Deduce Raises $7.3M To Secure Customer Identity

New York-based startup Deduce secured $7.3 million in seed funding and emerged from stealth to help secure user accounts.

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The round was led by True Ventures and included investments from Ridge Ventures and angel investors such as ISS founder Tom Noonan and former Neustar CEO Lisa Hook.

Account takeover fraud is one of the biggest problems in the world of cybersecurity, and has only increased with people buying more things online and working from home during the COVID-19 pandemic, said Deduce co-founder and CEO Ari Jacoby.

“COVID-19 has been challenging for the country and for companies,” Jacoby said. “It has changed customer behavior. Companies need to build trust and customers need to know they are protected.”

Jacoby said account fraud has increased 250 percent this year, with the pandemic undoubtedly playing a role in that acceleration. In total, account takeover fraud makes up about a third of the $45 billion in annual losses due to cybercrime, he added.

Deduce’s identity network draws data from more than 150,000 partner websites, which powers algorithms that help generate a risk score based on fraud-related behaviors. The company’s platform then can notify account holders when fraudulent behavior is spotted.

Including the customers

Notifying customers when there is a possible breach is a key part of deduce’s platform, said Adam D’Augelli, a partner at True Ventures. Typically, only large technology companies—like the FAANG (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) companies—or financial institutions can collect the data necessary to spot fraud while also alerting customers of issues.

Deduce helps bring those capabilities to a new market, allowing customers to be aware of what is happening and play a role in protecting their identities, D’Augelli said.

“When you’ve had your account taken over, it feels deeply personal,” he said.

D’Augelli said research indicates that 50 percent of consumers who have had their accounts compromised do not continue to do business with the company which held that account.

Expectations for growth

Deduce has more than a dozen customers and expects to see a 70 percent increase in customer acquisition in this fourth quarter, Jacoby said. The company is targeting verticals that have a plethora of consumer accounts, such as fintech, e-commerce, education, health care and gaming.

Jacoby named LexisNexus Risk Solutions and Shape Security as others in the account takeover space, but said Deduce differentiates itself by the vast amount of data it takes in and its ability to notify customers.

The company anticipates raising a Series A round next year, but there is no specific time frame for the raise, he added.

As a serial entrepreneur, Jacoby has had a number of exits through acquisition. Most recently, adtech startup Circulate, which he co-founded, was acquired by LiveRamp in 2016. While he does not know what the future for Deduce holds, Jacoby said this may be his largest market opportunity.

“This is a big, growing market,” he said. “If we solve these problems, there will be a number of suitors; maybe even the public market.”

Illustration: Dom Guzman