Baselayer, an AI-powered startup that helps financial institutions verify businesses and assess fraud risk, has raised $35 million to expand its identity technology to AI agents.

M13 led the San Francisco-based company’s Series A, with participation from Picus Capital, Torch Capital, Afore Capital and Matt Thompson of Socure. The financing brings Baselayer’s total funding to about $40 million since its 2023 inception, according to co-founder and CEO Jonathan Awad. The company declined to disclose its valuation.

Baselayer combines business identity, credit and fraud data to help banks, fintech companies and other financial-services providers evaluate prospective customers. It sells its products directly and through software companies that resell or put their own branding on Baselayer’s technology. Its automated platform initially focused on Know Your Business, or KYB, identity verification, fraud detection and risk management.

Timothy Hyde and Jonathan Awad, co-founders of Baselayer. (Courtesy photo)

More than 2,000 financial institutions — representing over 20% of such institutions in the U.S. — use its technology to onboard, underwrite and open accounts for merchants, according to Awad. Baselayer also works with Fortune 500 companies and has about 50 employees across offices in San Francisco and New York. Since its founding, the startup claims it has helped customers prevent more than $1 billion in fraud losses.

Awad declined to reveal hard revenue figures, saying only that Baselayer reached eight figures in revenue in less than two years.

Now, Baselayer is using its new capital to address a newer — and growing — identity problem: determining whether an AI agent is actually authorized to act on behalf of a particular person or business.

With people using AI agents left and right these days to book a restaurant reservation, for example, it’s becoming increasingly challenging to determine whether an AI agent’s automated activity is legitimate or if it’s a bot attempting to scrape data or commit fraud.

Alongside its raise, Baselayer today is also announcing the launch of its Agentic Identity Suite, extending its identity network from businesses to the AI agents transacting on their behalf.

From businesses to the agents acting for them

Awad and co-founder Timothy Hyde started Baselayer in February 2023, initially focusing on the lengthy and fragmented process financial institutions use to verify businesses and assess risk.

“What we set out to do was essentially bring risk assessment to the 21st century,” Awad recalls.

Awad describes Baselayer as both an identity network and a fraud consortium. Because its technology is used across thousands of financial institutions, Baselayer says it can recognize when the same person or business applies at multiple institutions and incorporate that activity into its risk scoring.

The company processes tens of millions of applications and says it sees many of the same businesses multiple times a year. That data becomes more useful as additional institutions and reseller partners join its network, according to Awad.

“We’ve essentially streamlined 10 years’ worth of selling into two years,” he said.

An AI agent presents a different problem, however. It may be created for a single task and disappear immediately afterward, leaving little or no history for a bank or risk provider to evaluate.

“Agents spin up and they spin down,” Awad said. “How can you trust this random one-task agent?”

To address this dilemma, Baselayer is developing what it describes as “Know Your Agent,” or KYA. The system is being designed to do things such as determine not only who deployed an agent, but also who that agent represents and whether it actually has permission to carry out a particular task.

It wants to do this by providing an authorized agent with a credential it can present when attempting to make a purchase or interact with another business. Then, when presented with a credential, a merchant, financial institution or online platform could use that information to decide whether to allow the transaction to proceed, Awad explained.

The startup is working with agent developers, payment processors, merchants and fraud-detection providers to issue and recognize its credential. They include FIS, Prove and Socure, among others. Unless agents can establish that they are acting on behalf of legitimate people or businesses, “agents will just get blocked everywhere,” Awad said.

AI can also make fraud easier to scale

Ironically, the same technology that allows legitimate agents to do more tasks can also help fraudsters operate faster.

In the past, identity fraud involved someone getting their hands on stolen personal and business information, creating a credible-looking identity, and then repeatedly applying for bank or credit card accounts until an institution approved one. At one point, the process took significant time and manual work. But today, AI agents can automate parts of it and run continuously.

“It’s fraud on steroids right now,” Awad said. “It’s so easy, it’s so cheap, it’s so fast, and it’s 24/7.”

Reports of AI agents bypassing restrictions have also raised questions about how to identify and control autonomous software. OpenAI, for example, recently reported incidents in which its models took unauthorized or deceptive actions, including activity involving the Hugging Face platform.

Baselayer’s technology would not keep a model from disregarding instructions or exploiting a vulnerability, Awad acknowledged. But its goal is to verify an agent’s credentials when it attempts to interact or transact with an outside party.

Without a way to identify themselves, he said, legitimate agents may resort to trying to get around websites’ restrictions just to be able to complete their assigned tasks. Or, they could simply become less useful because they are repeatedly blocked as suspected bots.

Competing to establish a standard

M13 managing partner Karl Alomar told Crunchbase News in an interview that he met Awad about a year before his firm invested in Baselayer. At the time, he saw the startup primarily as a provider of Know Your Business technology.

“The business did not feel like a business of the future,” he admits. “It just felt like he was solving a KYB banking verification problem.”

The investor’s view changed as more companies began exploring payments made by AI agents and Baselayer began applying its business-identity data to the field.

“Every agent ultimately is going to have to be tied to something real, and they understand the real world,” Alomar said.

He believes Baselayer’s existing data, identity network and relationships with financial institutions give it an advantage over a startup entering the market from scratch.

“AI agents are rapidly becoming economic actors, but the identity infrastructure underneath commerce was never designed for software that can open accounts, make purchases, move money or enter into transactions on someone else’s behalf,” Alomar added. “That creates an enormous new trust problem, and we believe identity will become one of the foundational infrastructure layers of the agentic economy.”

So far, no dominant standard exists. But Baselayer still must work to persuade agent developers, merchants, financial institutions and payment companies to recognize its credential.

That could take time. Awad said relationships with financial institutions typically take 12 to 18 months to establish, while large merchant partnerships can take up to 24 months. Baselayer may be able to reach some institutions more quickly, however, through its existing reseller relationships.

The company also sees potential use cases beyond payments. For example, Alomar said the technology could eventually authorize agents involved in cryptocurrency transactions or smart contracts, among other things.

“This is not just a fintech business — it’s a security business,” he said. “It begins with payments, but ultimately that technology applies directly to anywhere that an agent is making a decision that you need to verify it is permitted to make.”

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Illustration: Dom Guzman