Alex Zeltcer Founder and CEO of nSure.ai

Hi, my name is San Tito. This is CryptoKid Podcast. I'm going to be talking to you guys about blockchain technology and cryptocurrency. What can the CryptoKid Podcast, I appreciate you coming on, Alex, and it's honor. So why don't you tell me a little bit about yourself in the company? Sure. So first of all, happy to be there. And thank you for having me on the CryptoKid

Podcast. So a few words about myself. I've been in the Heidek World for quite a while now. So you can see a little bit from my white hair. And I've been both in corporates and in startups about half of my career in corporates and half of it in startups, in B2B and B2C. I've been with companies delivering a voicemail and then value the services to debt

cooperators. Product life cycle management, online farmers markets, online digital gift card malls, you name it a lot of them. And recently, I've joined to run a business that was a, as I mentioned earlier, digital gift card mall. And that was about probably seven years ago now. And, and one of the main main issues we've had there was, was, dealing with fraud. We were, I don't know

if you're familiar with, you know, with payment fraud in general, but it's pretty significant issue, especially with, with digital goods. And, you know, we launched our site in the UK. And we're very happy on the first week because we ran out of inventory. And we played there. We were very sad because we realized that 40% of that 40 came back as chargebacks, which is obviously not

great. And that's where we learned, you know, how, how difficult it is to sell digital assets and digital goods online. And, and decided to invest a bit heavily. My partner, Zeev, is, is our CTO, was the city of there and is the city of here. We've invested heavily and building the infrastructure to be able to cope with fraud on our own because none of the tools

that we were trying to use was doing a good enough job. And, and probably around the end of 17 and beginning of 18, we realized that what we've built could be also by others and it's probably more, you know, more significant than the entire marketplace we've built. It was pretty big at the time we were doing slightly more than 100 million a year. So, you know,

a lot of, a lot of transactions, a lot of people. But, but the value, the technological value that we've developed was around, you know, fighting fraud and decided to spin it out and actually brought its external investors to acquire the technology and the team and created a new company based on that, which is, and Shoryi, which is the company that we're working on. We're working on

the company I am with today. Zeev is with me, is, you know, is my partner. We've been growing the company nicely over the last few years. We're now almost 50 people, based in Israel. Some, about half of us in Israel, I want to say about the third in the US and, and then the rest in Europe. And dealing primarily with the fraud for digit assets. That's

pretty amazing. That in exciting ways. How you guys grew and then you guys are continuing to keep growing, especially like fraud with fraud. So, everything that happened with FTX, I'm pretty sure people don't really have any transparency with cryptocurrency and, and their, their trust. And I'm glad to see that you guys are trying to fight that and protect from companies doing fraud. So, like, is it

a legal company? Or is, do you guys have like lawyers to help fight against fraud? How does that work exactly? Well, no. So, we're, we're a technology company and we're not, we're not fighting the type of fraud that, you know, eventually, you know, broke FTX. Not getting into the details on that. Obviously, I think that there are a lot of people that are way more knowledgeable

than I am on that, on that front. What we're dealing with is what, what is called payment fraud. So, pay for something that happens when a fraudster is using your credit card information, your paper information, your bank account information, to steal goods online. So, he would be using your credit card information. He would be going on Binance and he would be buying crypto using your credit

card. And when that happens, the, you as a consumer. So, let's say he's actually using your credit card. As a consumer, you're always protected when it's a credit card. Because if you call the issuing company, the bank that issued your credit card, and you tell them that was not my transaction, you go through your, you know, the list of transactions, the printout of transaction, you say,

hey, that's, you know, on the statement that's not my transaction, they'll give you the, the funds back. You know, you'll have to convince them a little bit, not much. But once they're convinced that it was not your transaction, tell it, provide you the funds back. But you don't know as a consumer is where do they get the funds from. And the reality is if someone used

it on Binance, they get it from Binance. The merchant who sold it, they're going to get it from Binance. And then the merchant who sold the goods, whatever the goods are to the fraudster is the one left with a payment. Okay. For any kind of what's called a card not present transaction, the merchant that took the transaction, whoever processed the transaction is reliable for the fraud.

And so like, is it like how do you guys detect that? Do you guys report that to authorities and. Very rarely what we do is, is it. In real time, we reject these transactions. Okay. So we protect Binance. We help companies such as Binance. We don't work with Binance. I'm using their name as a, you know, as a pseudonym for crypto exchanges. And we have other

exchanges we do work for. So what we do is we integrate with them. And. And in real time online, we're able to track everything that happens on the side. And then just before someone. Is taking. Transaction, they'll ask us whether to accept it or reject will answer you. So no. And we will take the liability, meaning if we're wrong. And eventually a transaction that we approved

turns out to be fraudulent, we will pay for the fraud. Oh, okay. Thank you for collecting the merchant completely. Thank you for clearing that clarifying that for us. So. What's your expectations of the company. Of ensuring. From what perspective. Like where like. Where do you see like what's your demands for to protect against fraud? Like what like your team? Like how do you want them? Like,

okay, this is, this is a goal or this customer is coming here. And they're really upset. They have like, let's say they have $100,000 from fraud. And you guys are really trying to cool them down. Like what's, what do you expect your team to do and handle that high tense situation? So it's. I think it's. It's a bit more complicated than not to be honest. Okay.

Where the main thing we're trying to do is we're trying to help merchants approve more. Okay. Let me let you a little bit. Let me take a step back for a minute. So because this is such a painful problem. And it's, and crypto. It's, it's even more painful than in others. And, and, and let me steer you away for a minute and explain why this is

so difficult in crypto. So painful in crypto. Mm hmm. Think about in general online. If you are, if you're an online retailer, you're an online merchant, whatever you're selling, whether you're selling shoes or, you know, or crypto or, or, or your transfer in funds or you're selling iPhones, you're liable for the fraud that happens on your site. Always. It is very different from a fraudster perspective,

whether you're selling digital goods and assets or physical. The reason for that is that when these are digital goods, it is very attractive for fraudsters that do this as a business. You put yourself in their shoes, fraudsters that do this as a business. What they do is they go in the dark web. They buy a list of stolen financial instruments financial instruments are pretty call information,

big account information, PayPal information, whatever payment information. They buy them. They pay per device, right? So they pay per line on this, you know, long access. They sell file that has many credit cards, per line, they pay somewhere between 10 and 50 dollars. And now they need to turn that into more cash. How do you do that when you have a list of stolen credit cards?

You buy things and you sell them. So now imagine the difference between buying and reselling the 1000 iPhones or 1000 shirts and buying and reselling 1000 codes for a game on Xbox or 1000 Walmart gift cards, digital gift cards. Or buying crypto and then, you know, off-ramping it somewhere else completely. We complete anonymity. So from a fraudster perspective, it is way more profitable, coming in trying

to come in. And they believe that the only thing that they have at their disposal is declining transactions. So what do you do when you think a transaction is for you? You will decline it. And then what happens for fraud for crypto exchanges, they decline a lot. And the average numbers in the industry are staggering. You would see more than 50% of the people that try

to buy crypto getting declined. More than 50%. That's happening maybe for it. Sorry. It's happened to me before. It's happened to anyone who is ever bought crypto. There's no question. And it's happening even more for those that come for the first time for a certain exchange. So once you've been, you know, shopping or not shopping, buying your assets on a certain exchange for a while, you

have a better chance of success. When it's the first time you go on a certain exchange, it's way lower than 50% for you to get a good exchange. Even with the KYC, even with taking your picture and taking it near the driver's license or passport or whatever, they're asking you, the chances of you getting approved is very small. What we're trying to do is we're trying

to help them grow the approval rates. Because what we do is we identify fraud based on whoever is behind the scenes based on their behavior. We're not trying to gather identity information because from our experience, the they're, you know, the, the, the, the, let's call it a detallinated fraudsters or those that do this as a business, they would go through all the hoops and loops you

give them. They'll do that very well. And you'll end up with the fraud and you'll reject many good customers. That's what really happens. So what we do is we try to avoid that. And as a result of that, we help grow the business. So if not really only about fighting fraud, it's really about helping them grow the business because the only means they have today to

avoid the fraud. So is decline transactions and by that decline, a lot of legitimate jobs. Are you referring like grow the business to like Binance and other exchanges? All of them. Yes. Okay. Okay. Any of these, you know, there are, I think there are today there are two primary, I think, or maybe three primary types of companies that are suffering from this in the crypto world.

It's the big exchanges and it's the on-run solutions. Companies such as a ramp network, as banks, as won't pay if you're familiar with them. These are the companies that help other exchanges on-run, right? They help them take fiat and convert it into crypto. These are the companies that suffer. And now recently we are seeing more and more NFT marketplaces that have decided to accept fiat as

well, credit cards or bank accounts. And they suffer from the same problem as well. Once allowing fiat to be used to purchase crypto or NFTs, you know, you open yourself to a lot of fraud. Okay. Okay. Now it's all starting to make sense to me now. So what's your roadmap for 2023? So we're seeing really interesting patterns in the clients we're working with in the last

couple of years. We're seeing a lot of social engineering patterns. We're seeing a lot of scalable fraud attacks that are, you know, it's machines, right? It's all bots that are, you know, trying to flood, you know, trying to flood the site and by as much as they can. So our roadmap is primarily from a technology perspective is staying ahead of the fraudsters. We have, you know,

we're based on machine learning, the entire infrastructure is machine learning based. So it's training. And I'm hoping for each of the clients to make sure that we're as accurate as possible. And it's adding many more features on each and every one of those based on attacks that we're seeing. But there's a lot of work there. But the most important element, I think, is expanding our reach

within crypto and NFT. We're working with a number of very large players now to include our services as part of their platform. And that would be a major milestone for us in 2023. Okay. The crypto winner, everybody is kind of feeling blue and it's not really hyped about cryptocurrency and blockchain technology. So how are you, how are you embracing this? Is it like we didn't out

the the um is it we didn't out those who are not really involved with crypto that just jump on the train. Does it make sense? Yeah, no, so I'll tell you what we're seeing. So what we're seeing is we're seeing a lot less traffic on the crypto to crypto. We're seeing that traffic. We're not helping on that angle. Right. We we don't have the means to

help on that. We're helping only when fiat is turned into crypto. So we're seeing that there's a decline on, you know, on the trade volumes. There's very limited decline on the fiat to crypto. We are still seeing people purchasing and primarily Bitcoin and ether, not the rest of it, but primarily Bitcoin and ether. And if you look at bitter Bitcoin, it was anyway, you know, the

vast majority of the of the purchases before it still is. And I think that now people are starting to see it more as an opportunity, especially the, you know, the specular that the guys that are trying to do this as a business on their side. They see that as an opportunity, right? The rate at which the Bitcoin and ether are at today is you there's an

opportunity for them for the future. So we're actually seeing a lot of the merchants were helping increase their volumes over the past couple of months. After they're going to be able to get a lot of money, they're going to be able to get a lot of money. They've decreased since the, you know, since middle of last year. Yeah, like just like a Warren Buffett says. Buy

when it's low, sell when it's high. Exactly. Yes. Very simple. Right. Very simple. But people don't always listen to that. I don't know why you got you have people. You have millionaires billionaires that write books about this. And then, and then the majority just like, oh, no, I know, I know better. I know better than them. So I'm not going to do it my way. And

then they end up getting greedy. And then they end up losing everything and getting the divorce and losing house. So it's like, it's hoping doesn't get that. That's right. That's right. So can you share any like events or moves that's going to happen with ensure ID or ensure AI. And so, you know, where are stock up company, right? So a stock up company is always. On

a journey to reduce risks. Right. It's it starts from. From reducing the risk of can it work? Right. The first thing you're trying to do as a startup is prove that your idea can actually work. And you go, you implement what what the industry calls an MVP, a minimum minimum viable product. And you tested with a client or two. And you see whether it provides the

value. So that's the first risk where we've done that. Second risk is one. But it's normally called this product market fit. Product market fit means you've identified enough people and we'll talk about what enough is in a minute, but enough people that are willing to pay for your service more than what it costs you to deliver it. So because you know, for instance, there's a I

can share with you a service that I know has a great product market fit. It's not a but it's not a very good business. Let's say I have a service where you come in with a dollar. I give you two. Every dollar you give me, I give you two. Right. The product market fit is everybody. Right. Everybody's going to want to come in, give me a

dollar and get back to and try to do that as much as they can. And obviously that's not a good business for me. So what I want to do is find people willing to give me a dollar for something that it costs me to do half a dollar. Right. And then it's still not profitable, but at least it's not losing on the value of the sale

itself. So and you have to find enough of these organizations if you're a B2B company enough organizations that would be willing to pay you for that and would be willing to pay you more than it costs you to deliver. And once you've identified that and you're getting to a certain range and you know, for B2B companies, it could be a small, helpful number of customers that

generate a million dollars or $2 million a year. You're getting substantial. If you are B2C company, then you have you have tens of thousands of people that are there and a few thousands that are paying for the service. So you have to get a certain mass behind it and say, okay, there's product market fit here. Great. You've checked another box. Now, and we've done that too.

So we've gone through these two checkmarks. Now there's another one, the next one. The next one is what the industry calls go to market fit. Go to market fit means that it's not only that you have enough people that are interested in the service. And I will need to pay you. I will need to pay you for it, but that you can get them. You can

acquire them as customers at the cost that is not prohibitive. I'll give you an example. Let's say that I have a service that, you know, that costs me $50 per month and you're willing to pay me $100. So I'm making $50 every month. Now let's assume that it costs me $50,000 to bring the customer. Because I have to fly a team of people there sitting around

their premises for a month, do a lot of work and then come back home. And then the service starts every month. I get $50 from them. Right. They pay me $100. It costs me $50. I get $50. So that means I need a thousand months to cover the acquisition cost of that customer. A thousand months, it's eight years better not start. Right. There's no point. Mm-hmm.

On the other hand, I can get the customer for $200. I can get them on board, for instance, to Google ads. And, you know, every ad costs me $1. And one in every 200 people that presses the ad is actually becoming a client. Cost me $200 to get them. Now I make $50 every month. After four months, I've recovered the cost of getting them on board.

And now I'm starting to make money. Yeah, everybody loves to make money. So there you go. Right. That's good. So now that means that you've identified your go-to market fit. You understand how to get to the client, bring them on board at the cost that is not prohibited. Mm-hmm. Now for us, we're at that stage, where at the stage where we have a list of clients,

we're generating millions of dollars in revenue. However, at this point, we still don't have enough clients to average it out and say, okay, it costs us X to deliver a client to get a client. And we can cover these costs in three to six months. We don't have enough data to say that. What we're going to do this year is proof that we can do that,

that we can get customers at a cost that we can recover within three to six months. And once we're able to do that, we've proven go-to market fit. Once you've done that, you go to the next step. And then you go to scale. At that point, you're saying, give me a dollar. I'll make it to not today, three months later. But every dollar you give me,

I can make it to. And then you can raise significant amounts of funds. So for instance, ensures so far, has raised a total of 28 million dollars. And we have a runway of two years, which means, you know, we'll run out of cash based on the plan. We have at this point at the end of 24. We have two more years to prove this go-to market

fit. And then go and raise, go, be double that. In the range of 50 million and more, in order to be able to scale significantly and sell to many more customers. These are the main, that's the main milestones for, in short, for next year. All right. All right. Thank you for sharing that. Sorry for the long. Sorry for the long. No, no, it's okay. It's okay.

I'm glad you're explaining it pretty well. So like, let's go back to the people you saw real quick. How many, how many customers do you have? So at this point, we have 15 clients. Transacting with us. And we're doing a few millions of dollars a year of revenue. I'm not going to disclose the exact number, but a few millions of dollars. Okay. I can respect that.

I can respect that. So each client is pretty, you know, pretty significant. Okay. Okay. So like, what's the company culture? How is it? Like in the work environment at the office? Like, how do you get, are you guys like, are you like Elon Musk and everybody jacked up? And having, what is it? A fiesta or what is it? A rocky band? No, we work really hard.

Okay. It's, it's, it's a lot of hard work. I can tell you that, you know, the holiday season is, is staff because the traffic is very high. Usually the amount of fraud is lower because the fraud stays about the same, but percentage wise, it's lower because there's lots more, you know, legitimate clients, but the fact that they're a lot more traffic, it's, harder to identify the

fraudsters. So if we've onboarded a couple of very large clients at the end of the, at the end of last year, and the end of the year has been, that's called a challenging one, our front of fighting fraud. And so, you know, it's, we're, we're a tightly neat team. You know, as I said, we're not a big company. We're about 50 people at this point. So

it's a very tightly neat team. A big chunk of a desire and lead. And, you know, we're working very hard to make this a success. Okay. Yeah. Yeah. For sure. So how can people get in touch with you? So the easiest ways to go online and then search for ensure.ai, which is nsur.ai. That's the, that's the, that's the, that's the, you know, that's the link to

our, to our company's website. And you can always look for me at Alex, Zeltzer. It's Alex is ALEX and Zeltzer is slightly strange for space. But, you know, it's, it's Zelt, PCER. And you can look from your LinkedIn. And I'm, you know, I'm always there and always answering messages. I'm going to put those links down in the description. By the way, so that would be great.

And hey, man, is there any last words you want to share before we close anything that we didn't go over. No, I think I think you know, you were, we kind of covered it. Hey, you, I was very excited to have you on the show. And I really do wish you the best with your members. And hopefully we can link them together in person and have

a, have a cup of coffee or maybe a beer. If you do drink, I don't want to pressure you. I do. Okay. Okay. So great. Great. We have something to look forward to. And yeah, man, let's stay in touch. And I'll see you in the future. Excellent. Thanks a lot. Sunny. I appreciate that. I appreciate your time. And thank you for having me over anytime. And

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