also actively expanding outside of the tech and gig economy, he says. It recently began working with the staffing giant Adecco, for example, as well as the major insurer Allstate.
At present, all of these customers pay Checkr per background check. That may change over time, however, particularly if the company plans to go public eventually, which Yanisse suggests is the case. (Public shareholders, like private shareholders, love recurring revenue.)
“Right now, our pricing model for customers is pay-per-applicant,” says Yanisse. “But we have a whole suite of SaaS products and tools” — including an interesting new tool designed to help hiring managers eradicate their unwitting hiring biases — “so we’re becoming more like a SaaS” business.
While things are ticking along nicely, every startup has its challenges. In Checkr’s case, one of these would seem to be those high-profile cases where background checks are painted as far from foolproof. One situation that springs to mind is the individual who began driving for Uber last year, six months before intentionally plowing into a busy bike path in New York. Indeed, though Checkr claims that it can tear through a lot of information within 24 hours — including education verification, reference checks, drug screening — we wonder if it isn’t so fast that it misses red flags.
Yanisse doesn’t think so. “Overall background checks aren’t a silver bullet,” he says. “Our job is to make the process faster, more efficient, more accurate, and more fair. But past information doesn’t guarantee future performance,” he adds. “This isn’t ‘Minority Report.’”
We also ask Yanisse about Checkr’s revenue. Often, a financing round of the size that Checkr is announcing today suggests a revenue run rate of $100 million or so. Yanisse declines to say, telling us Checkr doesn’t share revenue or its valuation publicly. “It’s still a bit early,” he says. “There’s this obsession with metrics in Silicon Valley, and we just want to make sure we’re focused on the right things.”
But, he adds, “you’re in the ballpark.”
Correction: An earlier version of this story incorrectly listed Visa as a customer.