In 2011, Jon Coss was on the hunt for funding. He had an idea for a system that could leverage Google Analytics to detect and prevent fraud and abuse in government programs. But this infrastructure-as-a-service model was new back then, untested and hard to explain to venture capitalists.
“They would ask me, ‘Are you a product company or a consulting company?’” recalls Coss, the CEO and founder of Folsom-based Pondera Solutions. “And we would say, ‘Both and neither.’”
Three years later, his “fraud detection as a service” invention has taken off, earning Coss the distinction of Next Tech Innovator of the Year by the Sacramento Regional Technology Alliance. His company also secured a contract to provide fraud detection for California’s Employment Development Department (which manages the state’s unemployment insurance program), starting in January.
Pondera Solutions uses Google’s massive data centers to find improper payments, incorrect addresses or other suspicious activity in government programs at the local, state and federal levels. It runs every single transaction through a series of models, comparing data sources to see if something doesn’t match up.
But the solution didn’t just create itself. Coss used his three-step “throw-them-in-a-bucket” strategy to develop his initial concept into something tangible:
- Identify a problem.
- Round up the usual experts.
- Get out of the way.
To solve the problem of unemployment abuse, he brought in experts in unemployment, fraud and Google. “They argue, discuss, disagree, but they come back with a solution,” he says. “This allows for out-of-the-box thinking with in-the-box realism.”
If the system detects potential fraud, it will send an alert to the client (department employees), highlighting the inconsistency. The idea is that the agency can then correct the discrepancy before or shortly after checks go out — rather than long after the fact — saving time, money and resources.
His company’s contracts range from $400,000 a year to millions. Pondera’s technology has been used in four states, and sometimes in multiple agencies within a state. Investors he went to in the early 2010s never came around. They were intrigued by the idea, Coss says, but didn’t understand government procurement and heard nightmares about how lengthy they were. With lack of investor funding, Coss and two partners funded the startup with their own money — a combined seven-figure investment. He refrained from disclosing the amount for competitive reasons.
“It takes a fair amount of money” Coss says. “We’re not building an app for the iStore that $100,000 might be able to fund.”
But Coss knew he had a winner. He has been in government technology for 20 years, including a decade at Oracle, working with the government to modernize its systems. The breakthrough for his fraud detection tool came during a visit to Google’s headquarters in 2011. He got a chance to see its newer products, such as geospatial tools and analytics software. After that, it was just a matter of overlaying these Google-powered solutions on government programs.
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