Forter Raises $300M to Fight E-commerce Fraud | $3B Valuation

The Growing Challenge of E-commerce Fraud and Forter's Response

The expansion of e-commerce has unfortunately been accompanied by a parallel increase in the incidence of fraudulent activities. Forter, a company dedicated to combating this malicious activity, has recently secured $300 million in funding. This substantial investment underscores both the magnitude of the problem and Forter’s demonstrated success in addressing it.

Series F Funding and Valuation

This latest funding round, a Series F, has valued Forter at $3 billion. This valuation is particularly noteworthy given that it comes just six months after a previous Series E round, which valued the company at over $1.3 billion after raising $125 million.

Investment Details

Tiger Global Management spearheaded this new equity infusion. Joining them as investors are Third Point Ventures and Adage Capital Management, alongside existing backers including Bessemer Venture Partners, Sequoia Capital, March Capital, NewView Capital, Salesforce Ventures, and Scale Venture Partners.

Strategic Expansion Plans

The newly acquired capital will be allocated towards expanding Forter’s geographical reach. The company, initially founded in Tel Aviv and now headquartered in New York, also intends to enhance its product functionality and explore potential expansion into related areas, potentially through organic growth or acquisitions.

Forter's AI-Powered Fraud Prevention Platform

Forter currently concentrates on identifying fraudulent transactions at the point of sale. They have developed an AI-driven platform that continuously learns from transaction behaviors to refine its accuracy. This system also aims to minimize “false positives” – incorrectly flagging legitimate transactions as suspicious.

Future Roadmap: Remediation Services

Liron Damri, Forter’s co-founder and president, indicated that the company is planning to expand its services to include remediation efforts following fraudulent incidents. He stated that serving merchants as a comprehensive, trusted partner is their ultimate vision, making remediation a key component of their future strategy.

Strong Momentum and Investor Interest

According to Damri, who co-founded the company with Michael Reitblat, CEO, and Alon Shemesh, chief analyst, Forter wasn’t actively seeking additional funding. However, the company has experienced significant growth, with revenue and ARR doubling in the last six months, and a corresponding increase in customer volumes.

Tiger Global's Confidence in Forter

This momentum attracted substantial investor interest, ultimately leading to a partnership with Tiger Global, which Damri described as a “kingmaker” in the e-commerce sector. He believes this collaboration will provide the necessary impetus for Forter’s continued growth.

The E-commerce Boom and the Rise of Cybercrime

The past year has witnessed substantial growth in e-commerce, driven by a shift towards online transactions due to the limitations imposed on in-person commerce. While the market for cybercrime prevention tools has also expanded, the fundamental challenge remains: as transaction volumes increase, so does the need for vigilant monitoring.

The Evolution of Fraud Detection

Forter initially focused on monitoring website activity to detect suspicious behavior, such as bot activity or rapid accumulation of items. The core idea was to build a network of data to improve decision-making over time. However, the nature of the problem has evolved.

Adapting to a Changing Customer Base

As companies expanded their reach beyond early adopters and into an “omnichannel” environment, the characteristics of their customer base changed. Traditional indicators of legitimate buyers became less reliable, particularly with the influx of new e-commerce users during the pandemic. In 2020, the number of “newcomers” to e-commerce sites was seven times higher than in 2019.

Focus on Transaction Analysis and Conversion Rates

Consequently, Forter shifted its focus to analyzing activity at the point of transaction. Similar to Stripe’s acquisition of Bouncer, Forter is now prioritizing tools that identify suspicious purchases while minimizing false positives to reduce cart abandonment and increase conversion rates.

A Shift in Approach: From Suspicion to Trust

Damri explained that the traditional approach involved applying suspicion to all users, essentially assuming guilt until proven innocent. Forter, however, adopted a different philosophy.

AI-Driven Risk Analysis and Improved Outcomes

Leveraging its AI engine and risk analysis techniques, Forter aimed to approve as many transactions as possible while gradually building trust in legitimate customers. This approach proved particularly valuable during the COVID-19 pandemic. The company’s algorithms have reportedly reduced total declines by 80% and chargebacks by 60%.

Intentional Learning Through Controlled Exposure

This indicates a greater ability to identify and block fraudulent purchases while allowing more legitimate transactions to proceed. Damri also noted that Forter intentionally allows some fraudulent transactions to occur to learn how malicious actors operate – a strategy he termed “paid-tuition.”

Industry Recognition and Investor Statements

“With the unprecedented rate of digital transformation and the fierce competition in creating the slickest user experience, superior fraud prevention plays an ever more critical role in e-commerce revenue growth,” stated John Curtius, a partner at Tiger Global Management. “After we talked with dozens of customers of every relevant solution in this space, it was very clear to us that Forter is the clear leader in performance and scale.”

Ravi Viswanathan, NewView Capital, added, “As a longtime investor, it’s been incredible to see Forter’s ascent. It’s a testament to the leadership team’s vision and execution in allowing merchants to provide the seamless experiences customers expect and to be able to accept as many transactions as possible, while still accurately identifying and blocking fraud.”