Prelude is a relatively new a new French startup that focuses on SMS verification; it’s announcing new funding from Singular and Seedcamp on Wednesday. The two founders met when they were working for Zenly, a popular location-sharing app with tens of millions of users that was acquired by Snap (and later shut down). While you might not think much about those verification codes, the Zenly team thought about this topic quite intensely. It turns out that it’s extremely tedious to implement SMS verification codes that work reliably.
“Initially, when I started looking at this problem at Zenly, we only had one provider. And honestly, when I joined the company, I thought it would be a problem that would be fixed in a couple of months and we could move on. As it turns out, I spent most of the three years I stayed at Zenly on this issue, and we built a team around it,” Prelude co-founder and CEO Matias Berny (pictured above on the left) told TechCrunch.
You probably don’t pay for text messages on your personal phone, but telecom providers still charge companies for those text messages. And if you have a massive user base, SMS verification can become an extremely expensive cost center.
In late 2023, the Signal Foundation shared its operating budget for its popular messaging app and service; SMS verification codes alone cost $6 million per year. As a comparison, storage, servers, and bandwidth account for $7 million per year altogether.
You might think that it’s expensive, but — at least — that this is a problem that has already been fixed. A few years ago, Twilio made it easy to send SMS using programmatic calls, after all. Other companies followed suit with SMS verification APIs.
But when you request a verification code, the request is passed around several phone carriers and various intermediaries across multiple countries. This patchwork means that it can take a bit of time before you receive the verification code — when it doesn’t fail completely.
“What we’ve been building at Zenly — and now at Prelude on a larger scale — is really the Skyscanner of phone number verification. We’ll find the best route at any given moment to verify the user’s phone number,” Berny said.
This feature alone can help companies improve their conversion rates. But it can also help companies save money as new customers don’t have to hit the “resend code” button if they didn’t get anything.
“Beyond the smart routing aspect of the product, there are many other problems to solve,” Berny said. Fraud is one of them. “There are fake users who ask for fake codes to validate fake numbers with the aim of receiving a portion of the cost of the SMS,” he added.
According to the Prelude team, these fraudulent intermediaries that generate fake users to create artificial SMS traffic can represent as much as 30% of SMS verification codes. That’s why the startup tries to identify fake, virtual numbers with a variety of signals to stop text messages in the first place.
Prelude also doesn’t charge its customers depending on the number of text messages issued by the startup. It aligns the incentives with its own customers as it charges per verification. That’s also why Prelude supports other messaging services, such as WhatsApp and Viber; it’s more about verification than SMS.
Many popular consumer apps, such as BeReal and Locket, are already using Prelude. Companies in the fintech or crypto industries, such as Alma, Sunday, and Bitstack are also relying 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 angels also participating. Overall, the company has verified the phone numbers for 100 million different user accounts so far, it said.