In the ever-evolving landscape of financial technology, where innovation and security must coexist, DataVisor emerges as a beacon of hope against the rising tide of sophisticated fraud. Founded by two brilliant scientists, Yinglian Xie and Fang Yu, DataVisor has carved a niche for itself by deploying cutting-edge unsupervised machine learning to detect and prevent financial scams. Their journey, marked by academic excellence and entrepreneurial grit, underscores the transformative power of technology in safeguarding the digital economy.
The narrative begins in 2006, a pivotal year for Yinglian Xie, who, after completing her Ph.D. at Carnegie Mellon University, sought the ideal environment to further her research on internet security threats. Her focus was on identifying potential vulnerabilities by analyzing correlations between seemingly unrelated events—a concept that would later become the cornerstone of DataVisor's technology. Her search led her to Microsoft Research's Silicon Valley labs, a hub of technological innovation and intellectual prowess, where she joined a team of renowned experts, including multiple Turing Award laureates.
Just three weeks later, Fang Yu, having earned her Ph.D. from the University of California, Berkeley, with a thesis also centered on internet security, joined the same lab. The two women, who had grown up in close proximity near Suzhou, China, quickly forged a strong bond, both personally and professionally. Their shared background and academic interests laid the foundation for a fruitful collaboration that would eventually lead to the creation of DataVisor.
Their time at Microsoft Research was incredibly productive, marked by numerous academic papers and groundbreaking research. However, Xie and Yu felt a growing desire to translate their theoretical work into real-world solutions. They envisioned a platform that could proactively detect and prevent fraud, rather than merely reacting to it. This ambition fueled their decision to embark on an entrepreneurial journey, leading to the establishment of DataVisor in 2013.
DataVisor's core technology revolves around unsupervised machine learning, a sophisticated form of artificial intelligence that analyzes unlabeled data sets to uncover hidden patterns and correlations. Unlike traditional machine learning, which relies on labeled data to train algorithms, unsupervised learning allows DataVisor to identify emerging fraud schemes in real-time, without prior knowledge of specific attack patterns. This capability is crucial in the fight against modern fraud, which is characterized by its dynamic and adaptive nature.
The company's patented algorithms can detect subtle connections between seemingly unrelated events, enabling it to identify and disrupt fraud networks before they can inflict significant damage. For example, DataVisor can detect when a fraud ring targets a specific demographic, such as elderly customers with high transaction volumes, by analyzing their behavior and identifying anomalies that would otherwise go unnoticed. This proactive approach to fraud detection sets DataVisor apart from its competitors, who often rely on reactive measures that can only mitigate the damage after it has occurred.
The effectiveness of DataVisor's technology has been validated by its growing list of clients, which includes major financial institutions and fintech companies such as SoFi, Affirm, and Marqeta. These companies rely on DataVisor to protect their customers from a wide range of fraud threats, including account takeovers, fraudulent loan applications, and payment scams. The company's ability to provide end-to-end fraud prevention solutions, from user onboarding to transaction monitoring, has made it an indispensable partner for businesses operating in the digital economy.
In 2024, DataVisor's revenue surged by 67% to $50 million, a testament to the company's growing market presence and the increasing demand for its services. This impressive growth has earned DataVisor a spot on Forbes' Fintech 50 list, recognizing it as one of America's most innovative fintech startups. The company's success is a direct result of Xie and Yu's unwavering commitment to innovation and their ability to translate complex scientific concepts into practical solutions.
The journey to success was not without its challenges. Initially, DataVisor focused on serving tech companies by identifying abuse of promotional offers. However, as the market for these services dwindled, the company pivoted its strategy to target financial institutions, which were rapidly digitizing their operations. This shift required a significant overhaul of DataVisor's product offerings, transforming it into a comprehensive fraud prevention platform.
The pivot was not immediate, and Xie has stated that it took two or three years to completely transform the product. This transformation involved making the algorithms more end-to-end, which created a one stop shop for fraud prevention. DataVisor raised $40 million in December 2022, led by Brighton Park Capital, to assist in its reinvention. It took a lower $260 million valuation for that round, according to Pitchbook, at a time when investors’ enthusiasm for fintechs was sinking, bringing its total funding to more than $100 million. Forbes estimates the two founders have collectively retained around 25% of the company.
Xie describes the change in market sentiment in 2022 as a “reality check” for her and her board after the previous year set a high bar for valuations. But she never felt serious pressure to bring in more experienced managers to raise another round. Instead, she says DataVisor ended up with multiple term sheets to consider and chose to partner with Brighton Park, a growth equity firm based in Greenwich, Connecticut, which believed in her long-term vision.
“That was a point where we needed additional funding to bring us to the next level,” says Xie. “We were very confident that we still had the best technology in the world.”
The company's success can also be attributed to the founders' exceptional academic backgrounds. Both Xie and Yu were star students, with Xie ranking first in her computer science class at Peking University and Yu interning with the founding members of Microsoft Research Asia while an undergraduate at Fudan University. Their academic achievements laid the foundation for their groundbreaking research and their ability to develop innovative solutions to complex problems.
Their decision to pursue graduate studies in the United States reflects their belief in the country's leadership in computer science research. They obtained green cards and eventually became U.S. citizens, further cementing their commitment to contributing to the American tech landscape. Their work at Microsoft Research, where they published numerous influential papers, demonstrated their ability to push the boundaries of technology and develop novel approaches to solving real-world problems.
The founders’ journey from academic research to entrepreneurship is a testament to their vision and determination. They recognized the potential of their research to address the growing problem of financial fraud and took the bold step of launching their own company. Their ability to translate complex scientific concepts into practical solutions has been the key to DataVisor's success.
DataVisor’s 50 customers now include buy-now, pay-later firm Affirm, digital bank SoFi and card issuer Marqeta. Although that customer count is paltry compared with identity verification firms like Persona or Socure which serve thousands of businesses, DataVisor promises a deep relationship covering everything from onboarding users to monitoring their transactions and wire transfers. Customers pay an annual subscription fee that varies based on the volume of events they need DataVisor to process.
Xie says many customers now come to DataVisor looking to consolidate their fraud-fighting efforts after finding that trying to integrate several different vendors creates headaches and inconsistencies. That handholding and holistic approach allows DataVisor to charge more for each additional customer than the competition. “Over time, we hope that gives us a pathway to become a much bigger company,” she says.
The story of DataVisor is not just about technological innovation; it is also a story of perseverance and resilience. Xie and Yu faced numerous challenges along the way, from navigating the complexities of entrepreneurship to adapting to the ever-changing landscape of the fintech industry. Their ability to overcome these challenges and maintain their focus on their mission has been instrumental in their success.
In conclusion, DataVisor stands as a testament to the power of innovation and the transformative potential of technology. The company's success in combating financial fraud is a direct result of the founders' vision, expertise, and unwavering commitment to excellence. As the digital economy continues to evolve, DataVisor's technology will play an increasingly important role in safeguarding businesses and consumers from the ever-present threat of fraud.
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