Acquiring

Another Billion Dollar Week And Credit Karma’s Billion Dollar Vision

When Credit Karma came on the scene in 2007, it entered the startup marketplace with a fairly simply goal: help consumers better manage their financial lives by giving them truly free access to their credit reports.

“We’ve been handing out free credit reports since 2008,” Credit Karma Communications Director Christina Ra told PYMNTS in a recent interview. “We really founded [the company] with a policy that since your credit is used to evaluate consumers in almost every part of their life, anyone should have plain and easy access to their credit score so they can take control of their situation.”

Credit Karma has come a long way from its founding five years ago in San Francisco. About a year ago, the firm took in around $85 million in a Series C round. Ten months later, Credit Karma secured another $75 million in funding from its Series C investors – Google Capital, Tiger Global Management, and Susquehanna Growth Equity.

And, according to Ra, that second big influx of capital was not actually something Credit Karma was actively pursuing – or even needed to.

“That 75 million was a followon round so that was not actually money that we raised. Our investors were very excited about where we’re headed and wanted a larger stake in the company, so we accepted a larger investment,”she told PYMNTS.

Perhaps more impressive than scoring $160 million in funding in one year of which half was eager investors just wanting to up their stake is the very exclusive club that Credit Karma has joined – the billion dollar plus startup club.

That list has a lot of payments and e-commerce emerging power players including Uber and Lyft, Instacart, Stripe and Pinterest (just to name a very few). And although Credit Karma – with its “only” $1 billion valuation isn’t exactly swimming in the deep end of the pool which is largely defined by Uber’s $40 million valuation at present – it’s still a good feeling and a vote of confidence for the only 5-year-old company that promotes free credit reports.

“Our investors are the ones who create that valuation and it really  speaks to their confidence in what we are doing and where we are going long-term,” Ra noted.

And it seems Credit Karma’s investors have much to be enthused about. Unlike some other players in the billion plus valuation club, Credit Karma’s potential to be profitable and a strong revenue generator is not theoretical or predicated on their tapping and expanding a market.

“We are a healthy company, our revenue is in the hundreds of millions, we are profitable and there are a lot of other positive indicators that have really surfaced in the past year or two. Certainly being valued at a billion dollars has reinforced the things we’re doing and indicated to us that we are on the right track,” Ra explained.

So what’s the secret sauce to Credit Karma’s right track?

First and foremost, they produce what they promise – a free credit report. While there are many businesses that offer that, closer inspection reveals that consumers are often offered a single free credit report, after which they have to pay if they want to check it again.

“We let consumers view their credit reports any time and all of that data can be refreshed as often as once a week. It’s an awesome opportunity to keep track of [a consumer’s] credit and really understand what effects it,” said Ra. “That’s the distinction between Credit Karma and other services and a really important distinction for consumers. If someone is asking for [their] credit card, there is probably something (like a recurring charge) coming.  They don’t need your credit card to validate any sort of information. They should be able to do that with pieces of your social [security number] and a few other identifying factors.”

Credit Karma isn’t interested in making money from consumers directly, and instead it makes its money by matching their now 36 million users with the right financial products advertised on their site.

“We have a hyper-targeted ad strategy,” Ra explained. “We have [consumer] credit data and know what financial products will work, and so that is what we advertise to [consumers] when [they] are on the service. We’ll show [them] credit cards, loans that make sense based on [their] spending and credit profile. [Consumers] never see a generic ad on Credit Karma.

This, noted Ra, is a win-win for everyone. Consumers are guided to the right product.

“Not everyone can pursue the credit card that is being mass marketed on TV and we want to remove that pain point and confusion about where do they fit and what they qualify for.”

The advertisers are getting eyeballs, but even better than that, they are getting custom curated eyeballs which leads to conversions. And Credit Karma – well, they get paid when those conversions happen.

So what’s next for a company with money in the bank and a burgeoning track record of success?

“We have a long-term vision – and it is to become a one-stop shop for a consumer’s personal finances and credit. Because we have more than 35 million members, we want to be able to show [someone] how [they] can maybe change something about what they are doing.”

And though Ra says the eventual goal is to be the “Amazon” of financial products for consumers, they don’t quite have Amazon’s enthusiasm for spending money. Ra says that while they were happy to take in the extra $75 million, they do not have it earmarked for a particular purpose yet. The goals now are to keep up the good work, and expand their service beyond their current 36 million members.


The third week of February was a big one for the payments and commerce marketplace. $1.5 billion in financial activity was observed, entirely driven by strategic or venture-backed investments. That represents a 109 percent increase YTD over the $729 million that had been invested by this point in February of 2014. Additionally, the amounts for 6 out of 43 deals weren’t disclosed.

The biggest deals of the week were a $32 million fourth-round investment for Livefyre, which helps companies engage consumers in the digital space and $21 million for Urban Airship, which provides marketing solutions that help “build customer relationships.

And, in a bit of a change of pace, the U.S. was not the most active investment region this time aroundthat honor went to China followed by the U.S. and the rest of Asia, minus China.

PYMNTS also took a closer look at the data regarding investments – VC funding, private placements, IPOs, M&As, etc. – in the customer acquisition/loyalty and data analytics related to retail, shopping and commerce spaces which are characterized mostly by investments by VC and PE firms.

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