Prelude is a relatively new French startup that focuses on SMS verification; it announced new funding from Singular and Seedcamp on Wednesday. The two founders met while working for Zenlya popular location sharing app with tens of millions of users that was acquired by Snap (and then shut down). While you might not think much about these verification codes, the Zenly team has thought about this topic quite intensely. It turns out that it is extremely tedious to implement SMS verification codes that work reliably.

“When I initially started looking at this problem at Zenly, we only had one vendor. And honestly, when I joined the company, I thought this would be a problem that would be resolved in a few months and we could move on. It turns out I spent most of the three years I was at Zenly on this question, and we built a team around it,” Prelude co-founder and CEO Matias told TechCrunch. Berny (photo above left).

You probably don’t pay for text messages on your home phone, but telcos still charge businesses for these messages. And if you have a massive user base, SMS verification can become an extremely expensive cost center.

At the end of 2023, the Signal Foundation common its operating budget for its popular app and messaging service; SMS verification codes alone cost $6 million per year. For comparison, storage, servers, and bandwidth are $7 million per year. quite.

You might think it’s expensive, but at least it’s a problem that’s already been solved. A few years ago, Twilio after all, it has been easy to send SMS using programmatic calls. Other companies have followed suit with SMS verification APIs.

But when you request a verification code, the request goes to multiple phone carriers and various intermediaries in multiple countries. This patchwork means it may take a little while before you receive the verification code, when it doesn’t completely fail.

“What we’ve built at Zenly – and now at Prelude on a larger scale – is actually the phone number verification Skyscanner. We will find the best route at any time to verify the user’s phone number,” Berny said.

This feature alone can help businesses improve their conversion rates. But it can also help businesses save money, because new customers don’t need to hit the “resend code” button if they haven’t received anything.

“Beyond the intelligent routing aspect of the product, there are many other issues to solve,” Berny said. Fraud is one of them. “There are fake users who request fake codes to validate fake numbers in order to receive part of the cost of the SMS,” he added.

According to the Prelude team, these fraudulent intermediaries who generate fake users to create artificial SMS traffic can account for up to 30% of SMS verification codes. That’s why the startup is trying to identify fake virtual numbers with a variety of signals to stop text messages in the first place.

Prelude also does not charge its customers based on the number of SMS sent by the startup. It aligns incentives with its own customers because it charges per verification. This is also why Prelude supports other messaging services, such as WhatsApp and Viber; it’s more about verification than texting.

Many popular consumer apps, such as BeReal and Locket, already use Prelude. Companies in the fintech or crypto industries, like Alma, Sunday, and Bitstack, also rely on Prelude to verify phone numbers.

The startup has raised $8 million so far with Singular and Seedcamp leading the company’s seed round and various angel investors also participating. Overall, the company has so far verified the phone numbers of 100 million different user accounts, it says.