The growth equity investment world is taking notice of Idaho with an $80 million infusion announced Dec. 16 to Kount Inc., a Boise-based online and mobile credit card fraud detection technology company.
Online debit and credit card fraud just now is increasing exponentially as chip-embedded credit cards and card readers are making fraud much harder in physical stores. Kount, a fully-owned subsidiary of Keynetics, with which it shares a building on Lusk Street, finds itself ideally situated to help.
“Online merchants face greater fraud challenges than ever before,” Kount CEO Brad Wiskirchen.
CVC Capital Partners, with investor commitments worldwide of $79 billion, had already formed a relationship with Kount a year before Kount went out shopping for investments. CVC funded Kount through its CVC Growth Fund.
“This is probably the biggest private equity investment taking place in Idaho that I have heard of,” said Jay Larsen, president of the Idaho Technology Council, adding that it is probably more than 30 years since similarly large investments may have taken place at Boise legacy giants Alberston’s and Boise Cascade. “What it does is CVC sees Kount is a global leader in this (online fraud prevention) space.”
The $80 million CVC investment comes on the heels of TSheets, the cloud-based time tracking company headquartered in Eagle, announcing a $15 million growth equity investment from Summit Partners in October. Boise-based Cradlepoint, the global leader in 4G LTE networking solutions, in April announced a $45 million growth equity investment led by Sorenson Capital.
These are all new generation companies founded within the past 10 years.
“It continues to show expansion to access to capital for the Idaho market,” Larsen said. “We’ll see a lot more of that.”
Kount, founded in 2008, has 68 employees. The CVC investment is expected to take the employee count to over 100 in the next year and double revenue in the “next couple years.” Wiskirchen did not disclose annual revenue for Kount, a private company.
The $80 million infusion will help Kount speed up product innovation. Rollout for a new product originally set for 2017 will now be introduced to the market in 2016.
Wiskirchen anticipates adding 20 people to the 25-strong information technology team in the next year.
“This will enable us to double the speed in some things and more than double in others,” Wiskirchen said.
Kount develops technology that can analyze hundreds of bits of data when a customer makes a credit card purchase online or on a mobile phone to determine if it is a valid or fraudulent transaction within 250 milliseconds, said Don Bush, Kount’s vice president of marketing.
With the CVC investment, Kount will be able to enhance its artificial intelligence to evaluate transactions, Wiskirchen said.
Kount has clients in more than 180 countries. Over the last few years, the world has been making a transition from the magnetic strip technology used on credit cards for nearly 50 years to EMV cards that embed a chip in the card to make in-store transactions secure. Credit card fraud thus has shifted to the less secure online and mobile world.
The United States was one of the last countries to adopt EMV chip technology, as an October 2015 deadline was put in place to make businesses, rather than credit card providers, liable for fraudulent charges if EMV equipment was not used to process credit cards.
“It was the right time to look for a partner to finance us,” Wiskirchen said.
CVC Capital Partners, with a presence in 18 countries in Asia, the U.S. and Europe, was established in 1981 and set up CVC Growth Partners in 2014 to target growth-oriented companies in the software and technology-enabled business services sector.
“The payments fraud and security industry is one that we have been actively targeting for a while, and we identified Kount as the obvious industry leader,” said Jason Glass, managing director at CVC Growth Partners in a release. “Kount’s long track record of success in a rapidly expanding market will become even more critical to merchants and payment processors as mobile and Internet commerce grows.”