CertifID LLC has raised $20 million in venture capital funding that will help the company grow, innovate products and move its cybersecurity platform into additional industries.
The equity capital round with Minneapolis, Minn.-based Arthur Ventures more than doubles the amount that the Grand Rapids- and Austin, Texas-based CertifID has raised since its formation in 2017 as a cybersecurity platform to protect electronic fund transfers in real estate transactions.
The funding round will help CertifID “continue to evolve in this space of identity verification and making the transfer of funds safe,” Executive Chairman Thomas Cronkright II told Crain’s Grand Rapids Business.
“As we do that, other verticals will come into view where the application of what we have perfected in real estate is portable into those other verticals,” Cronkright said. “This is a big problem and it’s a complicated problem. We have to stay curious and committed to making the world a place where you can transact or you can interact with somebody without the threat of some type of financial loss.”
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The Series B venture capital investment that CertifID recently closed follows a $12.5 million Series A capital round in May 2022 that also included Arthur Ventures. The DeVos family’s Wakestream Ventures and Grand Angels, both based in Grand Rapids, and Detroit-based Invest Michigan previously invested in the company.
CertifID has developed a software to protect wire transfers in real estate transactions. The software platform verifies the identity of parties in a transaction to prevent business email compromise in which a cybercriminal impersonates a party in a transaction to intercept electronic payments through false instructions for a wire transfer.
The fast-growing company, which doubled revenue and customers in the past year, helps to safeguard transactions for title agents, law firms, lenders, real estate agents, buyers and sellers and protects some 750,000 transfers annually.
“CertifID is addressing a growing problem in an industry looking for modern solutions,” Patrick Meenan, general partner at Arthur Ventures, said in a statement on the investment in CertifID. “Despite the challenges posed by a decelerating housing market, CertifID stands out as a technology leader with a mission of utmost importance to the U.S. economy.”
Since launching, CertifID has helped to protect billions of dollars from attempted fraud attacks and recovered $60 million that fraudsters stole from victims, according to CEO Tyler Adams.
Cronkright and Larry Duthler, who are partners at Grand Rapids-based Sun Title Co., formed CertifID with Adams after they experienced a $180,000 wire fraud loss in 2015.
Through mid 2024, CertifID plans to retain a focus on the real estate sector where “we’re just so embedded and intently focused to solve this issue,” Cronkright said.
“There’s still a lot of market share either we haven’t been exposed to or haven’t been able to influence … from a service and offering perspective,” he said. “There’s still a lot of work to do in real state. Wire fraud in real estate is hands down the No. 1 risk factor that we face on a transaction-by-transaction basis.”
In plotting the future for CertifID, executives will consider new products and services “that further the validation of identity” in business transactions involving wire transfers, Cronkright said. New markets the company could enter include M&A transactions where buyers pay sellers, wealth management and brokerage firms, insurance payouts, law firms processing litigation settlements, and other professional service sectors where “you’re dealing with large sums of other people’s money,” he said.
Sectors beyond real estate could use a better ability to verify the identification of parties involved in electronic funds transfers that are susceptible to cybercriminals intercepting payments, he said.
“The root cause is a lack of identity verification at some inflection point in a communication or a transaction,” Cronkright said.
The FBI’s Internet Crime Complaint Center took more than 800,000 complaints in 2022 that held the potential for $10.2 billion in losses across all types of fraud. Complaints about business email compromises that often target the transfer of funds by businesses and individuals reached nearly 22,000 last year, generating $2.74 billion in losses, according to the Internet Crime Complaint Center’s 2023 annual report the FBI issued in May.
Real estate wire fraud is a subcategory among business email compromise scams that are “one of the fastest growing, most financially damaging internet-enabled crimes,” according to a November 2022 FBI report to Congress.
As CertifID prepares for the future, executives are “going to be very strategic in how we evaluate those markets and what our entry point would be,” Cronkright said.
“It would be a lot of intention before we truly run after a new vertical because there’s so much to be solved in real estate, but I think real estate provides enough texture between business to business and business to consumer (transactions) that the personas — just swap out the industry verticals — are representative in other industries,” he said. “It’s the same threat, it’s the same playbook. It’s just a different industry and a different transaction type that they’re trying to divert funds from.”
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