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Fighting Fraud With Big Data

February 25, 2016

Menlo Ventures is excited to announce that we are leading a $20 million Series B investment in Signifyd — a company that uses machine learning to eliminate chargeback fraud for online merchants. As retail spending continually shifts from brick-and-mortar stores to online, e-commerce fraud becomes an ever growing problem. E-commerce fraud costs the industry $9 billion a year in charge-back costs, and over $100 billion a year in lost revenue due to declined transactions. And, unlike the physical retail world, where the credit card issuers bear the cost of fraudulent transactions, online merchants have to bear the liability for chargeback fraud.

Signifyd offers online merchants a simple API-based solution to take that burden off their shoulders. With each e-commerce transaction, Signifyd offers a simple “thumbs up/thumbs down” approval decision and then backs it up with a financial guarantee, making merchants whole for any fraudulent charges. Signifyd’s customers don’t need to worry about building in-house fraud teams, risk scoring systems, and machine learning models to fight fraud. Instead, they can focus on their core competency—delivering great products and services to their customers. Over 2,000 customers today trust Signifyd for their fraud needs, including marquee clients such as, Shane Co, Lacoste, and Peet’s Coffee.

Signifyd is a classic network effects business—the bigger the group of merchants in the network, the more data Signifyd has to inform its machine learning algorithms, and the better its decision-making gets. Over time, Signifyd builds up its list of known “fraudsters” and can stop them wherever they show up on the internet, much in same way Interpol tracks criminals moving across international borders. The company’s proprietary data asset builds up over time, developing into a deep competitive moat.

Given the massive scope of the online commerce fraud, we strongly believe Signifyd is building a great company that will stand the test of time. We are delighted to work with Signifyd’s two amazing co-founders, Raj Ramanand and Mike Liberty. Both of them are deeply steeped in their field, having worked together in the fraud group at PayPal, and are committed to building a company for the long term.

Menlo Ventures previously backed HNC Software, the leading credit card fraud solution used by major banks. Today, we are happy to continue the mission of fighting fraud in the online commerce world. Signifyd sits at the intersection of two focus areas for Menlo Ventures—e-commerce (Warby Parker, Stance, Poshmark, The Black Tux) and fintech (Betterment, RealtyShares, Bluevine, Credit Sesame.)  A warm welcome to Raj, Michael, and the rest of the Signifyd team to the Menlo Ventures family!