The Israeli startup Riskified, which develops technology to protect e-commerce credit transactions and prevent fraud, reported on Tuesday that it has completed a $165 million financing round that, according to the company, values the startup at more than a billion dollars (before the injection of funds).
Last year, Riskified had revenues of more than $100 million. It has been profitable for the past two years.
The latest funding round was led by the American investment fund General Atlantic, which has also invested in Airbnb, Facebook, the Chinese internet giants Alibaba and ByteDance, the latter of which was the developer of the TikTok app. Also participating in the funding were Fidelity Management & Research, Winslow Capital Management and prior investors Qumra Capital, Pitango Venture Capital and Entrée Capital. The company, which has offices in Tel Aviv and New York and whose prior funding round was in June 2017, has now raised a total of $229 million.
The online commerce market has been growing at an annual clip of 20%. In 2021, it is projected that it will be worth $5 trillion worldwide, according to the eMarketer forecasting firm. But the growth is also accompanied by a challenge to prevent online fraud. Riskified’s technology seeks to distinguish between real attempted fraud and legitimate orders by analyzing the consumer’s behavior, thereby reducing the number of genuine transactions that get rejected.
The technology examines the user’s ongoing activity and analyzes transactions as being either “good” or “not good” and also examines the information that the user provides in the course of the purchase transaction. The system looks at how long the user has spent on the site and which pages have been viewed. At the end of the process, the online merchant is informed as to whether or not the transaction is approved.
Riskified’s CEO and co-founder, Eido Gal, told TheMarker that in the past two years, the company has expanded its product to include contact with banks. “For good [consumers] who have been rejected by the system, we will offer alternative payment methods, for example a deferred bank transfer that goes through us,” he said.
Riskified’s clients include Air Europa airlines, banks and the Wish and Prada websites.
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The Israeli startup generates revenues by charging a fee for each approved transaction. The company has some 420 employees, most of whom work in Israel. It has just announced plans to expand its workforce to 600 or 700 within a year.
The company was co-founded in 2013 by Gal, who gained exposure to the issue of credit fraud while working at the Israeli firm Fraud Science, which was acquired by PayPal. The other founder of Riskified was Assaf Feldman, the firm’s chief technology officer. He is a graduate of MIT’s Media Lab program, where he focused on the credit field.
Riskified was in the news in February when the 4th Genesis venture capital fund sold most of its portfolio to Insight Venture Partners. The shares in Riskified were retained, however, on the expectation that it would go public within the next couple of years.
Gal confirms that the company plans an IPO, calling it “a positive thing and right for the company.” He said he didn’t know when it would happen, whether it would take one year or two, “but the sum [already] raised provides flexibility at this stage for acquisitions and also regarding our expansion.”
In a news release on its latest funding round, the company said it would use its latest injection of cash “to accelerate our product development and further expand our geographic footprint.” Gal said the company would soon be opening an office in Shanghai.
“We have had a measure of success in China. There are several local companies that use our product and to provide them service, we need to be there. The office won’t only be used for sales but also to serve clients there,” he said.