Checkr has created a really impressive business doing criminal background checks. They pull in fragmented, nonstandard, sensitive data from thousands of sources. Joining and categorizing this information was a really difficult task. They overhauled the process for background checks and saw tremendous success early on. They’re now using this data to encourage fairer hiring practices and working opportunities. I enjoyed learning what made this possible.
Here are some highlights from my conversation with Daniel Yanisse.
Checkr invented the modern API for background checks. Legacy competitors did all of this work manually -- reviewing, filtering, matching. It was slow and error prone. The data was fragmented, there were no standards, and the data was incomplete. Identity resolution was also a massive challenge. Criminal records and DMV records aren’t tied to social security numbers. So you would get a ton of false positives and negatives when multiple people share the same name.
Running a background check wasn’t a trivial task. It could take a week and it was very costly for everyone. But the staffing needs for the gig economy were an order of magnitude larger and at least an order of magnitude faster. The old process wasn’t going to work for anyone trying to hire tens of thousands of contractors within a short period of time. And the gig economy was taking off back in 2014 when Daniel first founded Checkr.
Channel partnerships can really scale your business, but they are a long term investment. You might not see the benefits for years. In the beginning, Checkr decided to prioritize adoption instead of revenue. If there’s no product component, you’re likely not giving the end customer a reason to buy the two products together. You want to make sure that your partnership increases the value of your partner’s product and improves the end customer’s experience.
Consumers have to receive a copy of their background checks. This is a great situation for Checkr. Their customers have to introduce them to consumers. While they only monetize solutions today for businesses, this could change over time. Longer term, they could build out products that drive value for the customer. For example, FICO is primarily a B2B company that initially rolled out free services for consumers. As they expanded their consumer product offering, they found new ways to monetize their consumer business.
Checkr runs their software and data business as two separate entities. The data business is run separately, with its own CEO and P&L. Their data company sells data to Checkr as well as other companies -- credit and identity companies. They’ve done a lot of M&A on the data side because acquiring data companies can be far simpler than acquiring another SaaS company.
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