Packages ride on a conveyor belt during Cyber Monday at an Amazon fulfillment center on December 2, 2024 in Orlando, Florida.
The company has just closed a $12 million seed financing, led by venture firm Felicis, with participation from Amazon's $1 billion Industrial Innovation Fund and other investors.
Cambridge Terahertz, a Sunnyvale, California-based startup, has developed a 3D imaging system that can see inside unopened packages, enabling retailers to more easily and quickly spot cases of return fraud.
It's become a costly nuisance for retailers, accounting for $103 billion in losses last year, according to Appriss Retail.
Retailers of all sizes have in recent years struggled with an uptick in fraudulent returns . The scam involves shoppers requesting a refund, but instead of returning the merchandise, they keep the item and send back an empty package or a box of unrelated junk.
Amazon is turning to the startup world to find a potential fix for one of its thorniest logistics problems.
"Amazon handles a lot of boxes, as you can imagine," Nathan Monroe, CEO of Cambridge Terahertz, said in an interview. "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."
Amazon launched the Industrial Innovation Fund in 2022 with a goal of investing in businesses working on technology solutions that could apply to the company's massive and complex operations network, from the middle mile to the last-mile portion of the delivery process.
Franziska Bossart, head of the fund, said in an interview that Amazon will typically plan to pursue a deeper "commercial relationship" with portfolio companies over time, ranging from piloting the technology to a potential acquisition.
Cambridge's technology "aligns well with Amazon's needs" and can have a real impact on its ability to screen inventory for damages and defects once it's returned or before a package leaves the warehouse.
"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," Bossart said.
The fund has backed 20 companies so far. It also sourced Amazon's acquihire and licensing deal with artificial intelligence robotics startup Covariant last August, Bossart added.
Amazon's investment track record has come under scrutiny in the past. A 2020 investigation from The Wall Street Journal found the company's Alexa Fund, which primarily invests in voice and AI technologies, used privileged information gained during meetings to launch its own competing products, citing people and startups familiar with the situation. Amazon previously denied any wrongdoing.
One of the Alexa Fund's most notable investments was in video doorbell maker Ring, which Amazon later acquired in 2018 for $1 billion.
Cambridge connected with Amazon last year through a pitch competition focused on packaging visibility. Monroe co-founded the company in 2023 after researching terahertz imaging at the Massachusetts Institute of Technology.
The company, which has 10 employees, says it shrunk airport-scale security scanners down to a chip-based system inside a pyramid-shaped device that can fit in your hand. The device was originally conceived as a way to detect concealed weapons by seeing through nonconducive materials, like clothing or packages, in an unobtrusive way.