Checkr

static/images/Checkr_logo.png
Founded:2014
Founders:Daniel Yanisse (CEO), Jonathan Perichon
Twitter:https://twitter.com/checkr
Website:https://checkr.com/

Checkr is a company that provides an application programming interface that returns automatically generated background checks. Checkr uses the same data sources as traditional background check companies, but can usually turn them around a lot more quickly than traditional providers.

Contents

1   Function

static/images/checkr_example_report.png

Checkr can be loosely described as "Stripe Inc. for background checks". They have a system that enables clients to easily sign up and screen candidates either via an online form, or by using its REST API to connect with their own hiring systems. Standard reports include one county criminal background checks for $25, while a premium report costs $35 and include county searches for every place that a candidate has lived in the past seven years. [1] Clients are limited to those who are doing background checks for commercial purposes only — that is, for employment or tenant screening, car sharing, or something similar. The system cannot be used for random consumer checks. [1]

Usage is priced per person, per report in tiers of $25, $35 and a tailored price based on specific requirements that may include deeper checks on motor vehicles, international searches and drug screening. [8]

Mr. Wong said he also liked Checkr’s approach: Like online payment company Stripe Inc. and communications startup Twilio Inc., Checkr delivers reports in the form of an API, which automates the process and becomes part of the customer’s workflow. [7]

2   Market

2.1   On-demand market

The on-demand economy is booming, enabling consumers to get all sorts of goods or services taken care of through their mobile phones. In January 2015 alone, Uber says it onboarded almost 40,000 drivers. By 2014, two years after launch, on-demand cleaning and handyman service Handy said it had received more than 200,000 applications, an average rate of more than 8,000 applications per month. And as of April, Postmates had more than 10,000 couriers. [4] One analysis from Intuit predicted that number of workers would grow from 3.2 million workers to 7.6 million by 2020. [4]

About a third of all U.S. workers are freelancers or temporary workers. [2]

But all those new businesses looking to hire up contractors to drive passengers around, deliver them groceries, or clean their homes need to get background checks, and Checkr wants to help them out. [2]

2.2   Background checks

A background check is a compilation of criminal, commercial, and financial records of an individual.

The background check market is worth $4 billion according to Rich Wong, a partner at Accel. [7]

Background checks include social security number validation, address history, sex offender searches, and checks against terrorist watch lists and national crime databases. For companies hiring drivers, Checkr can run a driving record check for an additional $5 plus DMV fee. (Bulk discounts, of course, are also available.) [1]

Checkr uses the same data sources as traditional background check companies, but can usually turn them around a lot more quickly than the incumbents. Reports generally come back anytime between an hour and a couple of days, depending on how complex they are, but most are ready within 24 hours. [1]

The cheaper, faster option is to use applicant social security numbers to run checks through private companies like Hirease and Sterling, which access mishmashes of databases. They scan PACER for federal records, tap state DMVs for driving records, and employ runners to pick up physical records at county court houses where records aren’t digitized. There’s a lot of flaws with this system, but it’s a hell of a lot cheaper than Live Scan and it’s almost universally adopted by startups employing “background checked” contract workers. [3]

That’s how Checkr operates too. It put together its own background check system, but it’s not Live Scan, and it’s bound to miss stuff. You can’t send runners to every county in the country, so companies have the choice with Checkr to search records in the current county a person lives in, the counties they’ve lived in for the last seven years, or no counties at all. If someone went on vacation to Portland in that time and committed a crime, it wouldn’t necessarily appear in the search. [3]

Streamlined paperless checks came under scrutiny when the district attorneys of San Francisco and Oakland pointed out that Uber’s background checks had missed 25 drivers with criminal records. Partly because these on-demand background companies aim to make the whole process virtual and quick, these types of checks don’t use fingerprint data, which would allow them to access the FBI’s database. San Francisco District Attorney George Gascón has said that a background check without fingerprints is "completely worthless." [4]

Airbnb and other sharing economy services, meanwhile, often have no background checks at all, instead relying on social profiles, identity verification, and peer review to foster trust between users. "We strive to provide our hosts and guests with the right tools to make informed decisions regarding who they interact with on the site and in the real world," Airbnb writes in its FAQ section, citing user reviews, and an insurance policy that covers damage to hosts. [5]

Uber has less stringent background checks, and only uses services like Checkr. [5] Uber background checks use a database that can only go back seven years for some information. [9] However, Uber's checks are at least rigorous enough that not everyone passes, Bennett said. Ten percent of Boston taxi drivers who took Uber’s background check failed, he said. And some Philadelphia UberX drivers who passed the city's background test ended up failing Uber’s, he said. [9]

2.2.1   Live Scan

Live Scan is a thing that uses fingerprints to access a national database of the `Federal Bureau of Investigation`_ that theoretically includes a person's complete criminal history in the United States. [3] [9] (The actual information is only as up-to-date as what law enforcement agencies voluntarily provide.) [9]

Live Scan is required for many sensitive job positions, like school teachers, medical personnel, and (in much of California) taxi drivers. However, Live Scan is relatively expensive and slow. The processing fees in California, for instance, are between $25 and $42 (in many cases, there's also a $15 to $17 fee for federal records), and takes up to 16 weeks. [5] [9]

2.3   Competition

Checkr, which today operates in the U.S. and Canada only, competes against more established screening companies like Sterling Infosystems Inc., BackCheck, HireRight, and First Advantage, as well as smaller startups like Goodhire, BeenVerified, and Accurate Background. [7] [8] Checkr will also compete with Onfido in the UK, if the two ever enter each other’s markets. [8]

While a few startups offer new takes on background checks that cater to the on-demand economy specifically, some of them, like Onfido, GoodHire, and Checkr, focus on making traditional-style background checks easy to access. [4]

Because many workers in the on-demand economy work for more than one employer, another startup, Opus.me, has created a system that gives on-demand workers the ability to carry their background checks and verifications with them. This would also empower on-demand companies to avoid paying for a new background check if another company has already paid for a background check on a particular worker, which would make it a competitive option. [4]

3   History

Daniel Yanisse and Jonathan Perichon co-founded Checkr in April 2014. [7] Previously, Yanisse and Perichon had been software engineers at "deliv", an on-demand same-delivery startup that ran into the problem of running background checks for drivers it wanted to recruit. [8] They decided that if they added a little bit of technology, they would be able to automate the process and enable companies to fit into their existing workflows. [1]

Checkr went through the Y Combinator Summer 2014 class and DoorDash Inc. was Checkr’s first customer. [8]

Checkr raised $9 million in funding led by Accel Partners, with Khosla Ventures, `SVAngel`_, `Data Collective`_, and Google Ventures participating in October 2014. [2] With just a headcount of four, the company has signed up more than 50 enterprise clients, which include companies like Homejoy, iCracked, Instacart and Doordash. [2] With them on board, it is processing about 1,500 background checks a month, and growing that number by about 25 percent a week. [1] Checkr’s clients are on pace to request 10,000 checks a month, which is up from about 2,000 in July. [2] Wong pointed out that by deploying a modern API, Checkr was able to scale to a size that would have been unheard of if it had to provide manual customer support. [2]

Checkr raised a Series B of $40M with a valuation between $250 and $300 million led by Y Combinator in October 2015 (formally announced in March 2016). [8] The investment was the first investment out of Y Combinator's Continuity Fund, an investment vehicle that has raised $700 million mainly to back YC startups as they continue to scale. [8] Ali Rowghani, the ex-Twitter exec who now runs the Continuity Fund, said that Checkr was “well-respected in the YC network,” and its interest is not just because of Checkr’s own potential but the role it’s playing in the wider ecosystem for many other YC companies. [8] Checkr was already profitable, and according to Yanisse it would use the money to expand outside of Silicon Valley. [8] Checkr has already started on that route, with new clients coming from the world of call centers and large staffing companies, he said. [8] Also, Checkr still require human labor to track down and supply this information, so some of the funding will be used to work on making that process more efficient. [8]

4   References

[1](1, 2, 3, 4, 5, 6) Ryan Lawler. July 24, 2014. Y Combinator-Backed Checkr Automates Background Checks For The New, On-Demand Economy. https://techcrunch.com/2014/07/24/checkr/
[2](1, 2, 3, 4, 5, 6) Ryan Lawler. Oct 14, 2014. Checkr Snags $9 Million From Accel To Provide An API For Background Checks. https://techcrunch.com/2014/10/14/checkr-9m/
[3](1, 2, 3) Carmel DeAmicis. Oct 14, 2014. Checkr gets $9 million from Accel to capitalize on the darker side of the on-demand economy. https://gigaom.com/2014/10/14/checkr-gets-9-million-from-accel-to-capitalize-on-the-darker-side-of-the-on-demand-economy/
[4](1, 2, 3, 4, 5) Sarah Kessler. Augst 26, 2015. What Is The Best Way To Keep The On-Demand Economy Safe? http://www.fastcompany.com/3050314/tech-forecast/what-is-the-best-way-to-keep-the-on-demand-economy-safe
[5](1, 2, 3) http://www.fastcompany.com/3050172/tech-forecast/the-truth-about-ubers-background-checks
[6]Checkr Is Raising $30M+ For Its Background Checking API, Y Combinator Investing. Oct 13, 2015. https://techcrunch.com/2015/10/13/checkr-series-b/
[7](1, 2, 3, 4) Lizette Chapman. Oct 14, 2014. Checkr Raises $9 Million Led by Accel for New-Hire Background Checks. http://blogs.wsj.com/venturecapital/2014/10/14/checkr-raises-9-million-led-by-accel-for-new-hire-background-checks/
[8](1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11) Ingrid Lundern. Mar 23, 2016. Checkr nabs $40m to expand its background screening platform beyond the Valley. https://techcrunch.com/2016/03/23/checkr-nabs-40m-to-expand-its-background-screening-platform-beyond-the-valley/
[9](1, 2, 3, 4, 5) Adrienne Lafrance, Rose Eveleth. March 3, 2015. Are Taxis Safer Than Uber? http://www.theatlantic.com/technology/archive/2015/03/are-taxis-safer-than-uber/386207/
[10]Alf Mikula (VP of Engineering). July 12, 2016. Initial phone call.

[10]

14 full time engineers,

Aggressively automating, can turn around things faster and cheaper. Having an API is simpler to use. Having Uber and high-profile customers. Starting to do them in Canada. 1000 clients. The next big is moving into background checks for full-time employment. Already added a lot of different feature, education verification, drug testing, personal professional references, to compete head-to-head. Need to go after potential customer who already have a solution and convince them that Checkr is better. Many people are skeptical about whether or not its faster. Do you have a reference account you can send them to, someone in a similar industry. Here's the testimony, but a chicken-and-egg problem there. Can't send people to Uber if they're JCPenny. Identify niche market where they do high volume of background checks, often where this high-turnover. Volume high enough to justify in terms of revenue, and on their side, saves them a lot of money and time. Have pain points that other BC players haven't addressed, to build market share. Over the next few months, going over that. Even without that, still growing healthily. Crossed 100K BC, 2 weeks ago, 130K BC in a week.

1-hour exercise with an engineer inspired by a real problem. Share screen.