Amazon is investing in a new approach to one of retail’s costliest problems: return fraud.

Through its $1 billion Industrial Innovation Fund, the company is backing Cambridge Terahertz, a Sunnyvale, California-based startup that has developed a 3D imaging system designed to help detect fraudulent returns.

Cambridge Terahertz recently closed a $12 million seed funding round led by venture firm Felicis, with participation from Amazon and other investors.

Its technology can see inside unopened packages, offering retailers a new tool to identify when customers send back empty boxes or the wrong item.

“Amazon handles a lot of boxes, as you can imagine,” said Nathan Monroe, CEO of Cambridge Terahertz.

“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.”

$12 Million Seed Round Fuels Cambridge Terahertz Growth

Cambridge Terahertz was founded in 2023 after Monroe’s research on terahertz imaging at the Massachusetts Institute of Technology.

The company says its technology shrinks airport-scale security scanners into a pyramid-shaped, chip-based device that fits in the palm of a hand.

The startup has 10 employees and plans to use the seed funding to increase hiring and fully develop its product.

It has secured four government contracts and has spoken with U.S. Customs and Border Protection about applying its system to detect fentanyl in cross-border shipments.

Cambridge connected with Amazon last year during a pitch competition focused on packaging visibility.

3D Imaging Aims to Address Billions in Retail Fraud Losses

Return fraud cost retailers $103 billion last year, according to Appriss Retail. Common schemes involve customers keeping an item but sending back an empty box or unrelated products to receive a refund.

Cambridge Terahertz’s technology enables inspection of packages without opening them, helping companies quickly identify discrepancies.

This capability supports both returns screening and inventory checks for damage or 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,” said Franziska Bossart, head of Amazon’s Industrial Innovation Fund.

Amazon’s Industrial Innovation Fund Expands Its Tech Footprint

Amazon launched the Industrial Innovation Fund in 2022 to invest in technology that improves its operational efficiency.

The fund has backed 20 companies and is structured to support long-term commercial partnerships, including pilot programs and possible acquisitions.

Bossart said Cambridge’s imaging system aligns with Amazon’s operational needs across the supply chain.

The fund previously supported a licensing and acquihire deal with AI robotics startup Covariant.

From Security Scanners to Supply Chains: A New Use for Terahertz Technology

Originally developed to detect concealed weapons by scanning through materials like clothing and packaging, Cambridge Terahertz’s system has drawn interest beyond retail.

The company said it has been approached about applications in supply chains, manufacturing, aerospace, and medical settings.

Cambridge cofounders Nathan Monroe and Anand Dixit hold a custom chip and pyramid-shaped device that make up its 3D imaging system.

PHOTO: SECURITY INDUSTRY ASSOCIATION

This article was created with AI assistance.