Yardstik Inc., a workforce screening startup that monitors companies’ employees for potential fraudulent actions, said today it has closed on a $30 million growth round of funding that brings its total amount raised to date to $65 million.
Harbert Growth Partners led the Series B round, which also saw participation from existing backers such as Rally Ventures, MissionOG, Crosslink Capital, Grotech Ventures and Great North Ventures.
The startup is trying to fix what it says is a critical blindspot in most human resources departments. Founder and Chief Executive Andrew Johnson told SiliconANGLE that most companies typically conduct background checks on their employees only once, before they’re hired. But that doesn’t take into account the fact that humans change over time, and just because employees have been given the all-clear at the time they were hired doesn’t mean they won’t become a risk later.
In fact, Yardstik cites data from the Association of Certified Fraud Examiners, which shows that the average occupational fraud scheme runs for about a year before companies detect them. This’s why the startup built its Human Trust Platform, which aims to give employers greater visibility into what their employees are up to by combining background screening with identity verification, fraud detection and continuous monitoring. The platform essentially keeps tabs on employees for as long as they’re working at the company to ensure they’re playing by the rules and not getting up to no good.
Johnson said the problem is something he has personally experienced. While working at the financial technology firm Branch Microfinance Bank Ltd., he stumbled across a case where employees were using stolen Social Security numbers in order to work at the company under another person’s identity. The scheme went undetected until the victims began receiving tax bills for working at companies they’d never heard of. It was this episode that inspired him to create the technology needed to catch these kinds of scams before they get out of control.
“The legacy background check industry was built around a single moment in time, even though workforce risk changes every day,” Johnson said. “This investment allows us to move faster toward our goal of equalizing access to modern workforce protection. Fraud signals before a check runs, monitoring after someone is hired and real-time credential visibility should be the foundation of every trust program.”
Yardstik combines artificial intelligence-powered fraud detection algorithms with candidate screening, credential verification and ongoing monitoring within a single platform. It’s designed to integrate with existing applicant tracking systems and HR workflows via a REST application programming interface, which makes it simple for companies to embed trust infrastructure directly into the platforms they’re already using.
Alongside today’s funding news, the company also announced a new Fraud Insights feature that gives HR teams a live view of aggregated risk signals across their entire workforce. This adds to the Continuous Monitoring feature that automatically enrolls all new workers into ongoing, post-hire checks.
Johnson said the need for this kind of platform is clearly apparent, as Yardstik’s data shows that one in 30 job applicants fail a government identity verification. On average, its platform flags around 2,900 incidents each year of job applicants trying to use a flagged or duplicate Social Security number.
“If a motor vehicle report comes back with something disqualifying, you don’t wait for the next renewal cycle to find out,” Johnson said. “If a license lapses the day after someone’s hired, an employer should know about it that day, not at the next annual review. It’s like the difference between a photograph and a live video feed.”
Yardstik says it has sold a growing number of customers on the value it provides. In the last year, it has grown its revenue 149%, and during that time it has a 98% customer retention rate, plus a 99.4% customer satisfaction rating. Its biggest customers include gig economy firms such as TaskRabbit Inc., Gopuff and Liveops Inc. In the case of the latter, which connects businesses to outsourced customer service staff, it was able to flag between 10% and 15% of its job applicants as risks, because they were using fake identities or credentials.
On the back of this growth and funding, Yardstik is becoming more ambitious. It wants to expand its technology with the addition of new fraud prevention defenses that can detect expiring licenses and insurance policies. It also wants to build an Office of Inspector General exclusion monitoring system to detect individuals who are barred from federally funded healthcare programs like Medicare and Medicaid.
Harbert Growth Partners’ Brian Carney said the startup’s impressive growth makes it clear that employers need this technology, because they understand that risk doesn’t disappear the moment they hire someone. “Yardstik’s 98% account retention rate over the past three years shows that customers see real value in the layered protection it provides beyond the background checks at hire,” he said.