Molly O’Hearn, co-founder of anti-fraud technology company Iovation, says she and her fellow founders decided to start their firm after learning the hard way just how devastating hacks can be.
Molly O’Hearn is in the protection business.
She is co-founder and vice president of operations of Iovation, a Portland, Ore., information security firm. Her company sells fraud prevention tools that help businesses protect customers from identity and credit card theft and other hacks, as well as authentication products that help firms verify customers’ identities.
Iovation’s top priority is to stay ahead of hackers — a focus that O’Hearn and her co-founders, Jon Karl and Greg Pierson, embraced after learning the hard way what happens when it’s not front and center. Nearly 2 decades ago, when the trio ran another company, a maker of online-gaming software called IeLogic, a client was hit by credit card fraud. It was a moment of reckoning — and a painful lesson.
When the client sounded the alarm, O’Hearn recalls her team scrambling “like chickens with our heads cut off” to fix the problem. In the process, O’Hearn says Pierson, who was the CEO, realized that people’s devices needed a lot more protection. “That was the idea that birthed Iovation.”
That “aha” moment took place in 2002 — 2 years later, their new company was born. Since 2004, Iovation has inspected more than 4 billion devices, and received over 45 million fraud reports. O’Hearn declined to disclose annual revenue and employee numbers, but says Iovation has clients all over the world and staff in 59 countries covering 18 time zones.
“It’s a 24-7 kind of operation,” O’Hearn says. “Fraud doesn’t sleep, so the clients don’t — so we don’t.”
The Road to Iovation
O’Hearn’s diverse path to entrepreneurship began after she graduated from Oregon State University (OSU) with a bachelor’s degree in 1976. She held roles in development, public relations and marketing in various industries before finding a job in banking and working her way up to become the vice president of corporate development at OSU’s Credit Union. Along the way, she earned an MBA from the University of Oregon.
She found her calling when she teamed up with Karl, a former colleague from the credit union, and Pierson, a friend of Karl’s from college, to launch the online-gaming software company, IeLogic, in 2000. The pace and challenge of growing a startup was exciting and kept O’Hearn engaged — and even made a 5-hour daily commute worthwhile.
But startup life is never easy, and after the client hack that inspired the 2004 launch of Iovation, another hacking scandal hit their former company in 2009. An online poker site called UltimateBet, that used IeLogic’s platform, was attacked by a malicious gamer who found a way to see other players’ cards using what’s known as “God mode” hacking software. The fraudsters bilked the players out of millions of dollars. While O’Hearn and her co-founders had sold off IeLogic’s technology in 2004 and the fraud was discovered in 2009, critics claimed that the problem began far earlier. And they blamed Pierson.
Though O’Hearn says the accusations were “unfounded,” the UltimateBet scandal followed Iovation until 2016, when the company was granted a service-provider license by the Nevada Gaming Commission Board, which O’Hearn says effectively exonerated her team.
O’Hearn says the company addresses any concerns that prospective clients raise through conversations “with members of the executive staff, including [Pierson] and long-time customers.” It has not been a point of concern among employees, she says, but, “when asked, we tell the truth.”
Growing a Tech Firm
Initially, O’Hearn says Iovation had to do a lot of leg work to build its customer base. To get the company name out there, the co-founders attended a lot of industry trade shows. “I felt like Vanna White,” she says.
Still, it was worth the effort to hear about clients’ problems in person. “It’s always easier to sell something when you’re solving someone’s pain.” And these days, there is a lot of pain to address — according to research firm Javelin Strategy & Research, a record 16.7 million people in the U.S. alone were victims of fraud in 2017. In all, fraudsters stole about $16.8 billion.
Then again, people are O’Hearn’s specialty. She calls herself “the culture queen,” and has labored to foster an office environment that is equal parts work-focused and friendly for employees. As a result, she says, many of Iovation’s workers are older than the 20-somethings often associated with the tech industry — most of them are in their 30s and 40s, many with children.
Her efforts paid off in employee retention, she says; 48 percent of its staff have been with the company for more than 5 years. That stands in contrast with tech giants like Facebook and Google, where employees stay an average of about 2 years. Employees report positive work experiences on sites like GlassDoor, which collects anonymous reviews from workers, too.
It helps that, “we’re not just building some widget or shiny, sexy object,” O’Hearn says. “We’re doing good in the world,” and employees want to be a part of that.
Through its suite of products, O’Hearn says the team at Iovation is able to keep up with “the bad guys” — though the constant evolution of hackers’ methods is always a challenge. For example, Iovation has seen a uptick recently in “synthetic identity theft” — instead of taking one person’s name, phone and social security number, fraudsters will cobble together fake composite identities using those bits of information from several different people. “It’s so sophisticated, merchants with traditional systems can’t tell,” she says.
“We grow to keep up,” O’Hearn says. “Fraud does not stop. It has forced us to adapt and add more products. It makes our current products more sophisticated. As the bad guys change and evolve, we have to as well.”
Onward and Upward
Throughout its existence, O’Hearn says Iovation only completed one round of investor fundraising, a move it made in 2008 to fund growth — and since then, the company has bought most of those investors out. “As a tech company, we’re an anomaly, because we have been profitable from day one.”
Part of what has helped growth, she says, is Iovation’s focus on the experience that individuals have on clients’ websites. “We’re trying to protect both ends of the spectrum — to stop the bad guys, while making it easy for good people to do stuff on the internet.” She says its success at striking that balance shows in Iovation’s 97-percent customer-retention rate.
Given the ever-present need for anti-fraud services, O’Hearn is bullish about the company’s continued growth. Though she anticipates a tough road ahead, as fraudsters’ methodologies become even more sophisticated, she says her team is in it for the long haul.
Posted: March 5, 2018