Amazon venture fund backs startup developing fix for return fraud

In a bid to address one of its significant logistical challenges, Amazon is turning its attention to the startup sector. Retailers are increasingly facing issues with fraudulent returns, where consumers request refunds but fail to return the actual products, opting instead to send back an empty box or unrelated items. This scam is costing retailers a staggering $103 billion in losses annually, as reported by Appriss Retail. Enter Cambridge Terahertz, a startup based in Sunnyvale, California, which has developed a groundbreaking 3D imaging system capable of peering inside unopened packages. This technology aims to help retailers rapidly identify instances of return fraud. Recently, the startup secured $12 million in seed funding, led by Felicis, with significant participation from Amazon's $1 billion Industrial Innovation Fund, among other investors. CEO Nathan Monroe emphasized the magnitude of the problem, stating, "Amazon handles a lot of boxes, as you can imagine. It's a big problem just knowing what's inside boxes, knowing how efficiently they're packed, knowing if what you've returned to them is what you said it is." Launched in 2022, Amazon's Industrial Innovation Fund seeks to invest in companies developing technological solutions that can enhance the efficiency of its expansive logistics network. Franziska Bossart, who heads the fund, shared that Amazon often aims to cultivate a deeper commercial relationship with its portfolio companies, which could involve piloting their technology or even pursuing acquisitions. Bossart noted that the technology from Cambridge Terahertz aligns well with Amazon's operational needs, particularly in terms of screening returned inventory for damages and defects. "The ability to see into boxes, identify contents, along with the compact nature of the system could allow for integration at various points in our operations," she stated. To date, the fund has supported 20 companies and played a role in Amazon's previous partnerships, including its acquihire of the AI robotics startup Covariant last August. Despite some scrutiny over its investment practices, Amazon continues to explore innovative technologies to enhance its services. Cambridge Terahertz, co-founded in 2023 by Monroe after his research at MIT, has developed a device that condenses airport-scale security scanners into a portable, pyramid-shaped system. Initially designed to detect concealed weapons, the technology is now being explored for various applications in supply chains, manufacturing, aerospace, and medical fields. The startup has already secured four government contracts and is in discussions with U.S. Customs and Border Protection regarding its potential use in detecting illegal shipments at the border, a priority for the government. With the recent funding, Cambridge plans to expand its workforce and fully develop its 3D imaging technology.