Verid Secures $13.2 Million

Security startup Verid Inc. has pulled in $13.2 million in Series C funding to boost its service for tackling online identity fraudsters.

The round, led by Fidelity Ventures and CIBC Capital Partners, also included Palisades Capital. The Series C dwarfed Verids previous round of $3 million, which was completed in February 2004, and it brings the startup’s total funding to just over $20 million.

Verid provides a service designed to check that users of online banking or e-commerce sites are who they say they are. Rather than the traditional approach of relying on user names and passwords, Verid asks its clients’ customers a series of questions. Most of these are of a personal nature, such as, "What color was your grandma's Studebaker?" or questions about relatives' names. The idea is to add additional layers of security and prevent identity fraud.

The service is run by the Fort Lauderdale, Fla.-based firm from its own data center. Using software that it developed itself, Verid links up with its customers’ Web portals to verify end-user details, which are transferred via encrypted HTTPS links. Questions are pre-configured according to the customer’s wishes and checked for effectiveness with unnamed third parties. (This is, after all, the world of enterprise security.)

Kevin Watson, Verid’s CEO, says high-profile security snafus have done the startup's strategy no harm at all. Breaches at LexisNexis and ChoicePoint have clearly shown prospective buyers the necessity of verifying identity (see LexisNexis Begins Mailing Notifications, ChoicePoint Appoints Independent Exec, and Don't Be a Data Privacy Dunce).“The media attention on identity verification and identity theft has had a positive impact on our business,” he says. "Things like your name, address, and social security number are not as secure as you thought they would be."

Despite the mindshare, getting an application service provider (ASP) such as Verid to handle this checking raises questions for many ITers. Is it really safe to trust such a sensitive task to an outside firm?

Some say it is. Offloading identity checking to a service provider could relieve the load on data center managers. At the recent Interop event in Las Vegas, lack of effective identity management products was cited as a major problem by CIOs (see CIOs Face Identity Crisis).

Indeed, the startup finds itself up against some big names in the security space, namely, credit checking specialists such as Equifax and Experian, which also offer identity checking services.

Watson says Verid has already racked up about 150 customers since it started checking identities around two years ago. The company plans fresh business, too. Watson says Verid will use its cash influx to expand market coverage from areas such as financial services, retail, and telecom, into new verticals such as healthcare, government, and the insurance sector.The CEO also hopes to expand the company’s workforce over the next 12 months, particularly in areas such as sales, product development, and client services. “I would expect that we will go from the mid-30s to the mid-40s, but that's subject to change."

A new product release is also slated for the early fall, although Watson was unwilling to reveal any specifics on this.

Verid was founded back in 1999 and originally focused on credit card fraud, although the firm changed tack in 2003. Watson says the "online credit card verification [market] is very narrow. We did not have the scaleability that we needed to have in terms of going to other industries.”

— James Rogers, Site Editor, Next-Gen Data Center Forum