In an effort to fight fraudulent transactions and boost trust in online purchases, Paypal, the online payment service of eBay (NSDQ: EBAY), bought Israel/California based Fraud Sciences for a whooping $169 million in cash.
Fraud Sciences is has developed online risk management tools over the course of five years, creating propitiatory technology that identifies fraudulent transactions and suspicious bidders before they impact, with high rates of accuracy. The company offered its customers insurance against Internet fraud – if Fraud Sciences failed to detect the attack in time, the customer was guaranteed his money back. Not bad. For PayPal and eBay, the acquisition is expected to enhance their proprietary fraud management systems and accelerate the development of next generation fraud detection tools.
Fraud Sciences was founded in 2001 by Shvat Shaked (CTO) and Saar Wilf, both former employees of Trivnet (Wilf was also the founder of Trivnet). Both founders will join PayPal’s technology and fraud management teams along with Yossi Barak (COO) – although they won’t need to worry about money. According to some estimates, Shaked and Wilf will clear 20-25 million dollars each from the deal with eBay.
Fraud Sciences had only received $11 million dollar in two rounds of funding raised by Eli Barkat from BRM Capital ($5M), US-based Redpoint Ventures ($2M) and other US and Israeli seed investors, including Guy Gamzu. BRM Capital held 40% of Fraud Sciences and effectively made 12 times the original investment – about $70 million in cash. The rest of the proceeds ($30-40M) will be divided between the company’s employees and the remaining investors.
In the official press release, Scott Thompson, President of PayPal said:
Integrating Fraud Sciences risk tools with PayPal sophisticated fraud management system should allow us to be even more effective in protecting eBay and PayPal’s hundreds of millions of customers around the world”
This is another impressive exit made by an Israeli firm, third in one month. The acquisition, which is subject to the satisfaction of certain conditions, is expected to close within the next 30 days.