25 Jun Identity theft start up has fast-track growth plans
Madison, Wis. – The 2006 winner of the Steven Burrill Technology Business Plan Competition has launched its first identity theft product, and has an aggressive plan that calls for profitability in three months and three million customers after two years.
This probably sounds like sheer fantasy to technology companies that have multi-year plans to reach positive cash flow, but consider the total market of 660 million credit card accounts – five to seven credit cards per cardholder – in the United States alone.
That’s a colossal market size for a start up, but Aristotle Ventures’ chief executive Ahmed Fazil says that’s why his projections are on the modest side.
“We’re really looking for just a half a percent of that 660 million accounts,” Fazil said. “That is an extremely conservative business case.”
Case for the card
More than 70 percent of Americans now have personal computers in their homes, yet 60 percent hesitate to make purchases online, according to research by Edgar, Dunn and Co. Their reluctance is primarily due to fears that their credit card number will be stolen, that they will be the victims of identity theft, and that their personal information will be used by spammers.
Their fears are well-founded. While U.S. victims of identity fraud actually decreased from 10.1 million cases reported by Javelin in 2003, there still were 8.4 million victims in 2006. The Federal Trade Commission estimates that $52.6 billion was lost to identity theft last year, and that consumers incurred $5 billion in additional out-of-pocket costs as a result of identity theft.
Fazil and his cohorts believe the time is right to alleviate consumer concerns, especially since Americans now spend $2.5 billion per year to protect themselves from identity theft, and a growing number of consumers – 45 percent, according to Unisys – are willing to switch banks that offer better protection.
The aKaCard (for “also known as”) is a proprietary method of preventing identity theft that offers consumers a unique credential, or alias, that can be used in any standard e-commerce transaction. With this alias, they can make online purchases without revealing personal information on the Internet. Fazil and his partners have applied for a U.S. patent for the technology, and are quietly confident of securing one.
Thus far, the price point has been set at $9.99 per month or $100 a year. Banks are the ultimate customers – Universal Savings Bank already is using the platform – but Aristotle Ventures is attemtping to reach other banks through their account holders.
Fazil said the target market not only includes cardholders in general, but teens whose parents lend the use of their credit cards so they can play online games, college students who use their parents’ card, mature consumers who want to make more online purchases due to declining mobility, and businesses that for competitive reasons want to buy more from suppliers over the Internet.
The company is trying to reach them through a variety of channels, including the mainstream media, the viral marketing of the Internet, and perhaps vehicles like YouTube and Comedy Central.
Bootstrapping
Following the Burrill competition, president Khaja M. Din, who has a law degree from the University of Wisconsin-Madison, said the company – then known as IPIC – was courted by North Carolina investors and could move to the Tar Heel State unless Wisconsin investors stepped up. As the situation unfolded, however, the deals weren’t completely to their liking, and Din and Fazil decided to bootstrap.
It didn’t hurt that Fazil, a former technology executive with ABN AMRO who helped build Mortgage.com, had more to bootstrap than most. The company used about $400,000, which is at the high end of what an individual angel investor might provide, to reach this point.
While contract negotiations with national players are underway, and securing the business of large banking institutions and card issuers would keep the company flush with cash, especially with low operational costs, Fazil and his team haven’t completely abandoned the possibility of venture funding.
“It would be nice,” Fazil said, “to get investors on the right terms.”
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