Tony Fadell, a former Apple (AAPL) exec instrumental to the creation of the iPod and iPhone who later founded and ran Nest, the connected home appliance unit owned by Google (GOOG) parent Alphabet, has made his first ever cybersecurity investment, Fortune has learned.
The beneficiary is CashShield, a Singaporean startup that helps companies such as Alibaba (BABA), China’s largest e-marketplace, Square Enix (SQNXF), a Japanese video game publisher, and mobile carriers Vodafone (VOD) and T-Mobile (TMUS) fight online fraud. The company uses automated software tools and financial modeling techniques to analyze purchasers’ behavior and suss out fraudulent transactions from legitimate ones.
“It’s the only company in the sector with a Wall Street-style, high-frequency trading approach to weighing fraud risk for companies,” Fadell tells Fortune. “It’s clear that their technology will be in demand by many industries.”
Founded in 2008, CashShield had previously been bootstrapped by Justin Lie, the company’s founder and CEO, and a small team. The new funding, CashShield’s first ever outside investment, amounts to $5.5 million.
“A lot of tools in the market have always been trying to eliminate fraud to zero. That’s not effective,” Lie said on a call with Fortune while showing off a demo of the technology. “It feels a bit ridiculous asking clients to consider having more fraud losses, but they can increase their revenue growth this way.”
The trick then is to maximize businesses’ top line while managing risk, Lie said. “Think of it like trying to invest in a stock,” he explained, comparing the tech to the snap-decision algorithms traders use to buy or sell shares.
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Joining Fadell as backers are GGV Capital, a venture capital firm that focuses on U.S. and China deals, Heliconia Capital Management, a subsidiary of Singapore’s sovereign wealth fund Temasek, Stream Global, a Singaporean venture capital firm, and Razer, a gaming hardware maker that is also a customer.
Jenny Lee, a managing partner at GGV, is joining CashShield’s board as part of the fundraising deal.
Min-Liang Tan, Razer’s CEO, says his company relies on CashShield for its own anti-fraud program. “CashShield is tightly integrated with our online direct sales portal and it provides peace of mind with its advanced fraud prevention technologies,” the Singaporean entrepreneur said in a statement.
As part of the fundraising announcement, CashShield said it is opening its first U.S. office in Menlo Park, Calif., branching out from its current offices Singapore, Berlin, Jakarta and Shanghai. The team has grown to roughly 40 employees from only eight a year ago.
“Selling into Silicon Valley is my number one, top priority,” Lie said.
Online payment card fraud is estimated to reach $25 billion by 2020, according to the market research firm Juniper Research.
