Fintech startup Alloy leans on fraud prevention to land new $1.55 billion valuation TechCrunch

When Alloy was founded in 2015, the mission was to help banks and fintechs make better identity and risk decisions using its single API service and SaaS offering.

Since then, the startup has developed this offering to not only automate onboarding identity decisions, but also automate transaction monitoring and credit underwriting.

And today, Alloy is announcing that it has raised an additional $52 million at a $1.55 billion valuation eleven months after raising $100 million at a $1.35 billion valuation. The fact that the startup has managed to raise this amount of capital in such a challenging fundraising environment is impressive, but the fact that it has also increased its valuation inis remarkable considering that many companies these days are either struggling to raise or raising flat or even down.

Increased demand for identity tools that help financial institutions acquire more “good” customers and weed out the “bad” ones has led Alloy to double its annual recurring revenue (ARR) over the past year, noted Tommy Nicholas, co-founder and CEO CEO of Alloy, in an interview with TechCrunch.

Simply put, Alloy is on a mission to help banks and fintechs fight fraud and stay compliant while bringing in new customers in the US and abroad. It helps customers pull in customer information, traditional credit bureau data and other alternative data through a single point of integration.

Earlier this month, the company announced its global expansion to 40 countries across North America, EMEA, Latin America and APAC.

The New York-based startup has over 300 customers – including Ally Bank, HMBradley, Gemini, Ramp and Evolve Bank & Trust, Brex and Petal – who use its API-based product to connect to more than 160 data sources, automate identity decisions when creating new accounts and monitor them continuously. Alloy claims to process over a million decisions per day. The end goal, of course, is to help customers build fintech products that are safe for them to deploy and help them grow their customer base.

Fraud threats have evolved over time to the point that there are “professional fraud brands” trying to use stolen and synthetic identities to open accounts and move and steal money, Nicholas said.

And increasingly, he added, there are scams by organizations and people who actually trick people into committing fraud on their behalf using social media.

“You can think of it as Tinder Swindler type, where it’s organized on a mass scale,” Nicholas said. “And it’s really becoming a bigger and bigger problem.”

Raise $100 million in Series C money ‘still in the bank’

It’s somewhat unusual for companies to raise nearly half the amount they raised in their last funding round. But for Alloy, the decision was intentional and strategic, according to Nicholas. And it was made even with $100 million in Series C money “still in the bank.”

“We looked around and said okay, well the world has changed in these ways. We have a big opportunity in front of us. Boardrooms are making investment decisions differently,” he told TechCrunch. “How do we make sure we’re still set up to execute the plan that we need to execute and go on offense when we need to?”

Nicholas added: “Fraud is also changing rapidly for our customers. We’ve gone global and we’re doing more things than ever. We know opportunities are going to emerge where we’re going to … need to make R&D investments.”

Lightspeed Venture Partners and Avenir Growth co-led Alloy’s latest funding, which included participation from existing backers Canapi Ventures, Bessemer Venture Partners, Avid Ventures and Felicis Ventures.

Lightspeed partner Justin Overdorff doubled down on Alloy (his firm also led the startup’s September 2021 Series C) because he saw “the company’s role in not only helping companies bring financial products to market faster, without increased fraud or compliance risk, but also to help companies with safe growth in the customer base.”

“So as investors, we see a lot of potential for the company itself, but also see what it can do to help drive the entire ecosystem,” he wrote via email.

As a former Stripe employee and current fintech investor, Overdorff believes that something many do not understand is the risk associated with the space.

“Building financial products is inherently risky – because there are rules and regulations to keep people’s money safe (as there should be) and because there are bad actors out there trying to exploit any vulnerability,” he added.

Alloy, according to Nicholas, plans to use its capital to continue to improve service to existing markets, “solve global problems for global companies” and expand its offerings. It also wants to continue hiring. The startup currently has 290 employees.

At the time of Alloy’s latest raise, early investor Brad Svrluga, general partner at Primary Venture Partners, summed up the company’s rise in a challenging environment: “When Tommy Nicholas, Laura Spiekerman and Charles Hearn started the company in 2015, they were swimming. upstream. It was more than tough being a start-up that sells new-fangled technology into the conservative world of financial institutions. But over the past few years, Alloy has helped lead a transformation in the level of trust in disruptive fintech and partnerships.”

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