The covid outbreak added wings to the business of identity verification platforms as the work from home (WFH) culture became the new normal and tech firms started online onboarding for new employees. Several startups in the space such as Digio, Hyperverge and Karza saw business ramp up consequently.
One such startup is Blume Venture-backed IDfy which managed to grow its revenue to almost 50% to Rs 56.48 crore in FY22 from Rs 37.83 crore in the previous fiscal year (FY21), according to the company’s annual financial statement with the Registrar of Companies (RoC). For IDfy, the outbreak did not just force a change in modelit was also the year it launched two key products – Video KYC and Zero Touch Onboarding. It took HDFC Bank’s Video KYC Live during the year, besides onboarding 2 delivery executives every minute for Amazon to meet surging demand for these resources.
Banking, e-commerce, capital market, insurance, gaming, and fintech are all segments it serves. As per Fintrackr’s analysis, professional fees collected from these services are the only source of income for the Mumbai-based startup.
Launched in 2011, IDfy has been through its share of pivots, especially the one from a b2C firm to a B2B firm. Now it collects information either through its platform or on its clients’ websites or apps using the platform’s APIs. Its founder and chief executive officer Ashok Hariharan recently said that its proprietary AI-stack can detect 2D, 3D, and photo deep fakes.
On the expenses side, employee benefits expenses are the largest cost center for the company contributing 47% of the overall cost. This cost grew 72.5% to Rs 36.46 crore in FY22 from Rs 21.14 crore in the preceding fiscal year (FY21).
Verification expenses are another vital cost after employee benefit expenses which remained flat at Rs 11 crore in FY22. With the growth in scale, the company’s manpower expenses (outsourced) widened by 70% to Rs 9.72 crore in FY22. The cost for website maintenance also grew two fold to Rs 6.84 crore in FY22.
The company spent another Rs 3.22 crore on rent pushing total expenditure by 67.4% to Rs 76.9 crore in FY22. With the surge in overall cost, losses of the company soared 2.5X to Rs 18.72 crore in FY22 from Rs 7.39 crore in FY21.
Due to increased expenses, IDfy’s cash outflow from operations was recorded at Rs 81 crore in FY22. On a unit level, the company spent Rs 1.36 to earn a single unit of operating revenue. With such high costs and losses, ROCE also worsened to 30.86% during the last fiscal year.
IDfy directly competes with Kartik Mandaville-led SpringVerify, Phi Capital-backed AuthBridge which received $7 million in its series B round in December last year, Digio which raised $400K in 2016 and Karza, a risk management startup which was acquired by Perfios at $80 million in February. Besides India, it has a presence in South East Asia, and the Middle East.
The market for digital authentications in India is expected to reach $2.4 billion by 2024, according to a RedCore report. Globally, the market size is estimated to reach $142 billion by 2028, according to the Fortune Business Insights Report.
The nature of the business is amenable to newer revenue models, be it a per transaction model or recurring income. For IDfy, and the competition, it will be all about using tech most effectively to deliver at scale worldwide, to repay the faith of their investors.