Silver Lake, a private equity firm that led a $500 million round of funding online lender SoFi last year, is increasing its interest in the personal finance space by acquiring a “significant minority stake” in Credit Karma, the personal finance company.
Specifically, Silver Lake plans to invest $500 million in Credit Karma in a deal that values the company at $4 billion.
But, as the Wall Street Journal notes, Credit Karma isn’t actually raising any money in the deal. Rather, Silver Lake’s investment is going to Credit Karma’s shareholders to cash them out.
From the WSJ:
Silver Lake is amassing common shares from earlier investors and employees in a so-called secondary sale that values the 11-year-old company at roughly $4 billion, according to a person familiar with the matter.
Such deals are in vogue among Silicon Valley startups that want to postpone listing their shares on public markets but also want to give shareholders a way to cash out.
According to Credit Karma, the company’s founder and CEO, Kenneth Lin, will remain the company’s largest shareholder.
Additionally, Lin, along with co-founders Nichole Mustard and Ryan Graciano and the rest of the company's existing management team will continue to lead the company.
“Over the past five years Credit Karma has seen explosive growth, and now helps more than 80 million members make progress with their finances, making us the leading personal finance technology company in North America,” Lin said in a statement.
Lin added that the company views this as an opportunity for the company’s shareholders to reap the “rewards” of the company’s successs.
“As we planned for the future and our continued growth, we sought a partner that could support our growth trajectory and provide existing investors an opportunity to lock in some of the rewards they've earned for their support and hard work,” Lin continued. “I’m delighted to welcome Silver Lake and look forward to their support on the next stage of the Credit Karma journey.”
Credit Karma boasts more than 80 million members in North America, including almost half of all Millennials, the company said.
Credit Karma offers its members products that can be used to monitor and improve their credit, prepare and file their income taxes, monitor their identities, and track and manage vehicle information and financing solutions.
Credit Karma also connects its members with financial services providers including lenders. The company stated that it has originated more than $40 billion in credit products including credit cards, personal loans, mortgages, automotive financing, and student loan refinancing.
Silver Lake Managing Partner Mike Bingle will join the Credit Karma’s board of directors as part of the deal.
“Credit Karma is redefining personal financial management in dramatic ways,” Bingle said.
“The company's cutting-edge technology platform and unwavering focus on long-term partnerships -- both with its members and financial institutions -- are creating explosive growth opportunities for Credit Karma, increasing member engagement and expanding its membership base,” Bingle continued. “We look forward to partnering with Ken and his world-class team to achieve Credit Karma's long-term potential.”
Silver Lake also recently partnered with another private equity firm, Battery Ventures, to buy EDR, a provider of real estate data and software-as-a-service, for $205 million.