Accounting and tax preparation software provider Intuit agreed to purchase US-based credit management platform developer Credit Karma for $7.1bn in cash and stock, giving internet conglomerate Alphabet an exit. Alphabet had first backed Credit Karma via its CapitalG venturing subsidiary in an $85m series C round in 2014. The transaction would involve almost $1bn in equity awards to be issued in the next three years. The agreed price of the acquisition nearly doubled the $4bn valuation, at which the Credit Karma raised its latest round sized at $500m in 2018. The acquisition would be the largest in Intuit´s 37-year history.
Founded in 2007, Credit Karma has developed which allows its users to get free access to their credit scores once a week and online identity status in addition to filing their taxes and finding credit card and consumer loan deals. The platform has attracted 100 million users, 90 million of which from the United States. Its business model is based on referral fees it charges businesses for financial products and services it recommends to its users.
In 2016, Credit Karma launched a free-of-charge tax filing services for its users, which was a potentially big and dangerous competitor for Intuit´s best known tax preparation service TurboTax. In addition to acquiring a competitor with great potential, Intuit has now acquired also a sticky customer base of around 100 million users. Registered users of Credit Karma would not tend to defect, as frequent access to credit score is not offered for free by any other provider. Credit Karma, however, is set to continue operating as an independent subsidiary post acquisition. Intuit’s chief executive, Sasan Goodarzi, said: “By joining forces with Credit Karma, we can create a personalised financial assistant that will help consumers find the right financial products, put more money in their pockets and provide insights and advice, enabling them to buy the home they have always dreamed about, pay for education and take the vacation they have always wanted.”
The acquisition comes in the wake of a series of large deals in the financial services space (not to forget Visa’s acquisition of Plaid). And the fintech space has received much attention from corporate venturers in the past decade, as our GCV Analytics bar chart clearly shows.
