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UK’s Onfido raises $25M as it brings its background checking platform to the US

TechCrunch TechCrunch 14/04/2016 Ingrid Lunden

The rise of on-demand startups and other fast-growing businesses like online marketplaces has created a need for reliable ways to verify new hires and customers to make sure they are cut out for the task. Onfido, one of the group of startups building software-based solutions to do just that, is today announcing that it has raised $25 million.

The Series B round was led by Idinvest Partners, with participation also from existing backers Wellington Partners and CrunchFund (founded by TC founder Michael Arrington), and brings the total raised by the startup to just over $30 million.

Onfido plans to use the capital in a couple of different ways. First, to continue expanding its business internationally: originally founded in the UK by three friends from Oxford, Onfido is now focused on U.S., which co-founder and CEO Husayn Kassai says is currently its biggest market among its 1,000+ customers, who have collectively run 10 million checks through its platform in the U.S., Europe, Latin America and Asia.

And second, to continue building out its machine learning platform, which now claims to perform basic ID checks in seconds, and is constructed to learn more about fraud patterns to identify quickly when people are trying to hide their backgrounds in more sophisticated ways.

Kassai describes Onfido’s bigger mission as the building of a “trust engine” that can be used not just to verify identity for on-demand startups and others in the business of rapidly hiring contractors, but any business scenario that requires a company to make sure that the people using its platform are legit.

Background checks — and the automation of them by software — is a budding area right now: just last month, Onfido’s bigger startup rival Checkr announced that it had raised $40 million. Both companies — taking on more established players like SterlingBackCheck, HireRight, and First Advantage and other small startupslike Goodhire — say that they are growing fast right now. Onfido’s business is up 40% month-on-month, while Checkr told me last month it is already profitable.

A lot of the early business opportunity for companies like Onfido (and Checkr) has been in the on-demand marketplace — Onfido’s customers today include startups like Handy, TaskRabbit, Deliveroo and BlaBlaCar, while Checkr works with biggies like Uber. But what’s interesting is looking at how these businesses are evolving beyond this first wave of customers.

While Checkr is looking to tackle more traditional and offline businesses, Onfido is applying its expertise to more than just employee checks. One of its current customers is JustGiving, which uses the Onfido platform to check backgrounds of people who are looking to use the platform to raise money, to make sure that they are not defrauding their customers.

The other area that makes Onfido unique is its focus on machine-learning technology. While there are people on its team that do legwork to carry out certain checks — criminal background checks in the U.S., for example, often require physical visits to courthouses to verify — it’s pushing as much of the work onto its software platform. The machine learning aspect of it essentially means that it is getting faster and better at carrying out checks across some 20 different categories like credit ratings and verifying documents.

The software element is a tricky one, too, however. Jumio, another startup that made a big point of using software to verify credit and identity, filed for bankruptcy last month  after failing to secure funding in the midst of regulatory investigations. Investors believe that Onfido’s plaform is significantly more robust. 

“In what is set to be a testing year for many startups, Onfido has the product and business model that will allow them to continue their strong upwards trajectory,” said Mathieu Baret from Idinvest. “This is why we invested and we look forward to working together as they expand to new markets and territories.”

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