
Credit Karma Has Raised $175M on a Valuation of $3.5B - doppp
http://techcrunch.com/2015/06/23/credit-karma-has-raised-175m-on-a-valuation-of-3-5b/
======
erroneousfunk
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?

~~~
_mtr
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".

~~~
erroneousfunk
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 ;)

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Someone1234
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...](https://www.ftc.gov/system/files/documents/cases/140328creditkarmacmpt.pdf)

~~~
codegeek
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
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.

~~~
codegeek
I hear you. But you know as they say "When in rome...". The thing with
American financial system is that your credit score/history is of significant
importance if you want to part of the usual society. For example, to get a
loan, they want to check your credit as it is a standard way of ensuring that
you are an ok candidate. Does that work all the time ? Of course not. The 2008
financial crisis is a solid proof.

But the thing is that if not this, then what ? Not everyone can buy a house
with cash. Ok, so then don't buy it unless you can pay all cash? Fine. Try
renting an apartment without credit. Most of them will not talk to you. Now,
What about employment with certain financially sensitive companies ? They
check your credit..yes they do. It is a requirement to get an offer at those
type of companies. Want to get car insurance ? They may check your credit
history too. Of course you can choose not to drive a car. Did I forget to
mention cell phone companies ? Yes, here in the US, most people get a post
paid plan which involves checking credit. Could you use prepaid ? Sure you can
but it is not very lucrative as you cannot get Iphones for $0.99 with prepaid
plans.

So the point is that it is technically possible to not have any credit and get
by specially if you have a lot of cash, but it is extremely difficult to get a
lot of things done without credit in the US.

------
slg
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?

~~~
heimatau
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
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.

~~~
josephjrobison
Agreed - that was actually the problem, as they left Mint frozen in time as it
was when it was created (2008? 2010?). They've made some recent updates but
constant improvements would be welcomed.

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

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

~~~
paulpauper
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.

~~~
slg
Is your argument that we aren't in a bubble really "it hasn't popped yet"?

~~~
paulpauper
Look at companies like Uber, Whats-app, Dropbox, Snapchat, Instagram...these
aren't flashes in the pan, but are ecosystems harnessing hundreds of millions
of people. These companies are creating entire infrastructures and industries.
Facebook, Twitter and Instagram pretty created the entire mobile advertising
market. Uber is revolutionizing transportation.

~~~
ignoramous
Not long ago did MSN, Y! Chat, AIM boast multi-million people network. I
wonder what makes WhatsApp, and Instagram different? One product businesses
are also one trick ponies. WhatsApp has real ubiquity about them... (Replacing
SMS), but then, I'm not so sure about Instagram and Twitter. Sure the celebs
pull in a lot of users, but if the past is any indicator, social networks can
come down in a heap...

------
buckbova
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.

------
ctb_mg
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
> 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.

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encoderer
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.

~~~
hsshah
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_
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.

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deet
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
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.

~~~
paulpauper
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.

------
Veratyr
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...](https://www.reddit.com/r/IAmA/comments/2qq95l/i_am_the_founder_of_credit_karma_ask_me_anything/)

------
__z
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.

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aviv
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?

~~~
staunch
Their navigation is crap, but I found it:
[https://www.creditkarma.com/about/pressroom](https://www.creditkarma.com/about/pressroom)

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

------
joshdance
I use Credit Karma, very much enjoy the service.

~~~
stephengillie
Do you have an opinion on this news?

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skazka16
What is their monetization strategy?

~~~
w4
They've had a monetization strategy in place for some time: sharing user data
with credit card companies, and referral fees from lenders.

~~~
skazka16
I just created an account with them. Should I expect random calls from various
organizations?

~~~
bdcravens
When you login, you'll see product recommendations that fit your credit
profile.

------
devhead
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.

~~~
nkozyra
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
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.

~~~
nkozyra
"Need" means they make money without selling data directly (as described
above). In fact, they probably do/would make more money through direct
conversions than data sales when the data is generally available anyway.

In other words, they have access to data that is available to anyone who can
make a soft inquiry. That's a lot of people. It's easy and cheap.

