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Onfido, which verifies IDs using AI, nabs $50M from SoftBank, Salesforce, Microsoft and more

Security breaches, where malicious hackers obtain snippets of information that then get used to impersonate individuals in order to gain access to individuals’ and businesses’ sensitive financial and other private information, have become par for the course in the world of digital services. More than 2.7 billion records were  breached in a single incident this year in the US, and overall the damage from incidents like these potentially runs into the trillions of dollars globally.

Today, a startup called Onfido, which uses AI techniques combined with human verifiers to efficiently verify people are who they say they are when using digital services — is today announcing $50 million in funding to help address that ongoing — and growing — problem.

The funding comes on the heels of some very strong growth for the startup, which was founded in London but now operates most of its business out of San Francisco. In an interview, co-founder and CEO Husayn Kassai said that more than half of its customers, and most of its new growth, is coming out of the US.

Onfido uses computer vision and a number of other AI-based technologies to verify against some 4,500 different types of identity documents, using techniques like “facial liveness testing,” to see patterns invisible to the human eye, now has 1,500 businesses as customers, primarily in categories like marketplaces and communities, gaming and financial services, including companies like Remitly, Zipcar and Europcar; and in the last year, it had sales growth of 342 percent. Kassai said that it has to date verified “tens of millions” of IDs.

The money — a Series C2, technically — is coming from a group that includes top strategic tech investors. The round is being co-led by SoftBank Investment (SBI) and Salesforce Ventures, with M12 (the new name for Microsoft Ventures), FinVC and other unnamed new and previous investors are also participating. That’s a signal not just of how the biggest companies in that sector today are grappling with this problem, but also what approach they are using to solve it.

For SoftBank, the investment is separate from the Vision fund, founder and CEO Husayn Kassai noted, but it’s notable that a lot of the businesses that have been backed out of that fund — companies like Didi, Uber, Oyo, Lemonade, and others — fundamentally rely on people trusting that they are handling personal details securely while also carefully vetting suppliers on the platform (meaning, they need and use services like Onfido’s).

Meanwhile, both Microsoft and Salesforce have extensive enterprise businesses that could see multiple benefits from working with an identity verification provider, not just for their own purposes, but as a service that is sold on to its customers as part of a larger identity management and security offering.

The company is not revealing its valuation but has raised around $100 million to date and Kassai confirmed that it was an upround, with “a lot of happy investors.”

“We have strong metrics, and we have a long way to go in our growth,” he added.

There are a lot of companies today offering services to help offer secure services to authenticate users, for example, to help them log on to their work accounts or to access their online banking services. Onfido’s business focuses on the first step in all of this — customer onboarding — specifically around services geared towards consumers.

The opportunity that has opened up for it has been the result of more than just a rise in breaches. There’s also been a growing realization that a lot of the existing services that had been used for verification are simply not fit for purpose: either they too have been breached — as in the case of some of the bigger credit agencies like Equifax — or are not realistically efficient enough for how many online services run today, such as in the case of in-person verifications. (Onfido claims that its system can make a verification in as little as 15 seconds.)

Or, they are part of the new guard that has shifted its approach to the business of ID verificiation, either by choice or force. One would-be competitor from the past, Checkr, is now a partner of Onfido’s, Kassai noted. Others like Jumio — which is still grappling with the fallout from major illegal missteps from previous management — seem to still be trying to find their feet as standalone businesses.

“Fraud is rising and not going anywhere,” Kassai — who co-founded the company with Ruhul Amin and Eamon Jubbawy — said. “And the problem is that there are a dozen other companies that have not done a good enough job to detect it so far.” While no service is perfect — Onfido says that its “risk exposure” is 0.0195 percent — he says that the advantage of building its service on top of AI means that the algorithms use every experience to continue honing its accuracy. “What we learn from one client gets applied everywhere,” he notes.

“There has never been a more important time for companies to build trust with their customers by showing they are one step ahead of fraudsters,” said Frank van Veenendaal, the ex-vice chairman of Salesforce, who is joining the board with this round. “I believe Onfido has the unique opportunity to transform the digital identity market and deliver robust and scalable authentication-as-a-service, similar to how Salesforce transformed customer relationship management.”

African e-commerce startup Jumias shares open at $14.50 in NYSE IPO

Pan-African e-commerce company Jumia listed on the New York Stock Exchange today, with shares beginning trading at $14.50 under ticker symbol JMIA. This comes four weeks after CEO Sacha Poignonnec confirmed the IPO to TechCrunch and Jumia filed SEC documents.

With the public offering, Jumia becomes the first startup from Africa to list on a major global exchange.

In an updated SEC filing, Jumia indicated it is offering 13,500,000 ADR shares for an opening price spread of $13 to $16 per share, representing 17.6 percent of all company shares. The IPO could raise up to $216 million for the internet venture.

Since the original announcement (and reflected in the latest SEC docs), Mastercard Europe pre-purchased $50 million in Jumia ordinary shares.

The IPO creates another milestone for Jumia. The company in 2016 became the first African startup unicorn, achieving a $1 billion valuation after a funding round that included Goldman Sachs, AXA and MTN.

There’s a lot to break down on Jumia’s going public. The company is often dubbed the “Amazon of Africa,” and like Amazon, Jumia comes with its own mixed buzz. Jumia’s SEC F-1 prospectus offers us more insight into the venture, and perhaps any startup from Africa, thus far.

About Jumia

Founded in Lagos in 2012 with Rocket Internet backing, Jumia now operates multiple online verticals in 14 African countries. Goods and services lines include Jumia Food (an online takeout service), Jumia Flights (for travel bookings) and Jumia Deals (for classifieds). Jumia processed more than 13 million packages in 2018, according to company data.

Jumia’s original co-founders included Nigerian tech entrepreneurs Tunde Kehinde and Raphael Afaedor, but both departed in 2015 to form other startups in fintech and logistics.

Starting in Nigeria, the company created many of the components for its digital sales operations. This includes its JumiaPay payment platform and a delivery service of trucks and motorbikes that have become ubiquitous with the Lagos landscape. Jumia has extended this infrastructure as an e-commerce fulfillment product called Jumia Services.

Jumia has also opened itself up to Africa’s traders by allowing local merchants to harness Jumia to sell online. The company has more than 80,000 active sellers on the platform using the company’s payment, delivery and data-analytics services, Jumia Nigeria CEO Juliet Anammah told TechCrunch previously.

The most popular goods on Jumia’s shopping site include smartphones, washing machines, fashion items, women’s hair care products and 32-inch TVs, according to Anammah.

Jumia an African startup?

Like Amazon, Jumia brings its own mix of supporters and critics. On the critical side, there are questions of whether it’s actually an African startup. The parent for Jumia Group is incorporated in Germany and current CEOs Jeremy Hodara and Sacha Poignonnec are French.

On the flipside, original Jumia co-founders (Kehinde and Afaedor) are African. The company is headquartered (and also incorporated) in Africa (Lagos), operates exclusively in Africa, pays taxes on the continent, employs 5,128 people in Africa (page 125 of K-1) and the CEO of its largest country operation (Nigeria) Juliet Anammah is Nigerian.

The Africa authenticity debate often shifts into questions of a Jumia diversity deficit, which is of course important from Silicon Valley to Nairobi. The company’s senior management and board is a mix of Africans and expats. Golden State Warriors basketball player and tech investor Andre Iguodala joined Jumia’s board this spring with a priority on “diversity and making sure the African culture is in the company,” he told TechCrunch.

Can Jumia turn a profit?

The Jumia authenticity and diversity debates will no doubt roll on. But the biggest question — the driver behind the VC, the IPO, the founders and the people buying Jumia’s shares — is whether the startup can generate profits and ROI.

Obviously some of the world’s top venture investors, such as Jumia backers Goldman, AXA and Mastercard, think so. But for Jumia skeptics, there are the big losses. The company has generated years and years of losses, including negative EBITDA of €172 million in 2018 compared to revenues of €139 that same year.

To be fair to Jumia, most startups (e-commerce startups in particular) rack up losses for years before getting into the black. And operating in a greenfield sector in Africa — where it had to create much of the surrounding infrastructure to do B2C online sales — has presented higher costs for Jumia than e-commerce startups elsewhere.

On the prospects for Jumia’s profitability, two things to watch will be Jumia’s fulfillment expenses and a shift to more revenue from its non-goods-delivery services, which offer lower unit costs and higher-margins. Per Jumia’s SEC F-1 index (see above), freight and shipping make up more than half of its fulfillment expenses.

So Jumia has not turned a profit, but its revenues have increased steadily, up 11 percent to €93.8 million (roughly $106.2 million) in 2017 and up again to €130 million (or $147 million) in 2018. If the company boosts customer acquisition and lowers fulfillment costs — which could come from more internet services revenue and platform investment with IPO capital — it could close the gap between revenues and losses. This reflects the equation for most e-commerce startups. With the IPO, Jumia will have to publish its first full public financials in 2019, which will provide a better picture of profitability prospects.

Jumia’s IPO and African e-commerce?

There is, of course, a bigger play in Jumia’s IPO. One connected to global e-commerce and the future of online retail in Africa.

Jumia going public comes as Africa’s e-commerce landscape has seen its share of ups and downs, notably several failures in DealDey shutting down and the distressed acquisition of Nigerian e-commerce hopeful Konga.com.

As for the big global names, Alibaba has talked about Africa expansion, but for the moment has not entered in full.

Amazon offers limited e-commerce sales on the continent, but more notably, has started offering AWS services in Africa.

And this week, DHL came on the scene, launching its Africa eShop platform with 200 global retailers on board, in partnership with MallforAfrica’s Link Commerce fulfillment service.

Competition to capture Africa’s digitizing consumer markets — expected to spend $2 billion online by 2025, according to McKinsey — could get fierce, with more global entries, acquisitions and competition on fulfillment services all part of the mix.

And finally, the outcome of Jumia’s IPO carries weight even for its competitors. “Many things, like business decisions and VC investments across Africa’s e-commerce sector are on hold,” an African e-commerce exec told TechCrunch on background.

“Everyone’s waiting to see what happens with Jumia’s IPO and how they perform,” the exec said.

So the share price connected to NYSE ticker sign JMIA could reflect not just investor confidence in Jumia, but investor confidence in African e-commerce overall.

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