Credit Karma Has Raised $175M on a Valuation of $3.5B

http://techcrunch.com/2015/06/23/credit-karma-has-raised-175m-on-a-valuation-of-3-5b/

by doppp • 11 years ago

83 95 11 years ago

deet2• 11 years ago

Since their revenue models are pretty similar (lead gen for financial products), would it be reasonable to use Mint's per-user revenue (which had previously circulated back closer to their acquisition to be somewhere in the neighborhood of $20-$30 per user per year, I believe) to estimate Credit Karma's revenue? Putting their revenue at somewhere near 800m per year?

georgeglue1• 11 years ago

The revenue model is similar, but the product is obviously really different.

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.

paulpauper5• 11 years ago

It's license to print money..these card offers pay enormous commissions because they will make even more money from the applicants

curun1r• 11 years ago

I would hope their ARPU is higher...otherwise they'll never be profitable. Mint loses a ton of money. There are reasons why it makes sense for Intuit to fund that, but if CK can't be profitable, finding that kind of acquirer that will continue to operate them at a loss will be hard, especially with that massive valuation.

paulpauper5• 11 years ago

Profitably has never been the most pressing concern for these growth companies. Amazon went 20 years before turning a consistent profit, so it's not like there is a well-defined upper-limit where profitability is mandatory. Amazon made a trade-off choosing revenue over profitability, and that's what investors want.

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.

akg_67• 11 years ago

CK is much more than just lead referral program as Mint is. CK gets access to your FICO and credit report when you check your credit score at CK. These "qualified" leads are sold to financial services companies for several hundred dollars per lead. There is a huge demand for their leads because of the quality and amount of information you get with the lead.

threefour• 11 years ago

Similar but CK looks to expand theirs into more lucrative territory. It's the difference between referrals and commissions.

adventured• 11 years ago

Their revenue is nowhere near $800 million.

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.

mmanfrin• 11 years ago

Quality service, I really like CK -- but seems like a very high valuation?

psionn• 11 years ago

Just another example of Stupid High Valuation (SHiV) in the Valley Echo-Chamber

paulpauper5• 11 years ago

People keep saying we're in a bubble and yet seven years later, since 2008, I can only think of three major VC implosions off the top of my head: fab.com, zynga, and groupon. Fab was a train-wreck that anyone with a pulse could have seen coming. Zynga... way too dependent on Facebook and a fad. Groupon is the better of the three, only seeing its valuation fall from $30 billion to just $4 billion - but still well over $1 billion. These valuations, as lofty as they seem, are not falling. It's kinda weird, but not surprising considering how much wealth is circulating in the silicon valley. Then you look at twitter and it held up very well after its IPO despite its very high valuation.

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.

Someone12343• 11 years ago

I did some Googling, and the worst thing I can find anyone say about Credit Karma is that they failed to correctly utilise HTTPS/SSL through 2013[0]. But aside from that nobody has much bad to say about them.

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...

usaphp• 11 years ago

I guess you have no credit cards or loans under your name right?

Someone12343• 11 years ago

I cannot. No credit score.

codegeek2• 11 years ago

Not sure if you have done this on purpose but if there is any chance you actually want to build credit and be tracked by the credit agencies with a credit score, then the first step is to get a "Secured credit card" which means that a bank will give you a credit card but you will have to deposit like $500 etc as collateral/security. Then start using this credit card to pay for your expenses as much as possible while paying the statement balance in full every month. Do this for a few months and you will start building credit.

TorKlingberg• 11 years ago

Sorry to be the annoying European here, but the the American concept of building credit is really strange to me. Instead of just buying things with money I have, I am supposed to use the money as security for loans I don't need. That somehow proves that I am financially responsible in general.

devhead• 11 years ago

they are sharing your most personal financial information with lenders and creditors; best of both worlds for them... Skin you once, flip you over, skin you again.

emodendroket3• 11 years ago

I mean, what else could they use the information for? I think it's obvious to everyone what the deal is.

nkozyra2• 11 years ago

First, which most personal financial information are they sharing? They're only privy to credit reports now, no? A lot of these lenders could do their own soft inquiries and get the same data for a tiny fee.

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.

_jal• 11 years ago

I don't know what "need" means in this context. That is what they do - sell your data. Perhaps a different company that didn't do that could exist, and in a different sense, CK doesn't "need" to do anything, even exist. But they do exist, and do sell your data.

slg2• 11 years ago

As a Credit Karma user, this sounds like bad news. I was happy with the service I was getting at the price I was getting (free but with the knowledge they were probably selling my info to their partners). But I'm now worried what exactly they are going to have to do to justify $3.5 billion. Can you really earn that kind of valuation peddling new credit cards and refinanced loans?

ceejayoz• 11 years ago

Can you really earn that kind of valuation peddling new credit cards and refinanced loans?

I'd imagine yes. Those sorts of offers are immensely lucrative.

__z9• 11 years ago

Can you really earn that kind of valuation peddling new credit cards and refinanced loans?

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.

heimatau• 11 years ago

I'm concerned too. I jumped ship from Mint when Intuit bought them out. CK might do it right but...there is a very lucrative market for refinancing, I'm very concerned they will make a poor choice for it's users.

millstone• 11 years ago

Did you leave Mint because of specific changes that Intuit did, or was it proactive based on what you expected Intuit to do? I use Mint and haven't noticed any changes after the Intuit purchase.

hsshah2• 11 years ago

I had the same thought as soon as I read the HN title. Even NerdWallet is supposedly valued around $1B. I guess we need to get used to the new normal of billions of dollar of valuations.

joshdance• 11 years ago

I use Credit Karma, very much enjoy the service.

stephengillie• 11 years ago

Do you have an opinion on this news?

aviv2• 11 years ago

I tried to find more information about the people running the company, but can't seem to find any page on their site listing the executive team. Anyone knows why? Or perhaps I totally missed it somehow?

burger_moon• 11 years ago

Kenneth Lin, who previously founded Multilytics Marketing and worked with E-Loan and Upromise, launched Credit Karma in 2007, with the website going live in February 2008. Early investors include Chris Larson, CEO of Prosper, and Mark Lefanowicz, former president of E-Loan.

https://en.wikipedia.org/wiki/Credit_Karma

staunch• 11 years ago

Their navigation is crap, but I found it: https://www.creditkarma.com/about/pressroom

aviv2• 11 years ago

Good find :) This kind of information should definitely have more visibility on a site dealing with highly sensitive financial data.

skazka162• 11 years ago

What is their monetization strategy?

escaped_hn2• 11 years ago

You are.

w4• 11 years ago

They've had a monetization strategy in place for some time: sharing user data with credit card companies, and referral fees from lenders.

skazka162• 11 years ago

I just created an account with them. Should I expect random calls from various organizations?

ctb_mg• 11 years ago

From the article:

“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.

chimeracoder• 11 years ago

As a CK user I am not too worried. It's been clear to me that my information is shared with lenders/creditors

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.

encoderer• 11 years ago

Credit Karma would be a lot more useful if they gave you your actual Fico score. The score they give you, a so-called Fako, is for entertainment purposes only. I've never heard of a lender that actually uses VantageScore and its ilk in lending decisions.

hsshah2• 11 years ago

As I understand, there is no such thing as a singular FICO score.

FWIW Recently went through a refinancing process. Two of the bureaus had slightly different score. However, both were similar to what CK had.

ari_2• 11 years ago

FICO has different models depending on what industry you're in, and then even then, they have different versions of the model. Here's some info if you want to google: FICO Classic 04, FICO Classic 08, FICO Auto 04, etc.

The crazy thing is that the scales are all different, so your Classic 04 Score could be completely different from your Classic 08 Score.

tdicola• 11 years ago

Does FICO even matter anymore? I remember they changed the algorithms over the past few years and I think the banks have their own scores that the public don't see. I really just use my FICO & credit report as a ballpark figure to see how banks look at me, and to check there isn't identity theft or other shenanigans going on.

buckbova• 11 years ago

I use the service because it's more convenient than going to each reporting company for my reports. I don't necessarily trust the algo for my score, but I'm sure it's close enough.

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.

erroneousfunk2• 11 years ago

Their identity check was really odd. They asked me three questions, all involving loans I've never had (I think I'd know if I had a mortgage). I clicked "None of the above" for all, and failed that. Then with the next set of questions they tried, again, it was all loans/accounts I didn't recognize. Clicked "None of the above" for everything again, and verified successfully!

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?

us0r• 11 years ago

I didn't have problems signing up but according to them I have tax liens from before I was even born. I went to Experian directly and they don't exist (nor have I ever heard/seen such). Maybe they are trying to be cute with data and supplement it?

__z9• 11 years ago

If you don't have enough info in your credit report to ask enough questions of course they have to supplement it. you would presumably still know the answers since you'd know if you have a loan or not.

_mtr• 11 years ago

I signed up for CreditKarma too long ago to remember the process, but this is pretty standard for credit reporting services. I know Equifax, MyFICO, and the free annual government site do the same. In my experience the "You recently opened an auto loan..." questions are almost always answered with "none of the above".

erroneousfunk2• 11 years ago

Yeah, I've signed up for Equifax and MyFICO as well, and didn't have a problem with it. Maybe I just got "lucky" and stumbled on a bunch of really bizarre ones this time ;)

IgorPartola• 11 years ago

I believe there is a third party service that provides this type of verification. I don't know much about it by I've seen it many times (comes with applying for mortgages and other types of loans). I have gotten questions like "which of these streets have you lived on?" and "which of these banks issued you a credit card?" as well as "Which of these people do you know?" So I don't think it's necessarily Credit Karma's fault for asking you weird questions.

ari_2• 11 years ago

Sounds like a typical out of wallet type service. For Developers there's BlockScore, but the most used one is probably Experian's.

Atlas2• 11 years ago

Likely TransUnion or Equifax since CreditKarma has direct relationships.

Atlas2• 11 years ago

They have a direct relationship with Equifax and TransUnion, two of the major credit bureaus in the US. That is where the identity data comes from.

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.

Veratyr2• 11 years ago

The founder did an AMA on Reddit a while ago if anyone's interested: https://www.reddit.com/r/IAmA/comments/2qq95l/i_am_the_found...

__z9• 11 years ago

Credit Karma's algorithms are weird. They almost exclusively give me offers for credit cards I already have. I guess you can't tell which card someone has from their report, only they have an account with that institution. Makes for some humor.

Credit Karma Has Raised $175M on a Valuation of $3.5B

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