Top Deal: Protecting Biometric Information against Identity Theft

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The Trust Stamp team has been selected as a “Top Deal” by KingsCrowd. This distinction is reserved for deals selected into the top 10% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to


Identity theft is a major concern in this day and age. It is a complex topic due to the many different forms it can take. Unfortunately, this phenomenon is likely to worsen as the world continues to move towards more digital transactions and a greater digital presence. One area that has become a hotbed in recent years is the use of biometric information. Initially, biometrics were thought to be a solution for identity theft because the data collected from scans of people’s faces, palms, irises, fingers, or voices was so unique. Many companies, governments, and other organizations prefer to use biometric authentication due to that uniqueness. However, there is one major drawback to biometrics which has now been realized: it cannot be replaced if it is hijacked by hostile parties. Fingerprints and irises are permanent to an individual, so if that information is stolen they have no way to recover or replace it.


Trust Stamp was formed to address these industry shortcomings. The company takes an individual’s biometric information and combines it into what they call a single EgHash identity. The EgHash is a tokenized code, in essence, that represents that person because it takes multiple aspects of biometric information (i.e., fingerprint and voice and iris scan) and mixes it together. The process is irreversible according to management, which means that third parties cannot use any means to undo the encryption and separate the underlying data out. However, the data can be updated over time, allowing changes in a person’s biometrics (some do change like gait or voice).


Once the data collection and infusion processes are complete, the company’s system then links the anonymized EgHash to desired data, such as a username. This linkage allows one-to-one matching to occur when the users in question engage in future authentication. Trust Stamp already has major customers like Mastercard International and Synchrony Financial. It has also been involved in several startup programs like Plug and Play, Mastercard Start Path, QC FinTech, and more.


The company’s technology has wide-ranging implications for society if it is adopted in a meaningful way. As management discussed in its investor presentation, the technology can be used in several different ways. One scenario the company gave involved bank account protection. On the company’s app, you can take a ‘secure-selfie’ and take a photograph of the ‘ID’ created by their app. Once verified, users receive a PIN that they can use to regain access to the platform. This form of security was instrumental in busting 63 fraudsters and identifying 33 suspects last year alone.


Another big piece of the business involves what management refers to as Lakes. These are pools of EgHashes that allow organizations that have proper access to query new EgHashes against their existing ones. The objective is to find matches with the aim of either updating existing EgHashes or matching with them. These Lakes are often held in the public or private cloud, but they can be held on an organizations’ servers as well.


Management has big plans for their business. They have so far identified multiple ways to generate revenue from their technology. The first is to charge biometric service providers and other customers for their services on a pay-per-use basis. In addition to that, for multi-tenancy ID Lakes, the company plans to charge management fees and usage fees. The company intends to generate revenue from ‘zero-knowledge-proof interrogation of and between’ Lakes, which will be done on a per-use basis as well.


Part of the process also involves the use of AI. An example of this involves the company’s system employing AI to determine whether multiple EgHashes come from the same face. They would have the AI search for matches using probabilistic processes. Once matched within the Lakes, it would complete anything else required as part of the authentication process.

Despite only launching their monetized system in 2018, Trust Stamp has done well to grow. That year, revenue came in at $834,660. In 2019, this expanded to nearly $2.11 million. This growth is great for investors to see, and what’s even better is that management expects sales to grow to $3.70 million this year. One area the company really needs to work on, though, is its bottom line. In 2018, the business generated a net loss of $2.62 million. This metric did narrow to $2.14 million in 2019, but it’s still a big loss. What’s worse is that most of this is cash-based. You can see this by looking at the firm’s operating cash flow. In 2018, its net cash outflow was $2.29 million. Last year, this was $1.68 million.

A Large Market

The market opportunity facing investors here is quite large. It’s also growing at a nice clip. According to one source, in 2018, the global market for biometric authentication services was pegged at $18.81 billion. Of this, North America comprised the largest share at 31.2%, or $5.87 billion. Interestingly, both Europe and Asia/Pacific are following close behind at $5.32 billion and $5.18 billion, respectively. That source did not forecast a growth rate for the industry but others have.

One, for instance, believes that this year the market for biometric authentication will be worth $26.81 billion. That source also believes the space is growing at a rate of 12.8% per annum, which would place it at about $62.78 billion by 2026. It’s not alone in having high hopes for the market. Yet another source believes the market will grow 22.54% per annum from $28.25 billion today to $51.98 billion by 2023. A more timid estimate places the industry’s size at $20.15 billion, but with an annualized growth rate of 16.3%, it should hit $42.9 billion by 2025. That same source indicated that the increase in use of biometric authentication devices at nation’s borders will increase the global market for automatic identification and other data from $55.52 billion today to $100.5 billion by 2025, implying an annualized growth rate of 12.6%.

Terms of the Deal

Many early-stage companies looking to raise capital do so using a typical Regulation CF approach. Trust Stamp is an exception to this because it’s looking to raise a great deal more than what a Regulation CF filing permits it to. The business, in all, is hoping to raise $7 million at a $25 million pre-money valuation. This is up from the $17 million pre-money valuation of its last raise. The minimum it will close with is $1.30 million, but the goal appears to be to go big. The firm is doing this by offering up preferred shares, priced at $7.79 apiece, in itself. These shares are special in that they carry a liquidation preference of 1x, which means that preferred investors would receive all they invested into it should the entity shut down. Of course, these shares are subordinate to debt, but they are senior to common shareholders. The minimum investment required per participant in the deal is $1,000. Despite this lofty target, the firm already has $460,200 reserved.

An Eye on Management

Trust Stamp has an extensive team of qualified personnel. This team includes a CTO, a CFO, a CSO (Chief Science Officer), and many other executive-level positions. However, the two individuals who started and continue to run the organization are its co-founders. These two men are Gareth Genner and Andrew Gowasack. Genner’s most recent prior experience includes serving as the President of Pontifex University. Before that, he held the same role at Holy Spirit College. He has also been a co-founder of two different startups before, including Edevate, an online learning/education firm. He serves as the CEO of Trust Stamp as of this writing. Gowasack, meanwhile, is Trust Stamp’s President and a self-described evangelist of the product. He also serves as the President and co-founder of TrustedMail. Before this, he worked as an Agent and then as a Marketing Coordinator for Ashford Advisors.


After careful review and consideration, Trust Stamp has been rated by our team as a Top Deal. The company’s success with accelerators/incubators, as well as its ability to snare major clients, is an excellent sign by itself. What’s even more impressive is the revenue growth the firm has seen since launching. Add to this the fact that it has a qualified leadership team and it’s hard not to love what management is doing. Another positive is that it operates in a large and rapidly-growing industry. The valuation, while certainly lofty, could very well make sense if the firm’s projection for revenue ($3.70 million) this year is accurate. Though this would imply growth of 75.4% year-over-year, that’s not too hard to imagine given the 152.7% expansion seen in year two of its monetization.


However, the company is not a flawless prospect. Issues like competition and the ability for the firm’s technology to do all that it claims will undoubtedly be a risk. The former will be truer as time goes on, while the latter is truer early on. Another problem is the firm’s significant net loss and net cash outflow situation. Though improving year-over-year, the company is still losing cash. That loss can only happen for so long before the business cannot be considered viable. For now, it’s not so much an issue, but investors need to be cognizant that it does elevate the risk profile of the firm some. Even with these issues, though, we believe that Trust Stamp is a very attractive prospect for investors to consider at this point in time.

About: Daniel Jones

Daniel Jones is a graduate of Case Western University with a degree in Economics. He has spent several years as an equity analyst writer for The Motley Fool where he focuses primarily on the Consumer Goods sector but also likes to dive in on interesting topics involving energy, industrials, and macroeconomics, in addition to contributing equity research to publications such as Seeking Alpha.

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