Checkr acquires Truework to build a one-stop consumer verification platform targeting $50B+ TAM

businesses to eight of the 10 largest mortgage mortgage lenders in the country, including Rate, Penny, and Fairway. We've gotten to the scale only because we are obsessed with giving our customers the highest completion rate and accuracy in the in the industry.

Today marks a major milestone, but the journey is just beginning. I'm excited to see True Work and Checker continue pushing boundaries of what's possible.

Together, we can unlock endless opportunities from powering Checker's background checks with True Work employment data to expanding Checker into new verticals like mortgage and property management. It's going to be an incredible journey ahead. So, well, looks like we got both of them. Fantastic. Let's bring them in.

Let's bring them in. And, uh, I'd like you to kick it off with a little bit of an intro, get the background from them, and I will be right back. Sounds great. Yes. Okay. All good. Sorry, there was a Google Meet link in the same invite. I clicked on the Google Meet, not the Zoom. That's on me. Sorry, I messed it up.

How are you guys? Exciting week. Yeah, great. Great to meet and uh great to see you Ryan. Good to see you. Uh it's been a long journey. Why don't why don't you guys give uh your own kind of quick intros and uh and then John will get back and we can go from there. Great. Ryan, cool. Yeah.

Ryan Ryan here, founder and CEO of True Work. And Jordy, it's it's great to see you. Um you know, we started work eight years ago. um grew it to quite a large company and excited to see the vision really continue and accelerate under Checker. Um so I'll let Dan share himself. Awesome. Yeah. Hey guys.

Yeah, Daniel here, founder and CEO of Checker. We started 11 years ago. Um we invented the API for background checks and verifications.

And so we've been uh pretty big uh in the employment space and verifications for employment access to marketplaces and uh I've known Ryan and the Detroit team for for many years as well.

I was an investor in their in their bound and been following the journey and we're excited uh to announce that uh our teams are going to join forces and uh we can uh continue to build uh the product and and platform together. Amazing.

uh when when did uh did you know uh when you were investing in the bee did you have any idea that that your guys's journeys would really intersect at some point? I'm curious when uh when that conversation uh you know or that idea even popped into your head.

I mean we we we love I love this space because I love you know um APIs and uh data products and verifications. Um I wasn't sure it will if it will ever intersect at some point.

You know I thought that the the challenge that they're taking was great and then uh I think it's only in the last I would say maybe in less than last year that uh we started thinking that that that could align with our long-term data platform vision. Awesome.

Um talk about I guess the last uh your your guys' opinion the last few years. Uh, you know, I know Checkers, you know, more on the H, you know, H, uh, HR category, true work, uh, you know, more more of a like, you know, fintech darling.

But, um, Ryan, how how was it the last few years navigating, you know, all the ups and downs to get to this point?

Yeah, I mean we we saw immense growth during during COVID uh with home buying sprees and and once the interest rate went up, you know, we definitely had to navigate um a higher rate environment that meant lower volumes for mortgage lenders.

Um we expanded into other verticals like property management um that was a little less cyclical, but we were able to keep up, you know, really strong growth despite the market that we're really proud of. Um and now there's a way for us to expand into even more verticals like Back on Check.

Can you talk a little bit about the different tiers of verification and kind of like the the the different pools of TAM that you're going after together? Like I I run a a I I started a nicotine product company and uh we need to age verify. So we do background checks loosely. We do ID verification.

Uh but it's sometimes like a $30 checkout. So, you know, we need to be under a dollar per verification versus if you're hiring some engineer and you need to verify them. That could be hundreds of thousands of dollars in, you know, value essentially totally worth paying, you know, I don't know, $10 per verification.

Um, what are the different pools and and what's most exciting? What's the biggest TAM? And how do you kind of divide up the market? Yeah. Yeah. So we're going after over a $50 billion PM on on different types of verifications and identity products. Um which started in the 14 plus billion dollar employment market.

Ryan and Tim uh they've been going after financial underwriting uh property management which is also you know 12 billion plus TAM. Um we also are going after the risk and fraud market in TAM which we also size at that's about $10 billion.

Um you know specifically competing with companies like Lexus Nexus sure in financial fraud and and financial risk and then we also have a a nent consumer offering and product uh that's growing quite well and and that's also a multi-billion dollar.

So yeah, we're quite busy and um once we start to build a consumer-driven profile with verified credentials, identities, employment, work information that can uh that can be used um to solve lots of um use cases in different industries. Can you talk about the the the the war between artificial intelligence here?

Uh yeah, I saw a uh a post recently saying, "Oh, the new chat GPT images, you can generate a fake receipt. you can generate a fake ID and use that and upload that. Uh, at the same time, I'm sure you can use AI to weed some of that out. Uh, what technologies are the most interesting to you today? Yeah.

So, I mean, Ryan's product and ours, we've been more on the data sides. Um, which is a little bit harder to fake by AI. I mean, AI can fake anything. It's just a question of cost of, you know, the bad actors, how much money are they going to spend to to try to do fraud.

Um, so we're we're not focusing on taking pictures of driver licenses. I think that's going to become very challenging over time. Okay. Um, we're focusing more on verified data sources, you know, from from government signals like the DMV, from payroll companies and payroll records from, you know, employee records.

So, we stitch together, you know, different verified data sources, also consumer generated data. We triangulate it, we we score it, we verify it. Um and and so that that's a lot of our approaches that are a little bit more resilient I would say to to AI fraud.

Um we're also we also both in our products have you know document based verification and processes in case you know there's there's no data available on on different systems. Um and we also use AI to to combat AI fraud on documents.

So it's it's definitely multiprong strategy and AI I think is both an opportunity because it's going to create a lot more fraud and problems for customers. So it gives us a lot more work to do and at the same time um it's an opportunity because we're going to use AI tools and technology to combat AI fraud.

What is it like uh working with the DMV as a data source when you hit the API? Do they make you take a ticket and wait for the response or is it a little bit faster on your end? Yeah. And I'm curious about the evolution.

I imagine, you know, uh, when when Ryan started True Work and and, uh, Daniel, when when you started Checker even, uh, farther back, I imagine there was things that you had to do with humans that you maybe anticipated that you could do with AI at some point, but weren't immediately possible uh, just given um, you know, now we have products like Computer Use that could sort of like, you know, navigate uh, uh, systems that don't necessarily have APIs.

Yeah. Yeah, I mean for us like we you know as as D mentioned similar to checker we try to get our data from as automated of sources as possible like directly from the payroll system directly um from your bank account etc.

But in some cases where you know you work at a mom and pop store and there's there's just no other way to access the information we have to get in touch with the HR department.

we have to um we have to get verified data back from them and it's a mix of automation and manual work but there are some HR departments that that just only use a fax machine for example they will only respond to fact it's crazy and so we've had to kind of build a lot of automated flows on top of these manual processes AI LM are definitely making that easier you can automatically you know send a fax email communication even make a phone call to these teams um in an automated way so it's it's changing um but there are still a lot of these businesses that are really stuck in the legacy past.

It's really funny to be using like the future of technology to like work backwards with like a SAS company, right? Like they all build on top of these like archaic systems. Uh what's your take on eyeball scanning worldcoin? This is this the I was gonna ask you ask that.

I I imagine every time you guys see somebody walking around with a, you know, an orb scanning eyeballs, you're like, that's cool, but you can also sort of triangulate personhood. But um they're they're less focused on on the US market, but um but I'm curious how you guys think. Yeah.

What do you think about the far future of uh of verification? No, I think on on on identity, I think we're laughing about it, but I think in in person is going to become important when you want to want to have the best assurance um because online will be able to be faked so much easier and cheaper.

So, I think there's going to be actually more. It depends. It depends on the use case, but if you have some very very important transaction like getting a passport or you know like very important points, you still are going to need the biometrics in person. and it's going to be it's going to be hard to fake that.

Um so I think we'll see more in person use cases and probably in the identity stack more solutions. Um the the the other thing that I'm bullish on is um electronic driver licenses and wallets. You know like Apple and Google are starting to have your driver license in your wallet like Apple Pay.

And I think uh you know and the government especially in Europe and other countries they're moving to mobile driver licenses that connect to the government and if Apple and Google are are opening their SDKs and continuing to build them right I think that's going to be a more elegant solution um than scanning your you know picture of your driver license for example.

Yeah. Uh how do you think about like I don't know the the the the cost curve on this technology? A lot of people are complaining about like the dead internet theory. Uh all social networks will just be filled with spam and bots.

Uh is there is there a world where you can get this to a scale where it's so cheap and effective that we can reliably put an end to the bot problem on the internet or is that just intractable because it's like a capital fight? No, I think the the cost is definitely going down.

I mean just to give you an example, you know, the verifications Ryan and I were doing, they used to cost tens of dollars because a lot of human labor. Yeah. Um with AI and automation, we can now automate it end to end and bring it to pennies in terms of cost.

Many of them, for example, the criminal checks, we can do it at very high scale, very low cost.

And that allows us to open new use cases like not just hiring an engineer background check but we can um you know provide safety on online dating marketplaces, car car rental marketplaces, home sharing marketplaces for a fraction of the cost and it's an instant product.

So as you with technology you can lower the cost you can make it instant you can open new use cases. So I think we'll be able to do similar things also on on risk and fraud over time.

Yeah, we see this with uh like like ramp often looks at like the the B2B trend report of where companies are spending more money than ever before. Uh do you have data like that as well?

Because I see on your website like you know you're in gigan marketplace staffing, hospitality, retail, manufacturing, healthcare technology. Do you have an idea of what industries are doing an like a exponential growth in verification?

I guess like ours quickly and Elliot you had D like we we have a pretty good view of the mortgage market like mortgage mortgage lenders thousands of lenders on platforms. So y we we will see uh pretty early if if volumes are going up or or down. Sure.

Um I I think what's interesting these other verticals like property management like we we are seeing a huge uptick in using technology here. I mean 90% plus of property managers were using very manual processes. Hey, give me your payubs, give me a tax return.

Um, and you're seeing real momentum in that space of of folks bringing on AI and automation. Uh, the there was this tweet a while back that we talked about uh something like you'll meet your acquirer like four years before the deal gets done, something like that. How did you guys originally meet?

That's been true for us, right, Ryan? Yeah, exactly. You know, Daniel and I got connected, I believe, by a mutual investor and and um you know, Daniel's been incredibly helpful, just obviously really close to the space, invested in our series B about four or five years ago. So, um that that Yeah.

And we're both part of Y Combinator, so you know, we are well connected with Y founders and so Gary Tan wins no matter what. I again, another another million dollars for Gary. Love to see it. Um that's great. It's great. It's been great to just work with other founders.

You know, I think there's there's lots of small YC companies who, you know, some of them are going to break through, some of them it makes sense to join forces and build products together.

So, YC founders, working with YC founders been one of the most most fun thing for me to do over the last I think a lot of people don't often get like the inside story of like how an M&A event comes together. Can you give us some color on like how long the deal took? What who who were the parties in the room?

Uh was it just uh handshakes over dinner and stakes and Don Perryan or was this in a boardroom with all the lawyers and you're screaming at each other? Uh what what happened? And then I also want to go through the post merger merger integration stuff. But let's let's talk about the anatomy of the deal first.

Yeah, we we can share some story. Ryan, when did we go on that walk, Ryan? I think it was July of last year. So it's been quite the long process about 10 months. Um overnight success. That's great. and and yeah, I mean like like what how do you build vision?

What are the uh uh what are the hurdles that you guys have to overcome to kind of get a deal done? I think a lot of founders uh are open to acquisitions, but uh what what what are the parameters that you guys were thinking about that and the discussion points that led you to think that this would make a lot of sense?

Yeah, I think I mean I one thing I was really impressed by uh how Daniel and team approached it is I think it really started a lot with the product and is this is this a product that is that works really well?

Is this something that we we want to buy and um you know there was testing of the product and our completion rate and and how it could potentially look like a part of the checker environment and um I I really appreciated that as like one of the first steps. So are you both based in San Francisco? Yeah. Okay.

So you just went on a walk. Where was the walk specifically? Around my office right here in one Montgomery. Yeah. Very cool. Uh so the deal comes together. What What does post merger integration look like? I imagine that there's you know teams can work together. You guys can merge offices.

You can go into a new office together. What what are you thinking? What are the uh what are the hurdles that you both want to overcome? Yeah. Yeah. So it's still very fresh, right?

I mean, we literally signed it was there was a bit of drama getting all the signatures on Wednesday evening like less than two days ago like at 2 a. m. The last few days were a lot of lawyer calls like more than my entire life. Like I have enough lawyer.

I don't want to do more like but on like small details that are not very important like we're both sides were like let's let's get it done guys, you know? It's fine. It's just like legal ease. Yeah. Um, so it just got signed and then we just announced it yesterday externally and to our employees and everything.

So it's still very early. Yeah. Um, we've done six different acquisition bigger and smaller over the years.

So kind of trying to learn how to get better at it and a lot of acquirers mess up the acquisition as you know right like a lot of company it's a failure because mostly because of the acquirer just not not doing the best to welcome the team and to continue the growth and the business.

So our top priority is like to continue what's working at work. A lot of things are working. We want to accelerate their growth and give them more support. We don't want to suffocate them in a in a bigger company. So I think that's been early alignment with Ryan and and Ethan and and Victor and the team.

Um and so also the the rational for the acquisition is both we tested their product and their employment verifications are 10x better than than what we have. So it's gonna their product is going to make our product much better for all the customers and we're excited to expand into the the financial underwriting space.

Sure. So double rational and and on that they have Yeah.

It's cool to it's cool to think about, you know, I can imagine you guys are in a much better place to do this extensive diligence because you have such a, you know, similar and and potentially overlapping businesses over time than uh even somebody that'd be writing like a nine figure check, right?

Uh on the, you know, VC side just because uh yeah, who's going to be able to get into the weeds more and and really understand the product. So, it's a huge vote of confidence in the in the platform. Yeah. Yeah.

I remember hearing a story from a lawyer about like getting the signature from a VC who was literally this is not a joke literally on the ski slopes and they had to they had to fly someone out with the paperwork to get them to sign at the top of the hill because they were on vacation.

They're like this you have to sign this day. This is super important. Uh so I'm sure I'm sure there's a lot of drama and I'm sure there's going to be a massive legal bill for you but but good luck. Uh I think it's going to work out. Obviously it's a lot easier when the companies are growing, right?

because uh this doesn't become about like oh let's chop it up and like you really cut costs. It's like hey we're all growing together. This just will accelerate things. Um what is you're both private companies.

Is there uh like an FTC approval process for a deal like this or is that just something that doesn't even come into play at this level? Is Lena Khan punching the air watching two companies merge even though both of you guys seem pretty happy about this? Yeah. No, I think it's I think this one was below the threshold.

Um, we've had it for previous bigger acquisitions. Sure. Yeah. Uh, I is there any like regulatory process? How do you even calc how do you even think about that as a as a startup? Uh, I mean, we've we've all heard the story about like, you know, the big ones like the Figma, Adobe back and forth.

You know, they're still litigating uh Instagram and and Meta right now. um uh what what advice would you give to founders as they're growing to think about acquisition and merger and acquisition strategies broadly in the regime as it's evolved over the last few years. Yeah. Yeah.

I mean I think M&A and I was talking to M&A bankers you know last year and this year and the trends um M&A with the big big uh big four tech companies like Amazon Google everything it's been very difficult especially in the last regime uh lots of deals canceled and and everything um I don't know for right or for wrong you know I think it is important we we are startup guys like we root for new startups to succeed right I think we that's what we like to do um but I think in in the opportunity unities are for small and medium startups to to join forces and do M&A and I think it's a good M&A market right now.

Um the road to IPO is longer than ever. The bar is higher than ever. I mean the IPO window just got shut again. And even before that, you know, experts and and friends and and people are saying like, hey, even $500 million in revenue, it's not it's not strong enough these days. You want a billion plus in revenue. Yeah.

super strong growth, super strong profitability, super diversified business, very high bar. There's very few companies to get to that level. And so even for us, you know, I think the opportunity is like we have a big vision. We work in the data and identity space.

What other startups can kind of join the venture and we all work together to be a bigger, stronger company and and and qualify over time. Awesome. Yeah. Uh yeah, Ev Randall was talking about how he pulled up a screen of uh SAS companies with over $500 million in revenue that are public and there's hundreds of them now.

And so uh just as a public markets investor like you can kind of satiate your demand for SAS companies in like almost any vertical and so the bar has never been higher. Um uh I mean you mentioned that like the M&A markets are heating up.

Is that is that are you looking backwards towards a year ago when this start process started or is this what you're feeling even this week because obviously there's been some market turmoil.

Uh do you think that uh the mood in Silicon Valley, the mood in San Francisco has shifted at all around M&A because obviously Wall Street reacts much faster with like the the IPO window is closed like as of a week ago. Well, it might be open again. It might be open again. Who knows?

It might, you know, it changes so fast. But I feel like in Silicon Valley, the M&A market moves much more much more slowly as VC funds scale up and scale down. Obviously, there's still growth funds that are getting bigger than ever.

Uh what are you seeing in terms of M&A over the last like year and do you think there's going to be a shift this year? Yeah, I mean I think it's from the seller side there's going to continue to be a lot of appetite because the again the valuations were so high in 2021. Sure.

um it's really hard to catch up especially when you're like raising at 100 times revenue multiple or things like that. Um if the if the scale is not there, profitability is not there, companies might really struggle to fund raise more.

So I think we're going to continue to see companies interested in joining forces um and and demand on the seller side. Um that started over a year ago and it's continuing today. I think on the buyer side, I have seen some anxiety in the last few weeks from investors. Uh, you know, should we really do M&A or not?

Is, you know, it's it's scary out there. There's anxiety. And so, you know, it's always a big investment. So, you know, people don't want to invest or take risk um when when things are scary out there. But from our perspective, I'm fortunate. We have a strong financial position, strong long-term investors.

And, you know, we we continue. We went for it. We did that M&A because it's the right thing to do in the long term. So, we're really playing the the long-term game here. Yeah. Love it. Last question I have, Ryan. Uh, is there one investor maybe besides Daniel that comes to mind as the most helpful?

Somebody that stands out on the on the eight-year journey that uh that uh uh you would uh you know, highlight? Yeah, I mean, it's it's it's hard to single out uh just one. We we're lucky to have many really really great um helpful investors.

Because I mean all three investors on our board, Alfred Lynn from Sequoia, Heather Boy from Kla and really stacked. Yeah, stacked board. And who who is the last one? And Steve uh Sarino from Activant. Oh, cool. Awesome. Yeah, so they're st is stacked.

Incredibly helpful, incredibly supportive from the beginning till now. I really couldn't have asked for a better board. We got really lucky. But gun to your head, Keith or Alfred? Just kidding. No, I I I I do want to know uh like maybe last question for Daniel.

Um, uh, there's been this back and forth meme about chat GPT rappers, GPT rappers just, uh, we're we're the AI Salesforce. Maybe we're the AI checker, you know, uh, there's a lot of those companies. Some of them, uh, they felt like they were overvalued. And then some of them ramped up revenue really nicely.

Uh but they still feel like uh I wouldn't want to be building one of those companies when there's a active venturebacked company in founder mode building in the same category because I think that they're going to figure out how to wrap if they need to rap.

Uh but what are you thinking about in the early early stage of like AI empower disruption? How important is it is it to do a green field project build something? We're seeing that Windinsurf is getting acquired and I think a lot of people were saying, "Oh, that's just a chat GPT rapper.

OpenAI is just going to build that. " Well, maybe they will buy it and so what are you thinking about the latest crop of kind of AIdriven startups? Yeah. I mean, I think we we are the AI checker in found mode. So, good luck. Good luck if you want to come come but in our space. Yeah.

Um, no, but I I think AI is just the the latest software, right? Like just you used to say we're like the SAS company to do CRM. We're the AI we're a cloud company to do CRM. Now we're AI company to do CRM. Yeah. But I think in B2B and we're in B2B, it's like what B2B problem are you tackling? Are you tackling sales?

Are you tackling underwriting? Are you tackling HR? And AI is just the way to build modern products. If you think about it this way, it applies to every category, every business. And it's not enough to just be the AI rapper.

you have to come in and say why is AI going to be a differentiator to replace all of the you know other players um and if you have a strong story on that and the other players are not doing and leveraging what you're doing I think there's a chance it's highly disruptive building AI products is not the same as building the products we've been building as product and edge people in the last 20 years the paradigm the UI the experience is different the stack is different so either there's going to be opportunity because bigger companies are not going to change fast enough.

Um, but I'm racing in my company to transform everyone to be like, "Hey guys, we got to relearn everything from signup flow to monetization to, you know, buttons and dashboards. It's it's we have to rebuild products AI first. " It's it's different. Yeah. Have you thought at all?

Uh, we always say last question and then there ends up being more questions, but uh we have one minute left.

Have you thought about um a world you know maybe you've done this already but um integrating with something like a chat GBT where if somebody's using chat GBT at work and they can say like hey I have a new hire coming on board would there ever be a world in the future where you would actually like integrate into the uh you know agent layer if you're looking at something like a chat GPT as an agent or is that not even the right kind of workflow?

No, that that's futuristic. But uh it could be it could be, you know, I think if you look at uh who was it like CLA who's not even using workday and Salesforce anymore and just like directly agent who do the workflow.

Yeah, you could skip some of the traditional recruiting and hiring process and go straight into the agents. Um yeah, could happen. Awesome. Interesting. Well, thanks so much for stop. Congratulations, guys. Very congratulations. Uh excited to watch you guys dominate together.

Uh seems like it was fate and uh yeah, congrats to the whole uh True Work team on on the on the eight-year run, too. Um and the continued success. Thanks, guys. Thanks, guys. Bye. Really rubbing it in Lena Khan's face. She hates a merger, doesn't she? She hates a merger. I'm sure she's fine with this one.

Uh little tech. Little tech building up resources. Future big tech. Future big tech. But uh little tech right now. Gary