Cash flows to anti-fraud firms
By JIM HOPKINS
USA Today
As consumers' fears of identity theft soar, investors are piling into startups creating anti-fraud technologies.
Venture-capital firms in this year's first six months pumped as much as $70 million into companies selling anti-ID theft software, compared with about $101 million for all of 2004, according to the MoneyTree Survey, which tracks venture funding.
The new technology lets grocery shoppers pay without handing sensitive information to cashiers. It protects online-banking customers by memorizing the rhythm of their keyboard strokes. And it helps retailers catch shoplifters posing as customers.
The financing surge comes amid well-publicized cases this year involving millions of Social Security numbers and other personal data.
"Identity theft and fraud are in the paper all the time," says Gus Spanos, executive vice president at Pay By Touch Solutions, explaining investor interest. The company recently announced $130 million in hedge fund and private equity firm financing.
Investors are backing companies crafting biometric and other technology for use by:
The software checks a user's keystrokes during account login. Then it compares the rhythm of those strokes with samples taken when the customer initially signed up for online account access. The Seattle company says it expects $8 million in venture funding after getting $5.5 million from other investors this year.
Another startup, 41st Parameter, lets banks review login histories of a customer's computer. When a customer logs in to an account, the software checks the history. If it doesn't match because, for example, the customer is using someone else's personal computer, the software might prompt the bank to seek more information. That might mean phoning the customer to verify identity. The Scottsdale, Ariz., firm received $4.4 million in venture funding last spring, when media were awash in news of ID thefts. "The time was right," CEO Ori Eisen says.
Its technology roams through a retailer's databases for signs the suspected thief never paid for the merchandise. It then creates a risk "score," prompting cashiers to ask for more photo IDs, offer only a store credit or seek help from supervisors. Austin, Texas-based Infoglide is talking to venture capital firms and expects to close on as much as $10 million in venture money before the end of the year, CEO Michael Shultz says.
