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Supercharged biometrics market sees 9-figure funding rounds, IPOs and consolidation

Supercharged biometrics market sees 9-figure funding rounds, IPOs and consolidation
 

Investments in biometrics by venture capital, institutional investors and other businesses reached its highest-yet level in 2021, by a wide margin. As banks found themselves in dire need of biometric technologies to onboard new clients while complying with regulatory obligations, they were easily convinced of the value proposition of the companies providing those technologies. Likewise, investors were attempting to return to offices, travel and transact just like everyone else, making the need for touchless processes painfully clear.

Over the past two years, many biometrics providers who had seen a rush of customers on the horizon found them at the front door, and financial results for many show that belief in their products is shared by customers, as well as investors.

As the year continued, the funding rounds became bigger. They also drew closer together for several companies, indicating dramatically improved conditions (such as through exponential growth), and in the case of Clear funding was followed by an initial public offering.

Many of the investments were made in companies providing biometrics for remote customer onboarding and online identity verification, but hundreds of millions in backing was also funneled into businesses supplying biometric access control, wearables, and law enforcement technologies.

While hardly complete, the review below is intended to illustrate the scope of the investments over the past year.

Seed to pre-IPO funding rounds

The pace of funding rounds was fairly steady all year, but their size seemed to increase, indicating future market-size estimations being adjusted upwards.

Early in the year Tech5 raised $10.5 million, and Incode $25 million, before a further $220 million late in 2021.

Online identity and authentication companies made up the largest group of fundraisers, with Hypr raising $35 million, IDwall $38 million and LoginID $6 million, and Persona raising $50 million and then another $150 million later in the year, while Keyless raised $9.2 million and Sift raised $75 million in a two-part Series E, shortly before the latter acquired the former.

Veriff raised $69 million, Thirdfort $2.1 million, and AuthenticID $100 million.

ID.me $100 million, and then another $100 million, the same amount as Socure raised early in the year, before picking up another $450 million. Jumio raised $150 million in an early-year funding round.

In wearables, Oura also raised $100 million, while Sencure added $1.8 million in biometric wearables investment.

Clear raised $100 million to expand its biometric access control, prior to its successful IPO on the New York Stock Exchange.

In facial recognition, Paravision raised $23 million, Clearview AI raised $30 million and AnyVision (now Oosto) $235 million.

Several biometrics providers reached unicorn status during 2021, including Trulioo, which raised $394 million.

The largest single funding round in the space was Transmit Security’s $543 million round mid-year.

Early-stage startups were not left out, with ForMotiv raising $6 million and Verihubs $2.8 million.

The above funding rounds total more than $3.1 billion.

You might also consider the two combined $120 million rounds announced by Stytch as part of the group, with native device biometrics feature nearing general availability.

IPOs by biometrics providers and their partners during the year included Clear, ForgeRock and SenseTime.

The flood of venture capital into companies developing their own biometrics or integrating technologies developed by others makes clear the confidence the investment community has in biometrics adoption. The recipients serve a range of different markets with various biometric modalities and applications.

The expectation of near-future revenue that most of these investments reflect will necessarily be followed by either customer sign-ups or disappointment, so the pressure will be on for many of those above to show sustainable growth in 2022. The pattern of investment also suggests that the funding announcements will continue apace over the next year, minting still more unicorns and fueling further expansion, as well as market consolidation.

Acquisitions

In addition to the Sift-Keyless deal noted above, there were numerous acquisitions involving biometrics providers and their partners announced during the year without financial terms attached.

Jumio’s capital raise came in the midst of a strategic shift accompanied by a pair of transactions, with the latest, 4Stop, announced in December.

SecureAuth acquired Accepto, Onfido acquired Eyn, Prove added UnifyID and Signicat, Encap.

Trueface joined Pangiam, just months after Pangiam picked up veriScan.

Pindrop acquired Next Caller, while Trust Stamp picked up PixelPin, Acuant bought Hello Soda, and Entrust added WorldReach.

Avast acquired Evernym, One Identity joined OneLogin, Ping Identity bought SecuredTouch and Plurilock added Aurora Systems.

Just before the year closed, Aware announced a deal to acquire Fortress Identity for an undisclosed amount.

In a deal demonstrating the breadth of investment in biometric technology, McDonald’s sold its voice recognition unit to IBM as well.

The deals that we do have totals for, including Precise Biometrics acquiring building tech provider EastCoast for $8.8 million, Checkin.com adding GetID for $9.5 million and Datacorp for $4.7 million, IDnow merging with Ariadnext in a $59 million deal after its Trust Management acquisition, and ID R&D being acquired by Mitek for $49 million seem clear indication that prices paid in the above deals run into the hundreds of millions of dollars.

Then there are the year’s biggest biometrics acquisitions.

Acuant is becoming part of GBG in a $736 million deal.

The largest biometrics acquisition of the year is likely Microsoft’s $19.7 billion deal to take over Nuance Communications.

These investments also skip over a series of funding rounds and acquisitions involving companies that provide technologies related to biometrics and digital identity, such as computer vision and IT infrastructure providers.

The year ahead may tilt towards fewer, larger funding rounds and more acquisitions by incumbents. It may alternatively see even more early-round investments made in startups, as more established players find the resources they have, plus fast-rising revenues allow them to hold onto their equity, while investors continue to search for the next big thing. One outcome is virtually certain; expect billions to change hands again.

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