Funding Spec to fight AI-powered fraud

Published on Oct 25, 2023

Funding Spec to fight AI-powered fraud

AI is supercharging fraud, but not through DeepFakes like you see sensationalized in the media. Instead, neural networks and reinforcement learning commercialized inside attack tools allow fraudsters to hide from traditional fraud defenses. Fraudsters can now identify what data you're basing your fraud-or-not decisions on and reverse-engineer your defenses to mimic real customers and sneak underneath enforcement. CAPTCHAs and "I am human" buttons are just speed bumps that motivated attackers roll right over while introducing friction that drives away real customers.

Essentially, these new AI-powered fraud tools are now giving cheaters the answer key to the test. Traditional rules-based detection is easily circumvented. On-site and in-app user behavior data are analyzed too slowly. Blocking decisions are all made individually with no centralized intelligence. Any attempt to analyze fraudster behavior and upgrade the fraud stack requires significant engineering department commitments, leading to infrequent defense updates. By the time defenders know about new attack patterns, let alone try to implement solutions to block them, fraud has already had a significant impact on their financial bottom line. And this problem is only accelerating. Fraud weaponry is getting cheaper, more sophisticated, and easier to use, so much so that everyone from teenagers to hardened criminals can now wreak havoc on online commerce.

Fraudsters are realizing all of the value of AI, and defenders need a way to make those fraud attacks unprofitable and stop them altogether. They need Spec. That's why we're doubling down and leading a $15 million Series A for Spec after co-leading its $4.3 million Seed in 2021. Rather than struggling and overspending to try to fight fraud by themselves, businesses can rely on an antifraud platform from the experts at Spec.


A list of Spec

They truly are the experts, with a team that's spent their whole lives fighting fraud. CEO Nate Kharrl ran teams across ThreatMetrix, the leading antifraud vendor of the pre-AI era. He then joined eBay to build its new antifraud system from scratch to protect its more than $100 billion in annual GMV as it transitioned off of PayPal. 

Spec’s platform enables customers to collect longitudinal data in real time about a consumer’s entire journey on their website or app. This comprehensive data enables better decisions on who to block based on a pattern of behavior vs. individual actions. This centralized intelligence layer also forms the foundation for AI adoption—closing today’s technological gap between fraudsters and defenders. All of this is done invisibly to attackers while simultaneously removing friction from good customers. Spec's vision is to identify and protect every trusted online experience, so businesses can focus on serving their customers instead of chasing after the gaps that fraudsters exploit.

Spec cofounders (from left): Patrick Chen and Nate Kharrl
Spec cofounders (from left): Patrick Chen and Nate Kharrl

‎Spec is also, importantly, 100% no-code. Their platform enables defenders to shift detection strategies and spin up new countermeasures on emerging attack patterns in minutes, all without any engineering effort. Engineering teams are free to now focus on strategic initiatives instead of responding to constant fraud fires. This value to both CTOs / engineering leaders and fraud business owners has led the world's top merchants to adopt Spec to stop losing tens of millions to fraud each year and get the same quality of protection that giants like Amazon spend fortunes to build and maintain in-house. 

With its new capital, Spec is continuing to improve its core work of identifying and dismantling emerging threat vectors and expanding its partner network so customers can get access to the latest defense data and tools for their specific industry. It's also building new strategies to trap fraudsters in a sort of “mirror dimension” where they unknowingly can't transact but Spec can study their methods.

A pseud abstract visualization of Spec

‎Supporting Spec as its product vision comes to fruition has been inspiring. We helped them refine their pitch, which led to their first press in TechCrunch without having to pay for a PR agency. GTM leaders and CTOs in our network helped Spec level up their sales strategy, targeting both fraud and technical buyers leading to accelerating deals. Our data science team works to enrich information on attendees at Spec's events to identify high-potential customers. And since the company was founded remotely during the pandemic, our talent and people ops leaders, like the former Chief Talent Officer of Netflix Tawni Cranz, have helped Spec build an in-person office culture to accelerate innovation.

When we meet an expert team with a unique product perspective that can be commercialized on a huge scale, we are all in. We saw all those qualities in Nate and Spec with a chance to stop more than $40 billion in annual online fraud. Fraudsters will only get more advanced as AI matures, but Spec will ensure its customers always innovate even faster.

*Portfolio company founders listed above have not received any compensation for this feedback and did not invest in a SignalFire fund. Please refer to our disclosures page for additional disclosures.

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