“Identity theft is not a joke, Jim!” – Dwight Schrute
By Michael Miao, Jules Maltz, Steve Harrick, and Karthik Ramakrishnan
Online trust is broken. Businesses lose $200B every year due to identity theft and 60% of consumers worldwide have experienced online fraud. In the United States, approximately 5% of the total population is victimized by identity fraud every year. As businesses and transactions have increasingly moved online in the wake of COVID-19, identity fraud has followed suit. We live in a world of increasingly sophisticated fraudsters, rising fraud rates, and the emergence of deep fakes, which makes it difficult for businesses to trust individuals online. That is, until now.
IVP is excited to announce our investment in Veriff, an Estonian-based company that solves the oldest problem on the Internet; verifying that users are who they say they are. Veriff has built the world’s most advanced AI-powered identity verification (IDV) platform and powers the services of global companies like Wise (formerly TransferWise), Blockchain.com, Uphold, GoUrban, Turo, and some of the world’s largest technology companies. IVP is thrilled to lead Veriff’s $69M Series B along with Accel and earlier-backers Mosaic Ventures, Taavet Hinrikus (co-founder of Wise), and YC as part of this financing. Jules Maltz will be joining the board as a Director and Michael Miao will be joining as an Observer.
Veriff’s Founding Story
Kaarel Kotkas (CEO and founder) grew up on a farm in rural Estonia. Kaarel was constantly surrounded by bales of hay and noticed that the strings that bound these bales together were not biodegradable and were littered across an otherwise pristine countryside. At the age of 14, Kaarel set out to purchase an eco-friendly alternative and found the perfect biodegradable string on eBay. When Kaarel entered his payment information, PayPal rejected his order because Kaarel was not 18. Rather than ask his parents for help, Kaarel simply changed his year of birth from 1994 to 1984 using photo editing software on his computer and easily bypassed PayPal’s security check. Kaarel was shocked and alarmed at how easy this was. If it was that easy for a 14-year-old living on an Estonian farm to fake his identity online, how easy would it be for more nefarious individuals to do this? Six years later, Kaarel founded Veriff and was later joined by his co-founder, Janer Gorohhov, to help businesses of all sizes verify their customer’s identity digitally and fight fraud online. The business has come a long way since then and Kaarel no longer has to fake his age to buy things online!
IVP’s Tallinn Test
Veriff marks IVP’s second investment in Estonia (IVP led Wise’s Series E back in 2017). In our Wise Series E blog post, we joked about the “Tallinn Test”; whether a company is so good that we’d be willing to fly halfway around the world to invest in it. The world has changed a lot since then, and although we can’t currently travel, Veriff would easily pass the Tallinn test with flying colors. It’s no surprise that the world’s leading IDV company hails from Estonia. Estonia has always been on the bleeding edge of identity verification and launched a national ID system in 2002 where physical ID cards are paired with digital signatures. Estonians use this ID system to pay taxes, vote in elections, view healthcare records, and access financial services online. Despite being a country of only 1.3 million people, Estonia is quickly becoming a global powerhouse of technology and innovation. Companies like Skype, Wise, Playtech, Bolt, and Pipedrive have all come out of Estonia, which equates to 3.8 unicorns per million citizens (the highest in the world!). We are excited to continue our support of the Estonian tech ecosystem and hope to back more Estonian entrepreneurs in the future.
IVP spoke with many of Veriff’s customers and it was clear that Veriff has the most modern and sophisticated product in the market. Veriff differentiates itself through its video-based technology, high rates of automation, and developer-friendly platform. Most alternatives in the market take a “black box” approach to IDV (i.e. no insights on “why” a user was not verified) and also require significant manual review (i.e. can’t scale to handle massive volumes). Veriff is 6x faster, has 2x the document coverage, and has 30x lower false negatives than competitive offerings. Its platform is significantly more customizable and adaptable for use cases outside of KYC/AML and compliance. Veriff has a developer-friendly API with clean documentation and offers starter plans to help developers quickly get up and running in minutes and can scale to support the largest global customers.
A Crisis Doesn’t Create Trends, it Amplifies Them
COVID-19 was a massive accelerant for the entire internet economy and pulled forward digital transformation globally. As more businesses move online, identity verification has become more important than ever before. Identity fraud is a massive problem that costs the global economy ~$5T annually. As economies shut down in response to the pandemic, there was a surge in identity fraud that still remains elevated. Fraudsters are becoming increasingly sophisticated at bypassing traditional identity verification tools and there is growing regulatory demand for identity verification across all sectors. Identity verification use cases have expanded beyond traditional compliance and we are now seeing companies rely on identity verification products to power telemedicine, handle account recovery, onboard new employees, issue vaccination passports, and a wide array of new use cases. In a world that is becoming increasingly remote and digital, we believe that every company will eventually need a solution like Veriff to facilitate trust on the internet.
IVP loves backing talented and mission-driven entrepreneurs with big audacious goals, and we believe that Veriff is only scratching the surface of the potential market opportunity. Veriff is hiring aggressively across all teams so if you are looking to jump on a rocketship with global ambitions, click here for openings at the company. Edasi!
Michael Miao, Jules Maltz, Steve Harrick, and Karthik Ramakrishnan are investors at IVP, a later-stage venture capital firm based in Menlo Park, CA.