Sift Raises $50M at $1B+ Valuation - Fraud Prevention Platform

The Rise in Cybercrime Fuels Sift's Growth

The increasing prevalence of digital transactions has unfortunately created more opportunities for cybercriminals.

According to the FBI’s 2020 Internet Crime Report, reported instances of suspected internet crime experienced a surge of 61% in 2020, reaching a total of 791,790 complaints. These offenses – encompassing everything from data breaches affecting individuals and organizations to credit card fraud, phishing schemes, and identity theft – resulted in losses exceeding $4.2 billion for victims.

Sift's Response to Increased Fraud

For companies such as Sift, whose core mission is to proactively identify and prevent online fraud, even outpacing the evolving tactics of cybercriminals, this surge in criminal activity has translated into increased business opportunities.

In 2020, the San Francisco-based company evaluated the risk associated with over $250 billion in transactions, a doubling of the volume processed in 2019. Sift currently serves a diverse clientele of several hundred customers, including prominent names like Twitter, Airbnb, Twilio, DoorDash, Wayfair and McDonald’s, and leverages a global data network processing 70 billion events each month.

$50 Million Funding Round

To address the growing demand for its services, Sift announced today that it has secured $50 million in a new funding round, resulting in a company valuation exceeding $1 billion. Insight Partners spearheaded the financing, with additional participation from Union Square Ventures and Stripes.

While specific revenue figures remain undisclosed, President and CEO Marc Olesen stated that the company’s revenue has tripled since his appointment in June 2018. Founded in 2011 as a Y Combinator company, Sift has now raised a cumulative total of $157 million in funding throughout its history.

Digital Trust & Safety Platform

Sift’s “Digital Trust & Safety” platform is designed to assist merchants in combating various forms of internet fraud and abuse.

It also aims to “minimize friction” for legitimate customers, recognizing the delicate balance between protecting businesses and avoiding disruption for genuine users attempting to complete transactions.

The platform utilizes machine learning and artificial intelligence to automatically assess the authenticity of online transactions and interactions, identifying potentially problematic activity.

Fraud Trends and Tactics

Sift’s research has revealed that fraudsters rarely operate in isolation.

“Fraud schemes are no longer confined to single areas; they are highly inventive and frequently coordinated,” explained Olesen. “We have identified numerous fraud networks.”

Olesen highlighted two instances from the previous year where Sift successfully prevented fraudulent activities. One involved money laundering through donation platforms, where stolen debit and credit cards were tested via fake donations at guest checkout.

Fraudsters made small donations to themselves, effectively laundering funds while simultaneously validating the stolen card details for use on other sites with larger purchase amounts.

In another case, the company discovered fraudsters leveraging Telegram, a social media platform, to offer services like food delivery using compromised credentials.

Data as a Competitive Advantage

The extensive data accumulated by Sift since its founding enables the company to function as a “central nervous system” for fraud prevention teams. Sift asserts that its models become increasingly sophisticated with each new customer integration.

Jeff Lieberman, Managing Director at Insight Partners and a member of Sift’s board, stated that his firm initially invested in Sift in 2016, recognizing the rapid growth of online fraud. This growth wasn’t limited to the monetary value of fraud, but also encompassed the increasing complexity of the methods employed by cybercriminals.

“Sift offers a unique approach to combating fraud by combining extensive datasets with machine learning, and has consistently demonstrated its value to hundreds of online businesses,” he noted in an email.

Lieberman added that Insight Partners proactively approached Sift during the recent fundraising process, citing the strength of the product, the robust business fundamentals, and the substantial growth potential.

“As more businesses invest heavily in online channels, virtually all of them require a solution capable of intelligently identifying fraud while ensuring a smooth experience for the vast majority of legitimate transactions,” he explained.

Future Plans

Sift intends to allocate the newly acquired capital primarily to expanding its product offerings and scaling its product, engineering, and sales teams.

The company has also recently appointed Eu-Gene Sung – with prior financial leadership experience at Integral Ad Science, BSE Global and McCann – as its CFO.

Regarding a potential IPO, Olesen indicated that Sung’s experience in guiding companies through periods of rapid growth would be invaluable. Sift is also exploring potential mergers and acquisitions for the first time.

“Our strategy for expanding our portfolio involves a combination of internal development, strategic acquisitions, and partnerships,” Olesen concluded.