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Anti-fraud startup Shape Security has tipped over the $1 billion valuation mark following its latest Series F round of $51 million.
The Mountain View, Calif.-based company announced the fundraise Thursday, bringing the total amount of outside investment to $183 million since the company debuted in 2011.
C5 Capital led the round, along with several other new and returning investors, including Kleiner Perkins, HPE Growth and Norwest Ventures Partners.
Shape Security protects companies against automated and imitation attacks, which often employ bots to break into networks using stolen or reused credentials. Shape uses artificial intelligence to discern bots from ordinary users by comparing known information such as a user’s location, and collected data, like mouse movements, to shut down attempted automated logins in real time.
The company said it now protects against two billion fraudulent logins daily.
C5 managing partner André Pienaar said he believes Shape will become the “definitive” anti-fraud platform for the world’s largest companies.
“While we expect a strong financial return, we also believe that we can bring Shape’s platform into many of the leading companies in Europe who look to us for strategic ideas that benefit the entire value-chain where B2C applications are used,” Pienaar told TechCrunch.
Shape’s chief executive Derek Smith said the $51 million injection will go toward the company’s international expansion and product development — particularly the capabilities of its AI system.
He added that Shape was preparing for an IPO.
Correction: A draft of the company’s funding news said Shape had raised $173 million to date. The company said this was a typo and has in fact raised $183 million.
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Bots are ruining the internet.
When they’re not pummeling a website with usernames and passwords from a long list of stolen credentials, they’re scraping the price of hotels or train tickets and odds from betting sites to get the best data. Or, they’re just trying to knock a website offline for hours at a time. There’s an entire underground economy where bots are the primary tools used in automating fraudulent purchases, scraping content and launching cyberattacks. Bots are costing legitimate businesses money by stealing data, but also hogging system resources and costly bandwidth.
Clearly, the existing approach of playing bot Whac-A-Mole isn’t working.
“Until now you just had to suck it up as a cost of doing business,” said Johnny Xmas, director of field engineering at Kasada, an anti-bot startup that strikes at the heart of the bot economy itself by frustrating bots with complex tasks.
Their system is simple enough. Bots, said Xmas, are the “white noise” of the internet. Once a bot is started, they keep going until they’re told to stop or their job is done. Kasada tricks bots into thinking that their job is never done. By serving up a small but difficult math puzzle before the site even loads, it tricks the bot into spending its time solving the puzzle and not scraping the site as it thinks it’s doing.
Weeks earlier, Xmas tweeted a photo of Kasada’s proprietary platform Polyform. A single bot made close to four million requests to a website in a single day. Instead of loading the target website, Kasada pushed its randomly generated JavaScript code that loads silently in the browser to the bot instead. For more than 24 hours, the bot was sinking all of the cloud processing resources into trying to solve an impossible math challenge.
“This guy’s [cloud] bill is going to be nuts,” he tweeted.
We troll bots for a living. This one made 3.7M unsuccessful HTTP requests in 24 hrs, and we responded to each with a js cryptographic challenge, which effectively tarpits the bot by sucking up CPU resources. Expensive, Lambda CPU resources. This guy’s AWS bill is going to be nuts pic.twitter.com/erfuvvQmru
— Johnny Xmas @Kasada_io (@J0hnnyXm4s) January 4, 2019
The company’s aim isn’t to defeat the bot, but the reason for starting it in the first place, said Sam Crowther, Kasada’s co-founder, in a call with TechCrunch. “We cost them money, making their projects not fiscally viable,” he said.
Here’s how it works. Each time someone — or something — visits a website, Kasada accurately fingerprints the requester, using several methods to determine if it’s a bot or not. If not, the site loads as if nothing happened, taking only a few milliseconds off the load time. If it’s a bot, Kasada throws the bot the puzzle, keeping it busy. The bot thinks the website has loaded and doesn’t trigger any warnings on the back-end, all while busily plunging its resources into trying to understand and solve the math problem. “You don’t want to alert the person behind the bot, or they’ll just keep trying,” said Crowther. That’s when the bot starts churning more and more of its resources, and eventually topping out. “The human launches the bot and walks away,” he said. “Often the account maxes out and runs out of money long before the human comes back.” Even if the bot is automatically adding more resources, it won’t ever solve the puzzle. All while the processor usage is spiking, the bots don’t have the resources to target other sites — whether it’s a paying customer or not, said Crowther.
“We’re cleaning up the internet,” said Xmas. “We want to disenfranchise bots from operating to begin.”
False positives are rare — just 0.07 percent of all requests are mistakenly flagged. The team often found that more often than not it’s an old, legacy browser that’s mistakenly flagged its fingerprinting, or that the browser is exhibiting bot-like behaviors through a malicious Chrome extension, for example. Xmas said the service sends a CAPTCHA puzzle to solve in case, allowing the human through.
Bot authors take weeks or even months to develop code that will target specific kinds of sites hoping for a big eventual payoff, Crowther explained. Retail outlets, hotels, major financial institutions and realty listings — all revenue-making customers in the company’s portfolio — are at risk of bots that, if successful, could reap a huge reward.
“One bot targeted a betting company we protected, grabbing odds so that the most cost-effective bets are being placed at the micro-level — like stock trading,” said Xmas. “They’ll put months into a bot that’ll defeat every bot detection system.”
But already the team is finding some bot owners meeting their match.
In one case, Crowther and Xmas — both based in the company’s Chicago office — said they had one company, which they declined to name, was the target of account fraud and scraping. The company came in and stopped the automated logins and scraping of identity documents — preventing a wider attack hitting some 30,000 consumers from identity theft.
“One case we had a betting site where 95 percent of the traffic were bots,” said Xmas. “Think of that. You’re paying for tons of servers, tons of bandwidth because you think you’re doing a ton of business — and you’re making a lot of money so it seems rational,” he said. “Then you find out that 95 percent of that was trash.”
“At first we thought, ‘oh shit, what did we break?’,” he said. “It turns out we broke an insane botnet.”
The two recalled how one suspected bot operator was so frustrated by the company’s anti-bot countermeasures, he sent an abusive note to the company.
“The guy who was running some bots figured out it was us who was stopping them,” said Xmas. “And he went to our website, hit the contact us button, and wrote a very angry letter.” Crowther said that the company caught the bot controller’s IP address because he submitted the “not very nice email” through its contact form. “We found out that he was located in Sydney,” where one of the company’s offices is located. Xmas joked that he told Crowther, knowing who the bot operator was, to “send him a t-shirt.”
Or, better yet, Xmas said, “take that angry email, blow it up, and make it the wallpaper in our Sydney office.”
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Microsoft has been all in on AI this year, and in the build versus buy equation, the company has been leaning heavily toward buying. This morning, the company announced its intent to acquire Xoxco, an Austin-based software developer with a focus on bot design, making it the fourth AI-related company Microsoft has purchased this year.
“Today, we are announcing we have signed an agreement to acquire Xoxco, a software product design and development studio known for its conversational AI and bot development capabilities,” Lili Cheng, corporate VP for conversational AI at Microsoft wrote in a blog post announcing the acquisition.
Xoxco, which was founded in 2009 — long before most of us were thinking about conversational bots — has raised $1.5 million. It began working on bots in 2013, and is credited with developing the first bot for Slack to help schedule meetings. The companies did not reveal the price, but it fits nicely with Microsoft’s overall acquisition strategy this year, and an announcement today involving a new bot building tool to help companies build conversational bots more easily.
When you call into a call center these days, or even interact on chat, chances are your initial interaction is with a conversational bot, rather than a human. Microsoft is trying to make it easier for developers without AI experience to tap into Microsoft’s expertise on the Azure platform (or by downloading the bot framework from its newly acquired GitHub).
“With this acquisition, we are continuing to realize our approach of democratizing AI development, conversation and dialog, and integrating conversational experiences where people communicate,” Cheng wrote.
The new Virtual Assistant Accelerator solution announced today also aligns with the Xoxco purchase. Eric Boyd, corporate VP for AI at Microsoft, says the Virtual Assistant Accelerator pulls together some AI tools such as speech-to-text, natural language processing and an action engine into a single place to simplify bot creation.
“It’s a tool that makes it much easier for you to go and create a virtual assistant. It orchestrates a number of components that we offer, but we didn’t make them easy to use [together]. And so it’s really simplifying the creation of a virtual assistant,” he explained.
Today’s acquisition comes on the heels of a number of AI-related acquisitions. The company bought Semantic Machines in May to give users a more life-like conversation with bots. It snagged Bonsai in June to help simplify AI development. And it grabbed Lobe in September, another tool for making it easier for developers to incorporate AI in their applications.
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The Discord gaming community boasts 150 million members and 46 million active monthly users, who spend their days chatting about games, finding people to play with and looking for advice on how to resolve issues. Up until now, game publishers have had to monitor public discussions looking for people who need help or relied on expert users to assist them, but that’s about to change with Zendesk’s new Discord support bot.
Zendesk VP of product and platform, Luke Behnke, says they count a fair number of gaming companies as customers, and they have been looking for a way to have more direct communication with Discord users right where they play. With the Zendesk-Discord integration, users can request help by typing /support, and then the nature of the problem. This activates the Zendesk bot and triggers the creation of a help ticket, paving the way for a customer service rep to work directly with a person having an issue.
Calling the Zendesk bot in Discord. Screenshot: Zendesk
Prior to this, the only way that the game publishers could use Zendesk to generate help tickets was through the traditional sources like email, texts or phone calls, which required their users to leave the flow of the game. This integration allows the publishers to let the customers come to them for help without leaving the community.
Behnke says his company has been talking to Discord, whose members generate more than 530 million messages a day, about creating an integration that would work for their users. “We worked with Discord on this and they have been testing it internally and giving us feedback,” he said.
Conversation with game publisher CSR using Zendesk-Discord bot. Screenshot: Zendesk
Of course, it requires people know that you type /support to activate it, but Behnke believes that if the integration works well, word will get around that this is a useful way to get support directly from the publisher without leaving Discord. He says his company sees this as a unique approach to customer service, one that the gaming publishers, who tend to be innovative, are particularly open to.
Future updates could include the ability to push messages to the community such as information on an outage, or for the bot to answer common questions without accessing a human CSR. For now, this integration is in early release. The company is still working out the kinks with publishers, but they hope to get it into full production by the end of the year.
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Increasingly we are going to be having bots conducting business on a company’s behalf. As that happens, it is going to require a trust mechanism to ensure that bot-to-bot communication is legitimate. BotChain, a new startup out of Boston wants to be the blockchain for registering bots.
The new blockchain, which is built on Ethereum, is designed to register and identify bots and provide a way for companies to collaborate between bots with auditing capabilities built in. BotChain has the potential to become a standard way of sharing data between bots in a trusted way.
The idea is to have an official and sanctioned place for companies to register their bots securely. As the organization describes it, “BotChain offers bot developers, enterprises, software companies, and system integrators the critical systems, standards, and means to validate, certify, and manage the millions of bots and billions of transactions powered by AI.
Photo: allanswart
The company was created by the team at Talla, a bot startup in Cambridge, but the goal is to open this up to much larger community of partners and expand. In fact, early partners include Gupshup, a platform for developers and Howdy.ai, B2B enterprise bot developers along with Polly, CareerLark, Disco (formerly Growbot), Zoom.ai, and Botkeeper.
BotChain is the brainchild of Rob May, who is CEO at Talla. He was formerly co-founder and CEO at Backupify, which was sold to Datto in 2014. He recognized that as bot usage increases, there needed to be a system in place to help companies using bots to exchange information, and eventually even digital currencies to complete transactions in a fully digital context.
May believes that blockchain is the best solution to build this trust mechanism because of the ledger’s nature as an immutable and irrefutable record. If the entities on the blockchain agree to work with one another, and the other members allow it, there should be an element of confidence inherent in that.
He points to other advantages such as being decentralized so that no single company can control the data on the blockchain, and of course nobody can erase a record once it’s been written to the chain. It also provides a way for bots to identify one another in an official way and for participating companies to track transactions between bots.
Talla opened this up to a community of users because it wants BotChain to be a standard way for bots to exchange information. Whether that happens or not remains to be seen, but these types of projects could be important building blocks as companies look for ways to conduct business confidently, even when there are no humans involved.
BotChain has raised $5 million USD in a private token sale to institutional investors such as Galaxy Digital, Pillar, Glasswing and Avalon, according to the company.
In addition, they will be conducting another token pre-sale starting this Friday to raise additional funds from community stakeholders. “This token sale is a way to give [our community] access. Purchasing these tokens allows users to start registering their assets and create chains of immutable records of what their machines have done,” May explained. He said the company expects to sell about $20 million worth of tokens this year.
You can learn more about Botchain from this video:
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If you’ve tried to deal with a bot before you can speak to a human customer service rep, you know how frustrating that process can sometimes be. Sure, there are basic tasks that can free up a human rep to handle the more difficult matters, but it can be exasperating when there is no easy way to talk to a person. Agent IQ, a startup that has developed customer service bots, acknowledges… Read More
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We live in world where bots are operating all over the internet. Like Glinda in the Wizard of Oz asking Dorothy if she is a good witch or a bad witch, network admins simply want to determine if a bot is there to help or harm. It’s not always easy to know. That’s where Stealth Security comes in. The 4-year old startup wants to help you defend against automated bot attacks. Today,… Read More
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Just a few weeks ago I was in Utah for the holidays, spending time with the many family members my husband and I both have there. At one family gathering, a cousin began talking about how he bought a brand new home and sold his own home all without a real estate agent on a site called Homie. Read More
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Buying event tickets online isn’t a great experience. Sites like Ticketmaster are the default, but are difficult to use and expensive. A startup called Lea wants to offer a more modern experience by combining event search, discovery, seat selection and payment all in a single application that works right in Facebook Messenger. Read More
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It’s been just over a year since Salesforce introduced Einstein, a set of artificial intelligence technologies that are designed to underlie and enhance the Salesforce product set. Today, at Dreamforce, the company’s enormous customer conference taking place this week in San Francisco, it announced myEinstein, a package of tools it created to help developers and Salesforce… Read More
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