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 insurance company AllState, and the staffing giant Adecco.
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. But 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. And 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, Thumbtack, GrubHub and the other usual suspects as its customers, Checkr is also actively expanding outside of the tech and gig economy, he says. Not only did it recently begin working with Adecco, but companies like Visa that use flexible workers and contractors are signing up to the service, too.
Right now, 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 SaaS products and tools” — including a new tool designed to help hiring managers eradicate their own unwitting hiring biases — “so we’re becoming more like a SaaS” business.
During a call this wek, we ask Yanisse about those high-profile cases where background checks appear to miss things. We don’t say it explicitly, but 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.
Checkr claims that it can tear through a lot of information — including education verification, reference checks, drug screening — within 24 hours, meaning it’s fast. But does it miss things, we wonder?
Yanisse says he 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.'” Checkr provides information to employers, who then have to make hiring decisions that include a lot of other different factors, he says. “It’s up the company, based on what’s relevant to them.”
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 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.”