The ability to both locate and identify someone when they are about to make an online purchase is a key to controlling fraud, and it has several other uses too.
Zumigo Inc. has raised $6 million in new funding to continue developing this technology, which is already in use at financial institutions, Venture Capital Dispatch has learned.
Earlier this week, Zumigo, which is based in San Jose, announced an investment from the Wells Fargo Startup Accelerator, which is looking for innovative technologies for its customers.
The new round, a Series B, was led by Intel Capital and includes a business development agreement with Intel Services, a division of Intel that is building technology to allow cloud apps to interact directly with hardware at the lowest and most secure levels, according to Intel Vice President and General Manager Hank Skorny.
Intel’s efforts should also result in smarter, more manageable connected devices, but security is key, and Zumigo helps with that, he said.
“One thing the mobile network does incredibly well is authentication,” Mr. Skorny said. “…Things like GPS are spoofable, but when you combine that with double checks against the authentication system, it’s very reliable in a cellular network…The combination of those two is extremely powerful.”
Zumigo was started in 2008 by Chirag Bakshi, who has worked for years in Silicon Valley and most recently ran the mobile business at VeriSign Inc.VRSN +1.91% He said he noticed that when he was traveling internationally, his credit card would be denied, and once there were fraudulent transactions on his card originating from Eastern Europe while he was in Australia.
The bank should have known who and where he was, Mr. Bakshi said. So he started a company that spent more than two years developing a global network that detects the location of a device that can be used for purchasing–a phone, a laptop and so on.
That network is combined with technology that can verify whether a credit card owner and their phone are near a merchant or an ATM at the time of a purchase; whether an iPhone or Android phone trying to log into an account is a known device (i.e. what’s the phone number and who does it belong to); and whether a phone that is being added to an account actually belongs to the person adding it.
Zumigo’s technology also makes it easier to buy things using known mobile devices by automatically filling out purchasing information, so that it is possible to buy something even on a small screen with one or two clicks. Merchants can also target mobile customers with deals. To prevent privacy problems, users opt in to Zumigo’s services.
Business has started growing. Zumigo this year announced a joint development agreement with the credit bureau Equifax Inc., and both Wells Fargo WFC +2.20% and Intel are looking at ways to incorporate Zumigo’s technology into what they’re doing, Mr. Bakshi said. New partnerships will be announced soon.
Intel declined to comment on the details of the Zumigo agreement, but Mr. Skorny said the purpose of such relationships is “to take that innovation into ways that we can’t frankly imagine. Who knows what people will do with Zumigo plus Intel API management plus potentially Intel hardware?”
As for Zumigo, it’s close to profitability on only 20 employees. “We were very prudent,” Mr. Bakshi said. “We’ve watched other startups burn a lot of money [when] the market was not ready.…We believe in small tight teams to execute well.”
Current investors including Aligned Partners also participated in the latest round. Aligned General Partner Susan Mason said her firm looks for capital-efficient companies that require less than $8 million in funding to break even and exit.
This creates what she called “a great win-win,” where the founders and employees generally get to keep more than half the company and “it’s not the VCs walking away with all of it,” she said.
Total funding at Zumigo is now $7.8 million. Valuation isn’t disclosed.