Squeezed by Competitors And Finances, Jumio Sees a Savior in Facebook’s Co-Founder

Online and mobile-authentication technology provider Jumio Inc. filed for bankruptcy protection and put itself up for sale Monday, but the Palo Alto, Calif.-based firm expects to live on thanks to support from Facebook co-founder Eduardo Saverin.

Saverin, an early equity investor who has injected at least $23 million into Jumio and also holds $15.5 million of its secured debt, has formed an entity called Jumio Acquisition LLC that plans to buy Jumio Inc.’s assets in a so-called “stalking-horse” auction overseen by the U.S. Bankruptcy Court in Wilmington, Del. Such sales are designed to prevent low-ball bids but also leave a company open to accepting a potentially higher bid than that of the stalking horse, in this case Jumio Acquisition.

Saverin’s entity has committed to providing Jumio with $3.7 million of debtor-in-possession financing so the company can keep operating as it undergoes Chapter 11 reorganization. The Wall Street Journal reported that Saverin plans to buy Jumio for $22 million, much of which will be in the form of debt forgiveness.

“The fair and orderly process announced today will allow Jumio’s new management and its employees to continue to serve its top-tier customers and to realize the company’s potential,” Saverin said in a statement.

Jumio, whose customers include Airbnb, United Airlines, and money-transfer provider WorldRemit, provides several products that enable e-commerce merchants, financial institutions, and other clients to verify the identity of customers and increase transaction security. Its Netverify service takes images from an ID such as a driver’s license that are supplied by a Webcam or smart-phone camera and looks for inconsistencies between printed data and data encoded in the bar code. Jumio added a biometrics feature to Netverify in 2013 that compares an ID’s photo with a photo of the person supplying it.

Jumio’s Fastfill service facilitates quick customer on-boarding and the populating of customer information into data fields for fast e-commerce checkouts. In 2014, Jumio introduced a service for m-commerce merchants called BAM Checkout, which combined payments capability with identity verification on smart phones and tablets.

Payments-technology researcher Rick Oglesby, president of AZ Payments Group LLC, says “Jumio’s technology definitely has a place.” But he notes that PayPal Holdings Inc., Uber, Apple Inc.’s Apple Pay m-commerce service, and others are using similar technologies to facilitate consumer enrollment into mobile apps and for card processing.

“When PayPal wanted to acquire this technology and bring it in-house, it acquired Jumio’s competitor Card.io,” Oglesby tells Digital Transactions News by email. “And now Jumio faces new competition from Apple Pay’s, Android Pay’s and Samsung Pay’s in-app purchase capabilities. So despite being an innovator in the market with a very useful technology, it didn’t achieve a quick sale to a larger player, and now the larger players are direct competition.”

Jumio, which said that as a startup it doesn’t yet cover its costs through operations, also faces internal problems that led to the bankruptcy petition, according to a declaration filed with the petition by chief executive Stephen Stuut. Last year, the company restated its financial results for 2013 and 2014 because of errors involving revenue recognition, the declaration says. The company’s board of directors also engaged a special counsel to investigate secondary sales of Jumio’s common stock by some executives, including then-CEO Daniel Mattes, who resigned in April 2015.

Governmental entities also are investigating the financial restatements and stock sales, the declaration says. “In light of the government investigations and restatement of financials, Jumio has been unable to raise additional funds through either equity or third-party debt raises,” the document says. “This has left Jumio with few alternatives.”