Sardine raises $51.5M led by a16z to sniff out fishy fintech transactions • TechCrunch

As fintech becomes more efficient, so do fraudsters.

“Faster instant payments mean faster fraud,” Sardine CEO and co-founder Soups Ranjan told TechCrunch. That’s the mission behind his startup, which uses behavioral, financial and device-specific user data to detect fraud on behalf of its clients in the crypto and fintech industries.

These conditions also mean a faster collection process for Sardine, obviously. The company announced it has raised $51.5 million in a Series B round led by Andreessen Horowitz (a16z) Growth Fund after closing a $19.5 million Series A earlier this year. a16z was a new Series A investor, with fintech-focused GP Angela Strange leading Sardines’ previous round and Growth Fund partner Alex Immerman taking the lead this time around.

The other Series B participants were a mix of new and existing investors, including XYZ, Nyca Partners, Sound Ventures, Activant Capital, Visa, Google Ventures, Eric Schmidt, Vikram Pandit, The General Partnership, NAventures, ING Ventures, ConsenSys, Cross River Digital Ventures, Alloy Labs and Uniswap Labs Ventures, according to the company.

Sardin has grown significantly since announcing its Series A back in February, growing its list of clients from ~50 to ~135 today, Ranjan said. Their clients include crypto exchanges FTX and Blockchain.com as well as fintechs with broader mandates such as Wealthsimple and Digit, he added.

After participating as one of ten startups in the FIS Fintech Accelerator program this summer, the startup is making a push into “core banking processes” and is in discussions with major banks in the US and Europe, Ranjan said.

It’s easier to understand why a fintech or crypto startup might want to bolster its fraud prevention capabilities, but Ranjan explained that even for large banks, the standard KYC (“Know Your Customer”) compliance process does not equate to a fraud protection program. 90% of the fraud detected on Sardine’s clients’ platforms comes from people who have already passed the KYC process, he said.

Sardine faces competition from other startups in the identity verification space such as Socure, which told TechCrunch last year that it counts three of the top five global banks as customers. Socure, which counts Tiger Global as its lead investor, was valued at $4.5 billion in its last publicly announced fundraising in November 2021, a Series D round. Sardine did not share the valuation from its latest fundraising, but the startup is significantly earlier than Socure.

Ranjan described Sardine’s differentiation in the market as stemming from the team’s experience and the company’s focus on fintech in particular. Ranjan himself previously worked as Coinbase’s director of data science and risk and Revolut’s head of crypto, and the company’s head of banking partnerships joined the startup from Zelle.

Sardine co-founders Aditya Goel, Supper Ranjan and Zahid Shaikh Image credit: Sardine

“If you actually look under the hood of some of these traditional fraud prevention providers, you’ll find that the APIs don’t even support the identity of a person, because they’re all built or designed for the e-commerce checkout experience,” Ranjan said. Instead of analyzing a customer’s shipping address and shopping cart, Sardine looks at device intelligence and behavioral biometric data to help identify whether a person participating in a transaction is really who they say they are, he continued.

Another key differentiator for Sardine from competitors like Socure is its instant ACH and card onramp to crypto, which allows customers to buy over 30 different crypto assets instantly instead of having to wait the traditional days to access their funds. It also offers direct fiat to NFT cash in partnership with Tom Brady’s company, Autograph, and plans to expand this product to other NFT marketplaces, according to Ranjan.

Banks and card issuers typically use crypto fraud detection algorithms that aren’t nearly granular enough, Ranjan said, meaning around half of customers attempting to transact using fiat-to-crypto onramps through traditional platforms are rejected as fraudulent .

When Sardine launched the NFT cashier product in partnership with Autograph earlier this month, the conversion rate was much higher, around 98%, Ranjan said. It’s too early to tell if there are any chargebacks, or cases of undetected fraud, from that launch, he added, noting that Sardine is one of the first companies to even offer such immediate access to crypto through ACH.

“One of the reasons people haven’t attempted or launched ACH to crypto, or even directed ACH to NFT, has been that there is no [else] takes responsibility for fraud risk,” Ranjan said. He declined to share details about the chargeback rates Sardine is seeing across its legacy products, but said the platform allows customers to access some, but not all, of their crypto immediately.

“Sardine assumes the fraud risk. [The transaction] usually settle for two days plus, so for that period we take the settlement risk, and we take the risk of third-party fraud, as in, if someone connects to a stolen bank account,” Ranjan explained.

Venture capitalist Andrew Steele, who led Activant Capital’s investment in Sardine, believes the company is uniquely positioned to take on and manage risk in a way that enables immediate transactions.

“Identity and fraud are usually completely separate things,” Steele said. “We have invested in identity platforms. We have also invested in fraud platforms and usually they are completely separate. Identity for me is a moment in time. It’s when you onboard someone, it’s how you make sure they are who they say they are. And then fraud is usually a transactional thing, but both are completely separate and silos. Usually, this lack of connectivity means you have limited data and you can’t really take risks in the way we’re talking about [with Sardine].”