Checkr, founded in 2014 by Daniel Yanisse and Jonathon Perichon, offered an innovative approach to background checks intended to disrupt the $1.8 billion industry, which was dominated by three incumbent firms—First Advantage, Sterling BackCheck, and HireRight. After going through the Y Combinator program in the summer of 2014 and receiving overwhelming investor interest, Checkr raised a $9 million Series A round which caught the interest of Uber, the largest on-demand ride sharing company at the time. Checkr’s growth skyrocketed with this early flagship customer, and the company was quickly on track to achieve $35 million in revenue in its second year of operation. By early 2016, the company soon faced the critical question of how to most effectively scale the business in the months ahead. The three options Yanisse and his team considered included: 1) taking its product from the on-demand sector into the mainstream; 2) expanding into the sharing economy to offer background check capabilities for sites such as Airbnb where individuals transacted with one another; or 3) ride the coattails of Uber’s international growth to expand overseas.
Checkr’s CEO knew that taking on too much at once, while opportunistic, could come at the cost of losing focus, culture, and/or product quality, any of which could veer the company wildly off course. Yet perhaps the biggest risk of all was moving too slowly and letting a hungry competitor grab the prize of a new market or a new customer. As Yanisse looked ahead to the balance of 2016 and beyond, he knew that the decisions he, Perichon, and the rest of his team made in the weeks and months ahead would determine where Checkr would land in the storybook of start-ups.
Part B of the case reveals the option Checkr chose to pursue, and engages the students in a discussion about the factors (operational, financial, cultural, etc.) they must consider in making such a decision as the CEO of a rapidly growing company.
This case is taught in Formation of New Ventures, a class that explores all aspects of the entrepreneur’s journey from ideation to company launch, growth, and scaling. The story of Checkr provides students with an inside look at two founders’ journey launching a business after identifying a need in the market. Though background check services are a less than glamorous industry, the almost $2 billion industry had seen little innovation in years, and Yanisse and Perichon believed they could deliver a better solution to meet the needs of a technologically advanced customer. Because the company achieves success out of the gate, students are exposed to the CEO’s challenge in both determining the strategic options for both and then choosing the best path forward when there is no clear “right” answer.