• Prague-based VC fund Presto Ventures participated in Magic ID’s Pre-Seed round of EUR 350K
• The English startup offers a universal privacy-centered KYC solution
• Magic ID will primarily use the funds to expand its network of clients, as well as hire more talent to complement the core team and the R&D effort

This November, the well-known Czech fund Presto Ventures (invested in OTA Sync, among others) joined the Pre-Seed round of the UK-based digital identity startup Magic ID. The lead investor of the round is the British VC firm SFC Capital, and the total amount is EUR 350K.

To Build Trust Without Sharing Too Much Data

The startup’s co-founders Thanasis Mandaltsis (CEO) and Aarifa Hajamaideen (CTO) met at the Y Combinator’s Startup School. Mr Mandaltis had been an early employee of the identity verification provider Onfindo, while Ms Hajamaideen comes from large scale data, analytics, and integration projects background.

To access online services, people often share too much sensitive data about themselves – especially for regulated services like banking. Over many years, people have uploaded their Ids in dozens or even hundreds of services without control or even recollection of the flow of these documents. Meanwhile, an ill-intended third party may manage to steal a copy of a passport, pretend to be someone else, and e.g. get a credit card in an unknowing person’s name.

Another aspect is that, according to the startup’s numbers, businesses spend USD 1.5-5 on every ID verification check, which amounts to losing 10% of their funnel by every step they add to their signup process. By the time they are done, they never put that valuable data to use again. Magic ID’s co-founders have detected an opportunity to incentivize them to create more revenue out of that data while respecting users’ privacy.

Pseudonymous Reputation for Better Fraud Protection

‘Think of us as an ID Provider as a Service, where every company that works with Magic ID can benefit from being an indirect ID provider for other companies by using our software,’ Mr Mandaltsis comments.

He recalls that he was originally triggered while building the ‘grandparent’ of Magic ID back when he had worked for Onfido, – that’s when he saw the benefits it can have for both businesses and people. The co-founder also realized that photos of passports are simply not good enough to protect people from fraud in the age of AI, and the apparent solution was pseudonymous reputation to allow businesses to trust without revealing too much actual information about clients, – this is what Magic ID is about.

When the two co-founders met, they thought they were the two pieces of the puzzle to solve the issue of automated digital identification, having one co-founder coming from identity verification and decentralized identity background and the other – from a banking authentication and data background. In order to solve the problem, they needed to combine identity infrastructure and big data into UX-optimized journeys that convert users more effectively without being intrusive to their privacy.

‘In a world where everyone wants our data, Magic is like your personal identity assistant. When you use services that support Magic ID, you no longer have to fill in long forms and capture photos of your identity documents. Magic ID is your decentralized storage that contains only your information in encrypted format. That way, it reduces the incentive for bad actors to hack into it, and gives you full control over who you share it with. Lastly, Magic ID gives you the ability to selectively share proofs of your ID without the sensitive data around it. For example, your Magic IDs ‘verifiable proofs’ feature, allows you to prove you are over 18 when buying alcohol without having to show your identity to anyone. It simplifies your digital experiences and protects your sensitive data from abuse,’ Mr Mandaltsis explains.

‘In today’s digital age, users increasingly expect a user-friendly digital experience so that they can seamlessly prove their real identity in a way they know is secure and upholds privacy,’ Onfido’s CPO Yuelin Li adds.

Frontline KYC Solution to Benefit Both Businesses and Their Clients

As the Magic ID’s team came up with a hassle-free solution that allows anyone to reuse KYC information without the need to fill out one’s personal data over and over, Presto Ventures’ partner Milan Lupač is convinced that, over time, the majority of businesses will require some kind of identity verification.

‘Magic ID saves valuable resources that businesses would otherwise have to invest into traditional KYC solutions. Additionally, Magic ID will allow businesses to better target pre-verified customers to increase conversion rates and speed up onboarding. At Presto, we’re excited to support projects that make people’s lives easier,’ Mr Lupač tells ITKeyMedia.

For SFC Capital. Magic stood out because of their innovative approach, dynamic team, and their commitment to a privacy-centric and inclusive future. The fund’s investment manager Edward Stevenson states that they are excited to support Magic ID in their next phase of growth as the company brings its trusted digital identity ecosystem to more markets to empower more clients.

The startup’s blockchain-powered KYC solution supports over 2,500 types of global ID documents, covering all countries in the world, including ID cards and driving licenses, passports, residence permits, visas, etc. The verification typically takes under 30 minutes to complete. There are no geographic limitations, and Magic ID’s SDK additionally offers accessibility features that facilitate the signup process for people with special needs.

Expanding the Network and the Team

Seeing how Magic ID’s ethos is largely about encouraging client companies to share the trust within the service’s network, the growth of the network equals the growth of the startup. As such, Magic ID will primarily use the latest injection of capital to bring the product to startups and scaleups all over the UK and Europe.

‘We are also completing the key hires that will constitute our core team in the coming years, and finally, we are investing heavily in R&D to make our identity infrastructure the robust choice for companies who want to make the most of their identity data and protect their users and brand from the downsides on mismanaging it,’ Mr Mandaltsis adds.