Alloy, an identity operating system for the financial services industry, raised $40 million in Series B funding.
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The New York-based startup helps banks and fintechs more quickly and safely onboard customers through a single application programming interface service and SaaS platform. It can also automate certain decisions that mitigate fraud and reduce burden on back office operations.
“All of the risk and fraud requirements to validate identity were designed for the brick-and-mortar world,” co-founder and CRO Laura Spiekerman told Crunchbase News. “In a digital world, they have to use third-party databases, such as credit bureaus. However, if someone doesn’t have a credit history, there is not that reliable data to make a risk assessment.”
Canapi Ventures led the round with participation from Avid Ventures and Felicis Ventures, as well as existing investors Bessemer Ventures, Primary Venture Partners and Eniac Ventures. The new investment gives Alloy nearly $56 million in funding since the company was founded in 2015, according to Crunchbase data. That includes a $12 million Series A round secured last year.
As part of the investment, Canapi Ventures Partner Walker Forehand will join Alloy’s board of directors.
Forehand met Spiekerman and CEO Tommy Nicholas last year when the company was raising its Series A. At the time, Canapi was closing its fund and could not invest in Alloy, however, he stayed in contact with them.
Many of Canapi’s investors turned out to be customers of Alloy, and Forehand said he heard how much value they were getting out of using Alloy, and knew there was something there. Then during the COVID-19 pandemic, he saw the digital transformation happening combined with bank branches closing.
“It is becoming important to verify customers online, but at the same time, cybercrime has exploded since the beginning of the pandemic,” he said. “There are a number of factors coming together where automating digital onboarding makes for better outcomes.”
Meanwhile, Alloy has seen significant growth in the past year. It has nearly doubled both its recurring revenue and customer base, Spiekerman said. It has also grown 2.5 times in headcount.
As a result of the growth, the new funds will be used to build out its sales, marketing and engineering teams, as well as on product development. In addition to onboarding decisions, many customers have asked Alloy to utilize its technology to help make other decisions about identity, Spiekerman said.
“Demand has been so big, and with the pandemic, we could not anticipate what it would look like,” she added. “Banks are trying to grow through the digital transformation, and projects they had planned for 2021, they are trying to launch now, so a lot of their traffic is going into digital.”
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