Background checks pay for Checkr, which just rang up $100 million in new funding

Criminal records, driving records, employment verifications. Companies that use on-demand employees need to know that all the boxes have been checked before they send workers into the world on their behalf, and they often need those boxes checked quickly.

A growing number of them use Checkr, a San Francisco-based company that says it currently runs one million background checks per month for more than 10,000 customers, including, most newly, the car-share company Lyft, the services marketplace Thumbtack, and eyewear seller Warby Parker.

Investors are betting many more customers will come aboard, too. This morning, Checkr is announcing $100 million in Series C funding led by T. Rowe Price, which was joined by earlier backers Accel and Y Combinator.

The round brings the company’s total funding to roughly $150 million altogether, which is a lot of capital in not a lot of time. Yet Checkr is very well-positioned considering the changing nature of work. The company was born when software engineers Daniel Yanisse and Jonathan Perichon worked together at same-day delivery service startup Deliv and together eyed the chance to build a faster, more efficient background check. The number of flexible workers has only exploded in the four years since.

So-called alternative employment arrangements, in the parlance of the Bureau of Labor Statistics, including gig economy jobs, have grown from representing 10.1 percent of U.S. employees in 2005 to 15.8 percent of employees in 2015. And that percentage looks to rise further still as more digital platforms provide direct connections between people needing a service and workers willing to provide it.

Meanwhile, Checkr, which has been capitalizing on this race for talent, has its sights on much more than the on-demand workforce, says Yanisse, who is Checkr’s CEO. While the 180-person company counts Uber, Instacart, and GrubHub among its base of customers, Checkr is also actively expanding outside of the tech and gig economy, he says. It recently began working with the staffing giant Adecco, for example, as well as the major insurer Allstate.

At present, all of these customers pay Checkr per background check. That may change over time, however, particularly if the company plans to go public eventually, which Yanisse suggests is the case. (Public shareholders, like private shareholders, love recurring revenue.)

“Right now, our pricing model for customers is pay-per-applicant,” says Yanisse. “But we have a whole suite of SaaS products and tools” — including an interesting new tool designed to help hiring managers eradicate their unwitting hiring biases — “so we’re becoming more like a SaaS” business.

While things are ticking along nicely, every startup has its challenges. In Checkr’s case, one of these would seem to be those high-profile cases where background checks are painted as far from foolproof. One situation that springs to mind is the individual who began driving for Uber last year, six months before intentionally plowing into a busy bike path in New York. Indeed, though Checkr claims that it can tear through a lot of information within 24 hours — including education verification, reference checks, drug screening — we wonder if it isn’t so fast that it misses red flags.

Yanisse doesn’t think so. “Overall background checks aren’t a silver bullet,” he says. “Our job is to make the process faster, more efficient, more accurate, and more fair. But past information doesn’t guarantee future performance,” he adds. “This isn’t ‘Minority Report.’”

We also ask Yanisse about Checkr’s revenue. Often, a financing round of the size that Checkr is announcing today suggests a revenue run rate of $100 million or so. Yanisse declines to say, telling us Checkr doesn’t share revenue or its valuation publicly. “It’s still a bit early,” he says. “There’s this obsession with metrics in Silicon Valley, and we just want to make sure we’re focused on the right things.”

But, he adds, “you’re in the ballpark.”

Correction: An earlier version of this story incorrectly listed Visa as a customer.


Y Combinator’s Jessica Livingston on Dropbox IPO: “It was just a dream of ours”

Dropbox, after more than a decade, finally went public this morning — and the stock soared more than 40% in its initial trading, making it a marquee success for one of the original Web 2.0 companies (at least for now).

While we still have to wait for the dust to settle, it’s been a very long road for Dropbox. From starting off as a file-sharing service, to hitting a $10 billion valuation in the middle of a massive hype cycle, to expectations dropping and then the announcement of a $1 billion revenue run rate. Dropbox has been a rollercoaster, but it’s another big moment this afternoon: it’s Y Combinator’s first big IPO. And Y Combinator still has a very deep bench of startups that are, thus far, obvious IPO candidates down the line like Airbnb and Stripe.

That isn’t to take away anything from the work of CEO Drew Houston and the rest of Dropbox’s team, but Y Combinator’s job is to basically take a bunch of shots in the dark based on good ideas and potentially savvy founders. Houston was one of the first of a firm that now takes in a hundred-odd founders per class. Y Combinator Founder and partner Jessica Livingston was there for the start of it, recalling back to the day that Houston rushed to her and Paul Graham to show him his little side project.

We caught up with Livingston this morning ahead of the IPO for a short interview. Here’s the conversation, which was lightly edited for clarity:

TC: Can you tell us a little bit about what it’s like to finally see the first Y Combinator company to go public?

JL: I feel like 13 years ago, it was just this dream of ours. It was this seemingly unattainable dream that goes, ‘maybe one of the startups we fund could go public someday.’ That was the holy grail. It’s an exciting day for Y Combinator. It shows what a long game investing is in early-stage startups. I do feel kind of validated.

TC: How did Y Combinator first end up in touch with Houston?

JL: He applied as a solo founder. We had met Drew the summer before. Back then, we were so small that we always encouraged people to bring friends to a Y Combinator dinner. [Xobni founder Adam Smith] brought [Houston], and we met him then and talked it through. When he applied, we invited him to come to an interview, and Paul [Graham] before the interview reached out to [Houston]. He said, “I see you’re a solo founder, and you should find a cofounder.” Three weeks later Drew showed up with [co-founder Arash Ferdowsi]. It was a great match that worked well.

TC: As Dropbox has grown, what’s stood out to you the most during changes in the market?

JL: They’re a classic example of founders who are programmers who built something to solve their own problem. Clearly, this is a perfect example of that. Drew gets on the bus, he forgets his files, and he can’t work on the whole trip down. He then creates something that will allow him to access files from everywhere. At the time, when he came on the scene with that, there were a lot of companies doing it but none were very good. I feel like Dropbox, regardless of market dynamics, from the very beginning was always dedicated to wanting to do well by building a better solution. They wanted to build one that actually works. I feel like they’ve stuck to that and that’s been driving them since. That’s been their guidepost.

TC: What was your first meeting with Houston like, and do you think he has changed in the past 10 years?

JL: When I first met him, he was young — he was very young — and he was always a good hacker, and very earnest. During Y Combinator he was very focused on building this product and was not distracted by other things. That’s when there were just two people. He’s really evolved over the years as an incredible leader. He’s grown this company and he’s navigated through all different parts of his life cycle. I’ve witnessed his growth as a leader and as a human being. He’s always been a great person. It’s sort of exciting to see where he is now that he’s come a long way, it’s really cool.

TC: Houston and Ferdowsi still own significant portions of the company even after raising a lot of venture capital. Do you think Y Combinator had any effect on companies looking for more founder friendly deals?

JL: I think when Y Combinator started, our goal in many ways was to empower founders. It was to level the playing field. You don’t have to have a connection in Silicon Valley to get funding. You just have to apply on our website. You don’t have to have gone to an Ivy League school. We [try to tell them], don’t let investors take advantage of you because you’re young and have never done this before. In general, times have changed over the past 15 years. Hopefully Y Combinator played a small role in some of those changes in making things a little more found friendly.

TC: What’s one of your favorite stories about Houston?

JL: He was always very calm, cool, and collected under pressure. I remember that was definitely a quality about him. His feathers didn’t get ruffled easily. One of the things I remember most clearly is from that summer when we had demo day. Back then it was, like, 40 people tops. Still, there was a lot of pressure. I remember Paul [Graham] came up with this idea that, ‘hey, Drew, during your demo day you should show people how well Dropbox actually works by deleting your presentation live and restoring it through Dropbox.’ That’s kind of risky, right? To delete your presentation. You’re just standing up there without anything. And he did it and he nailed the presentation. It sounds a little gimmicky, but it really worked and showed his product worked. I remember thinking, like, wow, he’s pretty calm. If it were me I don’t think I could hit the delete button in front of these people. That’s an important quality in someone, not to get flustered.

By the way, we funded them in 2007. If you asked me in 2008 how were they doing, I would say, well, they’re making progress. But it wasn’t like we funded them and we could say, ‘this is gonna be a great one.’ We just knew, yeah they’re making progress, but it’s always hard to know there.

TC: Back then, what were you just expecting? M&A? Did you even anticipate an IPO?

JL:  As we were formulating the idea, the hope was rather than going to work at Microsoft — I use them as an example because that was the company back then — and rather than going to get a job out of college, why not build a company and make Microsoft acquire you to get you to work for them? We had low expectations back then. We were hoping there’d be some small acquisitions. But yes, the hope was always acquisitions, but maybe someday in our wildest dreams there’d be an IPO. We didn’t even think YC would work when we started, people didn’t believe in YC’s models for many years.

TC: Looking back, what would you say is one of the biggest things you’ve learned throughout this experience?

JL: What a long road it is for startups. When we started YC back then, it wasn’t a popular thing to do a startup. Now, thank goodness, more people are starting them, and more types of people are starting them. It’s not just super high-tech companies. That’s exciting, but what I think a lot of people don’t realize is how hard startups are. You say, yeah, I know how hard, but people don’t realize how difficult they are and how long the commitment is. If you’re successful, it takes such a long time. For [someone like Houston] to make it to that point, they’ve committed a lot of their life and energy and all their intellectual capacity to making this work. To me, that’s so exciting, but I think it would surprise people to know realistically how long that could take.

TC: What would you tell startups with the hindsight of what happened with Dropbox’s valuation hype cycle?

JL: I will say, with startups, sometimes you just have to stick to what you’re doing. There’s a lot of stuff going on around you, especially now with social media and things like that. With a startup, you just have to keep moving forward with building a company and building a great product.


Bear Flag Robotics wants to sell an autonomous tractor for farms

Autonomous vehicles are increasingly becoming the shiny object in Silicon Valley. But the opportunity doesn’t just extend to cars driving around the streets of a major metropolitan area, and Igino Cafiero and Aubrey Donnellan hope to take it somewhere a little less obvious: the middle of an orchard.

Cafiero and Donnellan are building an autonomously-driven tractor as part of a startup called Bear Flag Robotics. The pair argue that there’s increasingly a struggle to find enough labor to work on farms, and even then, the costs are continuing to rise over time — leading to a need to increase those efficiencies on the actual field in addition to a lot of new technology like satellite imagery and computer vision to analyze the health of plants. The first product for Bear Flag Robotics is a self-driving tractor, and the company is coming out of Y Combinator’s winter class this year.

“We got a tour of an orchard and just how pronounced the labor problem is,” Donnellan said. “They’re struggling to fill seats on tractors. We talked to other growers in California. We kept hearing the same thing over and over: labor is one of the most significant pain points. It’s really hard to find quality labor. The workforce is aging out. They’re leaving the country and going into other industries.”

There are certainly a lot of technical challenges that go into it, and not just pertaining from having the right computer vision products in place in order to create an autonomous tractor. For example, the tractors have to be able to operate without a GPS signal, Donnellan said, simply because operating a tractor in an orchard may mean driving around with a ton of canopy cover — which could block the signal. It might be a little simpler to just drive down a path in an orchard, but there’s still quite a lot to consider, she said.

“We have this platform that we’ve plugged a ton of sensors into it,” Cafiero said. “That includes cameras. When you look forward, once we’ve automated the driving part, the sky’s the limit in terms of utilizing some of this technology once it’s out there. When we’re out there we can use these cameras, and be able to make recommendations and spot treatment in the field.”

When it comes to testing, Cafiero and Donnellan just go out to an orchard over in Sunnyvale a few times a week to see what some of the challenges growers face.

While finding labor has been a challenge, Cafiero acknowledges that there are still questions around undocumented labor when it comes to labor on those farms. He said, in the end, Bear Flag Robotics’ aim is to augment the workforce by taking away some of the more mundane tasks required on the fields. Cafiero also said that there’s a lot of reverse immigration happening from the U.S., leading to more of a labor shortage.

“The work itself is really tough work,” Donnellan said. “You’re in the field all day long, sometimes in inclement conditions. One of the tasks we’re automating is spraying, fungicides, herbicides, and these people out there, they’re wearing hazmat suits. It’s not good for their health to be doing these tasks in general. When you’re presented in higher paying jobs in other fields, there’s less of a case to go into that job, and there’s demand in a lot of other industries like construction [and other industries] where it’s easier work and better pay.”

Selling the actual tractor can also be a challenge, simply because potential customers will be buying their equipment down the road at sellers they know. If something breaks down, they need someone to come over, in person, as soon as possible to fix it or risk losing yield. And the major equipment providers may too see the need to start working on autonomous tools. Cafiero’s hope is that the startup will be able to work with local sellers and get into those channels, and that’s the only logical place to start. There might be some aim to scale up over time, but the company hopes to just get started with local dealerships for now.


NexGenT wants to rethink bootcamps with programs for network engineering certifications

Developer bootcamps — several-month training programs that are designed to help people get up to speed with the technical skills they need to become a developer — exploded in popularity in the early part of the decade, but there’s been a bit of a shakedown on the space recently.

And that could be a product of a lot of things, but for Jacob Hess and Terry Kim, it’s just not enough time to become a fully-fledged developer. With training in the Air Force, where both had to work on these kinds of compressed programs for entry-level technicians, both decided to try their own approach. The end result is NexGenT, which is own kind of bootcamp — but it’s for getting a certificate in network management, and not a one-size-fits-all sticker as a developer. That approach, which includes a 16-week class, is considerably more reasonable and helps get people industry-ready with a skill that’s teachable in that compressed period of time, Hess says. The company is launching out of Y Combinator’s winter class this year.

“There are 500,000 open IT jobs, but when you look at that number, what’s more interesting is so many of them are IT operation roles, and the remaining is software development,” Hess said. “The bigger pie in IT is non-software programming jobs. Cyber security is also huge because of the automation and AI. We want to create the stepping stone. Network engineering becomes a foundation for a lot of these jobs, whether you want to be a cloud architect and work for Amazon, it all starts with understanding and building a foundation around networking.”

The end result is a 16-week program where a batch of applicants gets a review, and a percentage of them are accepted into a cohort of students. They go through an engineering module, which teaches them the basics and mechanics of network engineering and learn about the IT industry. Students can go faster if they want — it’s primarily online — and then start working on labs where they are building their own lab, either physical or virtual. The process culminates in a project where the students have to roll out an HQ facility in two branch offices from design to technically implementing it.

The next phase is about getting them certifications for various technologies, which help them basically show that they are ready to start entering the workforce. Think of it as something similar to having a Github account where prospective employers can review the work, except the process is a lot more formalized and you end up with something concrete on the resume. The final phase is around career coaching and helping them get a job, which can last up to 6 months. Throughout this process, students have access to a mentor and live coaching where students can ask whatever questions they wish.

So, the process is not so dissimilar from the notion of a developer bootcamp. But at the same time, there’s a small-ish graveyard of developer bootcamps and some with issues. Galvanize in August said it would lay off around 11% of its staff, while Dev Bootcamp and Iron Yard shut down altogether. The knock on these camps is it’s hard to get developers ready to start shipping code in such a small period of time — but Kim argues that getting them certified and ready to be a network engineer is definitely something that’s doable in around 16 weeks.

“It’s more realistic,” Kim said. “For coding bootcamps, you have to go by off the portfolios and check their Github, and they have to pass that technical interview. In our world of IT operations, it’s not about the bachelor’s degree, it’s about the person having the knowledge. But the industry certifications come from third parties, and when they come out of our program and have two or three certifications. It’s enough to get into that entry-level job.”

It remains to be seen if this kind of an approach is going to work. NexGenT charges a tuition — around $12,000, which with maximum discounts hits around $6,500. The company offers a 36-month payment plan as well that comes with an enrollment fee, which stretches out that very steep ticket price. In reality, these zero-to-60 programs are designed to be for-profit, though there are some different models that take in a percentage of salary among other approaches. With that in mind, though, there’s always an opportunity to build a strong pipeline with certain companies, and if they can identify high-performing students they can offer more of a proof point and potentially use that as an opportunity to offer some variation of scholarship.

While this is more of a bootcamp-ish style program, there are already some IT certification programs through tools like Coursera. Google, in one instance, is offering financial aid for a batch of those students, and companies with deep pockets might be able to build out these kinds of pipeline programs on their own. Hess and Kim hope to offer some kind of high-touch approach, instead of just a class on a platform of many, that will give them an edge to be a preferred option.


Ovipost wants to help drop the labor cost of building cricket farms

Trina Chiasson says a lot of cricket farmers will talk about how figuring out when they are laying their eggs is an art — and she hopes to turn it into a science.

She and her co-founder James Ricci started Ovipost, a new startup looking to optimize the right conditions for a cricket grower to get the most yield from a generation of eggs without having to lose a bunch of crickets in the process. At its heart, Ovipost is aimed at being a set of tools that will help farmers figure out the best way to optimize their cricket yield by managing initial problems, like the proper volume of cricket eggs, as well as traditional problems cricket farmers face. The end goal is to reduce the overall labor cost, taking the process from less of an art — and listening for the right song — to more one that farmers can augment with technology. Ovipost is launching out of Y Combinator’s winter class this year.

“When you look at the labor costs, it’s kind of a chicken and egg problem,” Chiasson said. “Right now, the industry is too small to warrant investment in research and development, and the cost of cricket protein is what we’re working on first. Seventy-five percent of costs are in labor. A lot of these farms have been growing the same way since 1940. You’ve seen advances in other animal protein sectors, they’ve been optimized, whereas with insects were just getting going in the process.”

And that labor cost is part of the reason that cricket farms have been a niche for some time. Farmers have spent years and years optimizing the protein yield of animals like cows and chickens, as well as developing the best farming methods to optimize crop yield. There’s also significant investment in tools that will help manage crops, all the way down to cameras flying around on rails to keep track of plant health and augment the “crop walk.” But crickets, despite being an efficient protein delivery mechanism, haven’t seen that investment because it really hasn’t gotten off the ground just yet, Ricci said.

There is, of course, a lot of interest in this space given the potential for cricket as a food source, and also for feed for other kinds of farming. Startups like Exo have raised financing to make cricket-based food, like cricket flower, and try to turn it into something consumers will enjoy — and also understand the implications. Ovipost’s goal is to start at the very beginning of the process, bringing the cost of labor down in order to get that flywheel up and running in the first place: make a lot of crickets, show they’re as valuable as they say they are, and then get more visibility from researchers and buyers and get the whole process spinning up quickly.

Should Ovipost and other startups be successful in showing that cricket-based food is an efficient way to deliver protein, and bring the cost down, the interest will end up coming with it. Ricci is pretty self-aware that Ovipost and other companies may be targeted by entrenched businesses as they try to come up with something more efficient, but in the end, the hope is that market dynamics will win out. The challenge that still comes with that is figuring out how to optimize the environment for crickets, which don’t have the benefit of decades of research, to fit their original climate they’ve grown to adapt to while still working in some scalable fashion. Factors like temperature, the substrate the eggs go into and even lighting all play a role in that.

“Feed’s an interesting point, a lot of people talk about using waste streams but you have to be very specific,” Ricci said. “You can’t use pure waste, you can’t use rotting garbage. When you say waste stream you have to specify spent brewers grains, sterilized plant matter. You could always have someone coming at you, but we’re just so small at this point that they haven’t taken too much notice. It has a lot to do with feed — we still have to feed these insects, and think about how we can feed them more efficiently than chickens, which have been optimized for decades.”

And the other part is the average consumer just getting over the fact that they’re eating crickets, too, to get them in the mindset that it’s an important potential food source. Chiasson spent her time prior to Ovipost running a small experimental setup that would sell edible insects — but that’s something that’s done all around the world already, she said, and once you try it you usually get over the fact you’re eating crickets. (Having done this, with some kind of barbecue-flavored crickets, it really seems like that’s the case. They didn’t have legs on them, though.)

“It’s so culturally dependent,” Chiasson said. “In places like Oakland, it’s a status symbol to go to these dinners and pay extra for bugs. But in other parts of the world it’s in the opposite direction. There’s this interesting clash between folks that have money and want it as something trendy and people who have been doing it forever. It’s part of their lives. I would really like for insect protein to be an inclusive thing, and a lot of that is bringing the cost down.”


Worklytics wants to cut down on lame meetings and help make teams more efficient

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Shogun wants to help businesses easily build a better online storefront

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ScopeAI helps companies analyze their customer feedback

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EnvKey wants to create a smarter place to store a company’s API keys and credentials

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Hunter2 wants to teach engineers to handle web app security with a hands-on approach

 When Equifax was broken into late last year — one of the biggest security breaches in recent history — Fletcher Heisler wanted to make sure engineers got to know exactly what happened right away, and how to fix it. That’s part of the goal of Hunter2, a new online learning platform for engineers that’s designed to teach them how to handle these kinds of breaches in a… Read More

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