Credit Karma’s Kenneth Lin on building a billion dollar brand

Building a great service is hard but not impossible. But building a great service and making it available for free -- that's really hard. Credit Karma seems to have figured out a way to do both. The company, with 85 million members in the U.S. and Canada, continues to roll out free, innovative financial products to its user base. It all began 11 years ago with a simple premise: to provide users with free access to their credit scores. From there, the company has rolled out a bunch of new products, including ID monitoring, tax preparation, a financial chatbot, auto finance, and unclaimed money.

Follow your mission and the money will come

Many of Credit Karma's new products aren't expected to make money right away. "As a founder, you have to always think about your mission, and not revenue," said founder, Kenneth Lin last week at a meetup in Israel. "Trust is built over time by actions you take, the products you build and how you treat your members." For example, as big data breaches started hitting the press in 2017, Lin had the firm's new ID Monitoring product fastracked and launched months ahead of schedule. More than 10 million people have used the product since it launched a little over a year ago. Credit Karma offers Direct Dispute, a product that enables its users to dispute erroneous items on their credit reports from the Credit Karma interface. The product doesn't provide any revenue to the company, according to Lin, a first generation Chinese immigrant to the U.S., but it's removed over $10 billion in erroneous debt that appeared on members' credit reports.

Finding new financial services to provide for free

Lin and Co. continue to scour for opportunities to provide members with free financial services. Credit Karma hit upon tax preparation services and acquired a company in the space in 2017. "Tax filings look a lot like credit scores," Lin said. "There are a lot of free offers out there for basic services with a lot of upsells." More than 1 million people filed their taxes during the 2018 tax season using Credit Karma. The company also launched an auto hub in 2017 with a simple insight: If an individual doesn't own a home, her car is the most valuable asset she owns. Credit Karma can pull make and model of a user's car from a local DMV, find the value of a car, and calculate the rate the user is paying on their auto insurance. Launched last year, more than 8 million members are using Auto Hub to find loans, refinance an existing loan, or get insurance.

The move towards Autonomous Finance

At its core, Credit Karma pursues opportunities to leverage the rich data it has on its users. The company collects about 2600 attributes per user, but the trick, according to Lin, is being able to create insights and value for its users from their information. "We have three motivations for collecting data," said Lin. "To provide a differentiated experience, to assist new customer segments, and to offer certainty, transparency, and simplicity." Lin's firm is moving in the direction of providing automated, personalized advice to his users -- something he calls, Autonomous Finance. When polled, 55 percent of millennials would trust AI to automate their finances and 70 percent want tech to help them make better financial decisions.

Coming back from the brink, an emerging unicorn

Credit Karma was rumored to have done $500 million of revenue in 2016, and a secondary investment round by Silver Lake in 2018 valued the company at $4 billion. But it wasn't always clear the company would thrive. The company may be known for its free credit scores but in the beginning, the company couldn't actually get anyone to sell them credit scores. Lin recounted that he got rejected from the big three credit bureaus. He turned to a colleague at E-Loan, which resold credit reports. He was approved and for a year, Lin's team of six toiled away on a beta product. After launching the MVP and getting about 10-20 daily signups for Credit Karma, Lin went on vacation. While he was away, a reporter from American Banker mentioned the beta launch in an article and provided the friends and family code to sign up. Lin, flying back home through LAX, landed and opened up his phone. It was early enough in the company's growth that he still received individual email alerts every time a new user signed up. He had six thousand new signups. Feedback was positive and Lin says he was confident he had found product-market fit. Fedex arrives a couple days later with a termination notice. His credit bureau was breaking up with him in 30 days. He's in panic mode. "Within 10 days of our termination, we received a stay of execution," Lin told. "I cold emailed the head of a bureau and I was able to provide enough stats to the bureau to save our contract. We convinced him and he was willing to take a bet on us because of the traction we had."