I have a special relationship with Daniel Yanisse and the company he co-founded, Checkr: I joined the board over six years ago as an investor and its first independent director. I was compelled by Daniel’s vision for fairer and far more efficient background checks, the company’s mission-driven culture and their exceptional breakout success — achieving $100 million in net revenues within a few years of founding. In this conversation, we discuss his identity and motivations as a founder-CEO, as well as his company’s resilience and reinvention through challenging times.
Highlighted Excerpts
Lightly edited for ease of reading.
Marcus: Thematically, I want to focus a bit less on the metrics and the financials and a bit more on the human part of the founder-CEO journey, but let's get the basics down for our listeners. Checkr is a remarkable company, north of $400 million in revenue, profitable, getting more so, taking share from competitors, et cetera. But why don't we go back to the origin, core concept of the company. What was that original spiky insight and who are we selling to?
Daniel: Yeah, so the origin was pretty simple. So I was a software engineer in another startup called Deliv, doing on-demand deliveries. It was in 2013, so in the very early days of marketplaces and the gig economy or the sharing economy, as it was called back then. I always wanted to start a company, a startup. I was a curious engineer, my co-founder Jonathan as well.
We tried different ideas, which were probably bad ideas, and in our last job, we found a business problem. And really, the idea was a very niche idea. It was like, would it make sense for us to launch the first API, we're big API fans, for background checks? Because we needed it in our last company, in our last job. I had a feeling that maybe that could be useful as the sharing economy or gig economy grows. So that was the initial insight, trying to solve a problem that I had in my last job, and that's where we started.
I've always been in the developer ecosystem and sought inspiration from Twilio, from Stripe, from AWS. I was really thinking that all of those complicated business boring backend processes could be abstracted enough for startups to build products and companies faster. So, I like the infrastructure behind the scenes, it’s a kind of boring space. I think those are fun problems to solve, and I was thinking it could be a good business opportunity as well.
Marcus: Well, boring or not, Checkr had one of the most extraordinary starts for any company, something that I think founders fantasize about happening. Could you share the story of those remarkable, very early days, the meteoric rise of the company, what it unlocked for you?
Daniel: We got quite lucky that somehow we had that idea for an API for background checks when it was the very early beginning of the gig economy. That industry and demand really exploded, and I think we were there at the right time to capture that opportunity. So I went to Y Combinator. We talk a lot about product market fit in Y Combinator and finding your first 10 users, those 10 customers who love the product, and to really focus on that. So we did.
I didn't have much experience outside of engineering in business, so we tried to focus on getting to as many customers as possible with our API and solving their problems. I was welcomed with open arms by any customers we would go to. I thought that was normal! I learned after the fact that that's not normal when you do sales, but we were working on the right problem back then. And yeah, the product market fit was very quick, very fast.
We went to Y Combinator in 2014 in the summer. By the end of the program, three months into the company, we were doing about a $1 million run rate in revenue, just the two of us, my co-founder, and we just hired our first employee. By the end of the following year, 2015, we're doing about $30 million in revenue, and then it got very quickly to one hundred, $200 million over the next few years. So that was very, very fast.
Marcus: That's magical. You must have had the sense that that was anomalous. I mean, I know you had a lot of confidence and you and Jonathan are brilliant, but you must have had a sense that this is not the normal path. How have you reflected on that incredible propulsion?
Daniel: I would encourage anyone: when you have customer demands, you should never slow down. You should capture as much of the business as quickly as possible. That's kind of rule number one of startups.
There was definitely risk in it. I was always paranoid that this is going to fail, disappear, that our customers are going to not be satisfied with the product expectations and churn. So I was always paranoid, thinking, "Okay, can we keep up, because this is too good to be true, and the companies and customers are too big for our capabilities and size." I was always kind of pinching myself and being ready to have customers leave us. And somehow, miraculously, we were able to work really hard and grow the team and keep up with expectations and retain those customers. And also, there are great problems to have when you have hyper-growth, but there are also big problems to have, like how to scale the company, how to go from three people to 30 in one week. All kinds of things break, there are growing pains, but those are great problems to have. These are the problems I wish for any founder or anyone growing a business.
A few years later, that hyper-growth, it was a blessing and a curse. We talk a lot about it, I think. Some companies take a long time to find product market fit, like Airbnb is a famous story. It can take years and years of grind to get to that inflection point. Never happens sometimes. And then some other companies have very early product market feed and hyper-growth. But then, at some point, the growth, at some point, will stop.
In any company, there's cycles, and when that stops, that's when it's hard. You plateau, your growth slow downs, what do you do next? So for us, a few years down the line that initial first wave of growth had to slow down. And then we had, of course, challenges to solve to continue our business.
Marcus: I’d love to talk about the challenges. But before that - when I was first introduced to the company by one of your investors, Henry Ellenbogen, he told me your story and I could hardly believe the numbers he was describing. And he said, "But somehow despite that, this company is so much more mature than you would expect for being only a few years in."
Where did that maturity come from? You were a first time CEO. You were not right out of school, but still very youthful. Do you attribute that to just having a great set of peers and mentors? Where did that early precocious maturity come from as you were dealing with a kind of growth that was really not a lot of precedent for?
Daniel: Lots of people around me have helped me and supported me in the journey. It’s a team sport. I would say some of our early investors and executives like Pascal Levy-Garboua were particularly helpful. Pascal was an experienced startup founder and had started companies that had failed or had challenges. It was good to hear some of the war stories from him and to learn how to build a company with him.
Our first board investor, Rich Wong, as well. We had cautious investors who shared with us how important it is to be profitable and efficient and to take care of every dollar, which is not always the case in VC funded startups. I'm also not a crazy risk taker. I mean, I'm a risk taker, otherwise I wouldn't have started a company like that. It's a pretty big risk, but I'm more on the cautious and conservative side, I would say, of startup founders. So I wanted to make sure that we do things right. We're also in a regulated space. There's compliance, so we wanted to make sure we organize ourselves in the right way.
When you have hyper-growth, I feel the company does not mature fast enough for the business. I think that's one of the challenges, because growth solves all of the problems, but you don't really understand your business mechanics, your business model or your culture, your people, systems, until you hit that plateau. So I feel like we've had a lot of growing up to do, actually, a bit later. And then this may be the second phase of the company.
Marcus: Share with us one or two of the most salient examples of where you realized hyper-growth kind of gave us the luxury of not addressing this for a while, but now the time has come to get a bit more disciplined about it. Where did you feel that most sharply?
Daniel: I mean, I think VC money and hyper-growth solves all the problems, but it's almost like a fake situation you are in. And so you think you're great, you think your company's great and everyone's happy. If you have hyper-growth, it does solve the problems. All the employees are excited, investors are happy. It's a great place to be. It's exhilarating and everyone thinks that you're doing something right, but you don't have the maturity of understanding the whole business from making sure that your product is really great for other customers outside of the first early adopters.
We thought our product was amazing and so then we went into bigger enterprise companies and we thought that they would come and love our product like the previous tech companies did. And I was super wrong and naive on that. Our product was really not enterprise ready and we had years of development to get it there. Go to market, we are barely now starting to fully have a scientific approach to our sales and marketing investment and truly understanding the ROI investment of every dollar. That's very hard to fully understand, your growth engine. We’re still working on it today, it takes many years.
And then the last one is culture and people. It does solve a lot of cultural problems to have hypergrowth, but when it stops, then you have to face the hard reality of why are your employees joining the company and why should they stay at Checkr versus going to another job? And what is the right path to develop their career and meet their expectations? Compensation, there's lots of hard things there as well to mature, if you want to have a stable company that works well in good days and bad days.
Marcus: I have the belief that no company fulfills its destiny without going through one or more of these chapters of profound humbling in this period where it just feels like expectations have to be deeply reset, the team has to recognize it's going to be much harder than hoped. Tell me the moment when that dawned on you, and what was the inner process of recognizing that? And where was the self-doubt, if any? You're a very introspective, reflective person, very self-aware, but share with us a bit of the inner journey and that realizing the next leg of this journey is not going to be quite as straightforward as the first one.
Daniel: I think the ups and downs and the struggles are definitely part of any company building, but also life. In personal lives, that's going to happen, too. And I'm a pretty optimistic person. I'm a pretty confident person. I've had a lot of challenges and feel pretty good. I like solving problems and solving challenges, kind of a fun, stimulating thing.
Really, the worst time for me was 2019. I think in 2019, all of the things that could go wrong and bad happened. It always happens all at once. When it rains, it pours. To describe a little bit, in 2019, we tried to do an enterprise expansion, like I was sharing, post gig-economy. It was already almost going on for two years. And we looked at our results and it was terrible.
We spent millions of dollars in R&D product engineering. We had a whole sales go-to market teams, professional services, solution engineers, everything, it was very expensive. And then we signed some contracts, but then customers would actually churn at implementation. So imagine you do a one year or 18-month sales cycle, you sign, you're happy about it, and a few months later you try to implement and go live with the customer… we realized we had so many product gaps, we couldn't keep up with them. And then the customer leaves and the multimillion dollar deal, it goes away. Very demotivating for everyone.
So our new enterprise motion that was supposed to be the future growth of the company was clearly failing. I didn't have another plan. Some of my executives started to quit on me. The morale of the company was low, the board was starting to put pressure on me and questioning me. A little bit of pressure, as they should. They're like, "Daniel, what's going on? What are we doing here?" So that was tough. I remember those days, I was like, wow, this is hard. I need to find some solutions here.
And luckily, we did. I think persistence in hard times is important. Staying optimistic, focused, working with the team, we have alternatives. In a way that's a good thing, because then COVID hit, which was even harder. We had to do layoffs and our business slowed down. We lost 30% of revenue in one month. But then when the hardest times happen, sometimes that's what forces you to change your strategy direction. And by looking at what else we should do, actually we found the next growth opportunity.
So in a way, hard problems always bring people together more. At least the team that stays there gets more bonded. And then it could be actually a good reset on the business strategy. So we came out stronger from the other side.
Marcus: That reminds me of something that you shared with me, an insight that I've come back to a number of times in other contexts, that some of the best run companies tend to be in the businesses that have a kind of crappy, low margin quality to them because it just compels a discipline that otherwise you could get away with not having. But tell me about how you first encountered that insight, and it had to do with some of Checkr's customers, right?
Daniel: With some of Checkr's customers, I was really deeply impressed by their strength. If we think about it, especially in the gig economy, there's lots of companies that are not just software. They're in the real world. If you think about ride sharing or food delivery platforms, those are tough businesses with thinner margins, lots of human costs and real world operational challenges. It's not just building pure software. I just realized how tough their business is and the people are working extremely hard to put high talent.
And then I was contrasting that also through our hiring process. When you're in tech, you interview people from all kinds of other companies, startups. A lot of people come from software, many have been at the software giant companies, like Google or LinkedIn or Apple, big companies that are extremely strong and extremely profitable. And so even if they have very smart people, it might not be the best talent for an early startup because they haven't dealt with the level of adversity and competition that we have to deal with.
I realized that some of the best people actually were the people who were maybe more hungry from tougher businesses because if you're in a tough business, you have to really differentiate on the hard work you're doing. You can't rely on the Google brand or the massive network effects that the big company has. So that's when I started to feel like, yeah, we can get maybe some better talent from lower margin businesses.
Marcus: I think it's quite an insight. There's another asset that you've talked about in terms of the people side of recruiting, which is the mission. Mission is, it's a pregnant word at Checkr. It means a lot. Maybe elaborate on that mission and speak a bit about where it's been supportive of the business goals. And I think you've alluded to me at times that it also has a kind of obstruction or represents a certain kind of challenge. And I know you love your people, but like every CEO, you can get a little bit exasperated with your people, as well. So can I press you to share a bit more on that count?
Daniel: I’ve learned a lot about that. For me, this is my first time in building companies. So I feel like I've made every single mistake in the book, but it's fun to share that with everyone and get better. So mission and culture, those are very hard things to do. A lot of people want to work for a mission-driven company. It's exciting to have that clarity. I think a mission that's very clear is good for people to be excited, to be clear on where the company's going, what kind of company are we building here?
There’s also two types of missions. Mission can mean different things. Like, our mission is to build the best data cloud analytics AI company in the world to help our customers or to improve productivity for our customers. So those are a bit more like customer and business missions, which work well. And then there are missions in Silicon Valley of people who want to change the world or make the world a slightly better place. And we happen to be in that space, especially if your business is close to social justice, the environment. In terms of technology, education, healthcare, you can have a mission and your product and your business can be related to doing a bit more good in the world on some of those dimensions.
So for us, we're a background check company. So of course we deal with criminal records. We help companies hire and make hiring decisions based on the backgrounds of candidates. So the criminal justice system and crime and backgrounds are at the heart of what we do. And the industry before us was very close-minded and really focused only on fear and the risk value of background checks to protect companies, but really discarding the human value or the potential that people have even if they don't have a perfect background.
We set a mission to right the wrong and to improve this industry and to care not just about the customer and risk, but also about the candidate. I was seeing just a lot of wasted potential in amazing people who don't have a perfect background. People make mistakes in this country and deserve a second chance in some shape and form, I believe, after paying their debt for the mistakes. We have a mission focused on fairness and we're big leaders on enabling businesses to do second-chance hiring or fair-chance hiring, which we believe is a win-win-win. It's great for motivated candidates who have rehabilitated. It's great for businesses finding more talent. It's great for the economy to not have all of the tax dollars going into keeping people in prison and recidivism.
I think where it becomes tricky, when you have maybe an environmental or social mission, is to align this with the business motivations and the customer motivations. And so that's really been a learning for us. We have a lot of nonprofit partners. This is also a problem that's handled by the government, of course, and we have to be humble about what a business can and cannot do. And unfortunately in tech and in Silicon Valley, a lot of businesses, maybe founders got overly excited about changing the world and then it backfired. There are examples of how this really backfired, sometimes really badly, when people make a promise bigger than what they can deliver. For us, it's been about being humble about what we can do about our business, how we can align this value to what our customers want and really finding that right balance.
We refocused our mission to really be focused on the hiring benefits for customers, finding the right balance between risk and fairness and opportunity, but also, we can't solve all of the world's problems. We can't solve the social justice system issues. We're not a nonprofit. We also want people who are motivated to solve those business problems for our customers.
For us, a lot of people are excited to join Checkr because of our fair-chance work and mission. But then when you work day to day, we do volunteering. We're very proud of what we do. We hire people from prison at Checkr. We do everything we can to be the best leaders and participants in this whole ecosystem. And at the same time, we're not a non-profit that does this 24/7. We have to build products to enable our customers to hire. We have to care about risk as well and safety for our customers.
We will support and help other nonprofits who are doing direct services, but we as a company can't do direct services all day long. That's not what we're about. So that clarification is helpful and still something we're working on to make it clear and obvious to everyone that when they're joining Checkr, they're joining an amazing product, customer-centric company that can also help advance fair chances for businesses and customers.
Marcus: How have your investor relationships been helpful? How have they been maybe less than helpful? Unlike a marriage, you don't get to date for a long time and move in together. So how do you advise an entrepreneur to make that critical judgment?
Daniel: I didn't have much background on VC investors at all. I got a little bit of help from Y Combinator, but it was very much like speed dating for me. I was so fortunate and lucky to meet Rich Wong at Demo Day in 2014. He approached me and I connected with him and I was lucky. He is one of the best investors I've ever worked with and highly recommend him to everyone.
To me, what's important is the quality of the partner is almost more important than the brand of the firm. Of course, there are some higher-brand VCs that have name recognition, but really finding the right partner that's aligned and cares about the business, the vision, the mission and that there's good chemistry and alignment. That's good and that's the most important, even more important than the economic terms.
Sometimes I advise people, like, don't over-optimize for terms. Work with the best, try to work with the best investor, the best human partner, because it is a very long-term relationship, as we know. We've been working together for over six years. Some of our investors have been with us for almost 10 years. It's a very long-term relationship. So you want to optimize for that partnership first and foremost.
I think that spending as much time as possible is key. Really talking about, deeply about the business, the vision, the mission. Sometimes what's tricky is when the investor might have a different vision for your business and yourself, like that can become dangerous. So making sure they really understand, they really care. They're really excited about that. Just the human chemistry. Do you feel like you're thinking alike, similar values? You can get that out after a few coffees, maybe a dinner, going a bit deeper on even just the personal side and then any back-channels. I think in recruiting or in VC selection both ways, investors are going to back-channel generally the founder and they should. And so I think asking other founders what their experience has been is great. And especially asking founders who have maybe not succeeded.
Of course, if it's a success story and a great exit, everyone's happy, everyone's high-fiving each other. But when actually those relationships are tested the most is when there's challenges. When the business is not doing as well as everyone's expectation, that's when you're going to really see the strength of the relationship. So trying to interview or talk to founders of companies that may have failed, or didn't have a great exit, or had some tensions, or had to step down from the company. That's I think going to give you some more insights on the character of the investor.
Marcus: One of the many illusions that my entrepreneurial journey cured me of was thinking that I was such a great judge of character. We all think we're such good judges of character and then we find that we actually make terrible mistakes all the time. And is there a pattern that you've identified and hiring decisions you're proud of? Or maybe the opposite kind of pattern?
Daniel: I think everyone's excited about the shiny resumes, right? You're like, "Oh my God, this person worked at this amazing company, this big brand that's way bigger and better than our company." So you can fall in love with those kinds of exciting resumes, but that's almost like an anti-pattern. People sometimes just surf the wave of success. It's not that they've really built that much value and growth themselves, especially in that bigger company.
Tenure is really important because it takes years to really have an impact. Also have had more success with people with a chip on their shoulder. Maybe not the best resume. Back to giving chances to people who have failed. People who've failed or companies that succeed, struggled or died, went through just hard work that made them a better leader, a better person.
I think you learn more through mistakes and failure than through being there winning all day long in a successful company sometimes. So those are some patterns that have been helpful. I think you get it mostly through the interview and asking people what their motivations are, where they want to get in, what have been the hardest times in their career? Another thing that's important to us is self-drive. There's only so much you can do as a company to mold the person's behavior, especially with more senior leaders. People are going to be pretty set in terms of their values, their leadership styles, their motivations.
The people who are self-driven, who are hungry, who talk openly about their failures, they don't try to hide it. They say, "I failed. I messed up. I did this wrong. I could have done this better. And I'm extremely motivated because I do want to be in a great company. I do want to get to that level of scale. I do want to reach those personal goals for me and my family." You can hear it through the energy and the passion that they have when they interview.
Marcus: There's a lot of glory in the CEO role. But if my experience was any indication, and those of people I've talked to, this can also be a profound loneliness. And some CEOs I've met really identify with that feeling and others don't recognize it. What about you? Where have you drawn that deepest gratification as CEO Founder, and do you relate to the loneliness side? Where have the sharpest sacrifices been?
Daniel: What gratifies me is I really like what I'm working on. I mean, it's super hard work, it's super intense. It's a big sacrifice on the personal side, but I just enjoy the products, the customers. I feel like I work with some of the smartest people in the world I've never worked with before. Every year the game gets more complex and I like that.
The loneliness, I've felt it a few times. I feel it sometimes, but I'm grateful that I have a very good support system from my family, my friends. I'm also part of the YC and YPO communities, which are groups of CEOs. And that's super helpful because you realize that you have the same problem as other CEOs and everyone has the same struggles and just doing group sharing helps you feel better and support each other. So I'm lucky that I have good support also from my board, my team. So I would feel well-supported in that crazy journey.
For me, the biggest sacrifice is that it’s all consuming to be a founder-CEO. You think about it nonstop, 24/7, there are never enough hours. So it's in your brain, it's top of mind, it's there. It cannot go away. That creates a sacrifice on the personal side, on the friends and family side. That's what's hard, is to allocate time. And also mind-sharing, being present. Not thinking about the latest business fire and really enjoying quality time with your loved ones. That's the challenge.
What's been hard as well, I've hired a lot of friends and old friends joined my company. Some of my best friends. They really wanted to join the company. And then I've had to lay off or let go of some of my best friends. And that has hurt our friendship and relationship and really, really hurt and took years to heal and maybe not even fully back there. So I try to separate family and business for sure. I don't recommend it. Friendships, it's a bit harder. You also want to build relationships, but yeah, that can be a sacrifice really on family and friends.
Marcus: I had some very pointed experiences of my own, but usually in the end, sometimes it takes time, but it's understood that you did what you had to do in your role and that you carried a very heavy weight. So between questing for glory and terror of success as motivations, where is the slider for you between those two drives? I know where it was for me, but I'd love to hear from you. I don't think I've ever asked you that.
Daniel: So, by trade, I'm an engineer. I'm a very rational, analytical person. So I tend to be more like zero, one, black or white. Yeah, let's go do it, or no, let's stop it. It's good or it's bad. And I've had to learn and continue to learn over the years to be more in a world of mild emotions. To be more in the middle. Because if you're in the middle, it's a happier place to be in. No one is as bad as you think and nothing is as great as you think either. If you stay in the middle, it's a happier place, it also leaves more room for the team to opinionate on should we do this or not. It's getting harder. Those decisions are never yes or no.
Exec coaching also has been amazing for me, just having another CEO coach me and help me through that. So that has helped me. And in a way, that makes the lows less low, makes the highs less high and just gets a better life of joy and happiness, in a way. So, for me, I'm just motivated by great coworkers, great days. We're going to tackle the mountain, we're going to do great things. We're going to celebrate victories, but we're also going to enjoy solving challenges together. And I mean, it's a bit cheesy. People say. 'Enjoy the journey, not the destination.' I think it 100% applies. Otherwise, it's not going to be sustainable to do it for 10 plus years. So yeah, always trying to find that happy middle.
The information contained herein is based solely on the opinion of Marcus Ryu and Daniel Yanisse and nothing should be construed as investment advice. This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity. The views expressed here are solely those of the author.
The information above may contain projections or other forward-looking statements regarding future events or expectations. Predictions, opinions and other information discussed in this publication are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Battery Ventures assumes no duty to and does not undertake to update forward-looking statements.
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