ThreatMetrix Picks Up $18 Million To Expand Its Fight Against Cybercrime

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The world of data breaches and other malicious online acts are on the rise — with some $2 trillion lost to IT thefts and other cybercrimes annually, according to research from Goldman Sachs — so we will continue to see a focus on companies that try to combat these threats. One case in point: today, ThreatMetrix, a provider of cybercrime prevention solutions, says that it has raised $18 million to continue to expand its business.

The Series D round was led by August Capital, with existing investors Tenaya Capital, US Venture Partners and CM Capital also participating.

To date, ThreatMetrix has seen some signficant sales growth — 300 percent year-on-year — which speaks not just to the company’s own product and business development — that includes the December 2011 acquisition of security company TrustDefender — but also the big rise in cybercrime and the fact that online companies are scrambling to plug their holes.

Verizon last week released a huge report on the subject. It found that last year, 2011, was the second-highest ever recorded for data breaches. While cyber criminals accounted for the vast majority of financial breaches — either in the form of stealing card data or other financial details; or in the form of taking other details that were then sold on to others — hacktivists acting for political or social motives actually accounted for more activity, at 58 percent of all attacks.

CEO Reed Taussig says the two areas that have “pretty much infinite demand right now” are the areas of banking/financial services and device authentication. He calls demand for their services in these two areas “explosive”. On the enterprise side, it’s all about the consumerization trend: more people looking to use their own devices at work.

In the case of financial services, it has to do with the rising amount of fraud on networks and more sophisticated ways of targeting them; wire fraud, as one example, has grown by 300 percent over the last year.

Because financial services and e-commerce companies tend to have better protection in place, Taussig says that only between three and five percent of their transactions are fraudulent; but given the volumes of money exchanged that can work out to significant sums of money.

Social networking, Taussig points out, can have fraud rates — that is, data getting picked up and mis-used elsewhere — of as high as 20 percent. And sites that rely on affiliate marketing, he says, are “off the charts for fraud.”

ThreatMetrix currently has 700 large customers worldwide covering 5,000 web sites and some 1 billion devices across the network.

ThreatMetrix says that it will use the funding to continue to expand its business specifically in the areas of e-commerce, financial services and enterprises. In the latter area, it focuses its efforts around device management and the increasing frequency of employees bringing their own devices in to the workplace.

It will also look to grow its international business, a segment that already accounts for 40 percent of ThreatMetrix’s revenues, says Taussig.

The total amount raised to date by the company is now $42 million. Taussig notes that in this last round, $8 million of the total sum is being used to retire one of its investors, TDP. “They had a fund that expired and so we were able to realize a good profit on their shares,” Taussig said.

As part of the deal, August Capital general partner Vivek Mehra will join the board of ThreatMetrix. August has a strong track record of past investments that have included Atheros, Microsoft, Postini, Sun, Symantec, Seagate and Skype.