Prelude is a relatively new French startup focused on SMS authentication. On Wednesday, it announced new funding from Singular and Seedcamp. The founders met while working at Zenly, a popular location-sharing app with tens of millions of users that was acquired by Snap (and later shut down). You might not think much about these verification codes, but the Zenly team has thought very hard about this topic. It turns out that implementing SMS verification codes that work reliably can be quite tedious.
“Originally, when I started looking at this problem at Zenly, there was only one provider. To be honest, when I joined the company, I thought this problem would be resolved within a few months and I could move on. After all, I spent most of my three years at Zenly working on this problem, and I built a team around it,” said Matias, co-founder and CEO of Prelude. Berny (pictured above, left) told TechCrunch.
You probably don't pay for text messages on your personal phone, but your communications provider still charges businesses for text messages. Also, if you have a large user base, SMS authentication can become a very expensive cost center.
In late 2023, the Signal Foundation shared operating budgets for popular messaging apps and services. SMS verification codes alone cost $6 million annually. For comparison, storage, servers, and bandwidth collectively account for $7 million annually.
You might think it's expensive, but at least this is a problem that's already been solved. After all, a few years ago Twilio made it easy to send SMS using programmatic calls. Other companies have followed suit with SMS verification APIs.
However, when you request a verification code, your request passes through multiple phone companies and various intermediaries across multiple countries. This patchwork means that even if it doesn't fail completely, it may take a while before you receive your verification code.
“What we've built at Zenly, and what we're building now at a larger scale at Prelude, is really the Skyscanner of phone number verification. We always find the best route to verify a user's phone number. ” said Barney.
This feature alone can help businesses improve their conversion rates. But businesses also save money because new customers don't have to hit a “resend code” button if they don't get anything.
“There are a lot of problems to solve beyond the smart routing aspect of the product,” Barney says. Fraud is one of them. “There are fake users who ask for fake codes to authenticate fake numbers with the aim of receiving a portion of the SMS charges,” he added.
According to the Prelude team, these fraudulent intermediaries that generate fake users and create artificial SMS traffic can account for 30% of SMS verification codes. That's why the startup uses a variety of signals to identify fake virtual numbers and stop texting in the first place.
Prelude also doesn't charge customers for the number of text messages the startup issues. Align incentives with your own customers to charge a fee per verification. That's why Prelude supports other messaging services like WhatsApp and Viber. Authentication is more important than SMS.
Many popular consumer apps already use Prelude, including BeReal and Locket. Companies in the fintech and cryptocurrency industries, such as Alma, Sunday, and Bitstack, also rely on Prelude for phone number verification.
The startup has raised $8 million to date, with Singular and Seedcamp leading the company's seed round, with participation from various angels. All told, the company says it has verified the phone numbers of 100 million different user accounts.