$500m secondary investment boosts Credit Karma’s valuation to $4bn
Through a secondary investment process, the technology investing company is taking a significant minority stake from existing investors in the consumer credit monitoring and financial health start-up. Founder and CEO Kenneth Lin will remain the largest shareholder. Additional terms of the transaction were not disclosed.
Unlike a primary funding round, Credit Karma will not receive any proceeds from the sale and will not issue new shares as a part of the deal. It will, however, benefit from a 23% increase in valuation, making it worth around $4 billion. According to TechCrunch, the move may be beneficial in placating investors and employees who are eager to cash out their equity, as well as help postpone an IPO.
Lin, who co-founded the company in 2007, says: “As we planned for the future and our continued growth, we sought a partner that could support our growth trajectory and provide existing investors an opportunity to lock in some of the rewards they’ve earned for their support and hard work.”
Silver Lake’s managing partner, Mike Bingle, will join Credit Karma’s board of directors. He cites multiple reasons for investing in Credit Karma, including the company’s “cutting-edge technology” and its “unwavering focus on long-term partnerships” with both members and financial institutions.
While it’s best known as a consumer-facing tool to help users check their credit for free, Credit Karma’s functionality extends far beyond credit scores, credit card offers and loan comparisons. Last November, the company launched a new automotive information centre where members can manage and organise their vehicle-related finances and information. And in late 2016, Credit Karma unveiled Credit Karma Tax, a free online tax filing service that, thanks to a partnership with American Express, lets users opt to receive their tax refund in advance. The company even has a tool to help return unclaimed money to users.
Credit Karma has 80 million members across North America, almost half of which are millennials and 80% of which access the service via their mobile devices. The company has originated more than $40 billion in credit products including credit cards, personal loans, mortgages, automotive financing, and student loan refinancing. Its platform offers free credit reports from Equifax and TransUnion, and seeks to serve as a hub for users to monitor their financial health.