San Diego’s ID Analytics Comes Full Circle in $120M Buyout

4/6/12Follow @bvbigelow

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decisions about the credit-worthiness of consumers. “It’s now probably 15 or 20 percent of our business,” Hansen says. “They use our data and analytics to make better credit decisions, and not just better fraud decisions.

“That was a natural for us because all our clients were risk managers,” he adds. “They not only wanted fraud risk tools. They also wanted credit risk tools, and they had a big problem around evaluating credit risk when the dynamics of the world changed over the last two or three years.

The second part of ID Analytics’ growth strategy is where LifeLock weaves into the story.

“We asked ourselves why can’t we help consumers protect themselves from fraud using the same network and the same technology?” Hansen says. So ID Analytics developed the capability to issue a real-time alert whenever a consumer’s identity popped up on the network.

The technology led to a deal with LifeLock in which ID Analytics issues a real-time alert to LifeLock customers whenever they apply for credit. “It’s very different from credit monitoring where you might get your alert a week or two later,” Hansen says. “In this case, if you’re standing in a Best Buy, trying to get a Best Buy credit card, you’d give that personal information and the guy punches it into their point-of-sale system. In about 10 seconds you’ll get a phone call that says, ‘You’re in a Best Buy trying to get a credit card.’ And if it’s not you, and you’re not really at Best Buy, you dial 1-800-Help. Then the case comes back here and we shut it down.”

The partnership was not exclusive, and Hansen says ID Analytics also works with a number of LifeLock rivals. “As time went on, the consumers really liked it, because they felt like they really had some control over their identity with this real-time alert. And the enterprises loved it because it helped them protect against fraud.”

As time went on, Hansen adds, “It became apparent how powerful it was, and there was enough value to consumers that the snowball started rolling.”

Of course, a credit card company or wireless company must be part of the ID Network before ID Analytics can issue an alert to consumers as they apply for credit.  “We don’t have 100 percent coverage,” Hansen says. “But we have enough coverage and pretty deep coverage.”

By 2009, ID Analytics had become fully profitable, and Hansen says, “We never really burned through that $20 million” in venture capital the company had raised from a new investor, Investor Growth Capital (IGC), as well as its existing VCs—Mission Ventures, Canaan Partners, and Trinity Ventures.

I’ve heard that the company’s investors had higher expectations—and that visions of HNC’s $810 million buyout danced in their heads. Still, they’ve built a successful analytics business, which is no mean feat in a decade that seemed to begin and end in financial tech wrecks. And with the LifeLock deal, ID Analytics has completed a full turn in the great startup circle of life.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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