Prove Identity, the smartphone-based identity verification startup that originally made its name years ago as Payfone before rebranding in 2020, has raised $40 million. According to sources close to the company, the funding is coming in at a ten-figure valuation, which would pip it past the $1 billion mark (it’s not disclosing an exact figure). The company, which has around 1,000 business customers, said it has grown its international business some 40% in the last year and is cash-flow positive; we are asking for a figure that also includes the U.S.
Prove’s technology links up data from a phone’s SIM card, which “acts as a privacy-centric proxy for digital identities”, to functionality offered on smartphones, such as facial recognition, to authenticate users. This subsequently triggers other actions such as the pre-filling of information, customer verification flows and password-free authentication.
Prove said it plans to use the funding to build out more tools for digital payments and commerce, as well as fraud detection, and it sounds like the mobile handset will remain a central part of the proposition.
The raise is being co-led by strategic backers MassMutual and Capital One, and it is coming at a time when digital identity continues to be a hot topic.
A spokesperson for the company would not elaborate on a more precise valuation. For some context, when the company last announced significant funding — $100 million mere days before its big rebrand — CEO Rodger Desai told me it was already profitable. At the time, it had a post-money valuation of $549 million, according to PitchBook data. That is the figure that had been locked in since then.
The number of cybersecurity breaches resulting from malicious hackers using stolen identity credentials continues to grow — underscoring the opportunity for more effective tools in the market and the interest investors have for placing bets in the space.
Notably, back in 2020, Desai told us that Payfone (as it was known then) in 2019 processed 20 billion authentications, and that it was growing 70% year over year, with an aim to boost that figure to 100 billion transactions in the coming years. Its site today does not give an updated transaction number (and its 40% growth today is definitely lower than 70%). That speaks to a lot of competition in the space.
Prove is, of course, not the only company eyeing up the opportunity.
In addition to older startups like Jumio, there are startups like ThetaRay and Fourthline building approaches based in AI. Big PE firms are also getting in on the act, scooping up and consolidating technologies and customer bases for more economies of scale.
And then there is Worldcoin, co-founded by OpenAI’s Sam Altman, which wants to bring a completely new concept (and business) to the world of digital identity. It’s building physical “orbs” aimed at scanning irises, in order to build a network of digital IDs, which will in turn link up with a new global cryptocurrency, and an app for payments that tap into the two together. The startup has already been courting controversy in various markets, but it’s also been courting some serious funding, so it may be around for a while.
While projects like WorldCoin’s are still in their early days, Prove has expanded its customer base beyond commerce. It said that its 1,000 customers include “9 of the top 10 U.S. banks, 2 of the top 3 global cryptocurrency exchanges, 3 of the top 5 U.S. retailers, 2 of the top 3 U.S. healthcare companies, and 6 of the top 10 insurance companies in the U.S.” (FanDuel recently signed on as a customer; others include Experian, Visa, Starbucks, BlueCross BlueShield and DocuSign.)
Prove was founded in the first wave of smartphone adoption, around 2008, with an aim to reduce some of the friction, and subsequent shopping cart abandonment, around e-commerce transactions, leaning into the growing ubiquity of phones, and the data that they unlocked about their users, to help speed up the process. (Speed remains a priority: It claims that its tools today offer “79% faster onboarding, a 35% reduction in abandonment, and a 75% reduction in fraud.”)
Initially, its focus was on carrier billing, teaming up with mobile operators to provide an alternative to credit cards (and the pain of entering related information). Later it pivoted to where it is now, using its algorithms to tap phone data to help design flows for customers to verify users.
The overall market for identity and access management was estimated at nearly $16 billion in 2022, according to GrandView Research, and that will keep investors interested in new technology and approaches to tackling it.
“Prove is driving a paradigm shift in how businesses and consumers interact securely,” said Charles Svirk, a partner at MassMutual Ventures. “As consumers continue to experience risk in their engagement with brands, Prove’s solutions ensure that verified and authenticated information is being used, enabling brands to drive both loyalty and revenue. We’re delighted to continue supporting Prove as they redefine how we look at digital identity.” Svirk is joining the startup’s board of directors with this investment.
Updated to clarify that the 40% growth is international only, and to further explain how Prove’s technology works.