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Lifelock, an online identity management and identity theft protection company has raised $6.85 million in Series B funding led by Kleiner Perkins Caufield & Bayers with Biltmore Venture Partners and Bessemer also participating in the round. Lifelock has previously raised $4.5 million from Bessemer Ventures in Series A funding and $2 million in angel funding.

The company has more than 100,000 paid customers and is said to be profitable. Lifelock has developed a system called Fraud Alert which establishes road blocks if identity thieves attempt to use your identity to obtain credit. The alert notifies the lenders, such as banks or insurance companies who use your credit reports, that the person using the specific identity is a thief. The lenders after receiving the alert notice takes steps to verify the identity before they:

• Issue credit
• Arrange loans
• Obtain utilities, cell phones, housing leases, etc
• Increase credit lines
• Open new credit cards

After an alert has been placed in your credit file, any creditor using that credit file must first contact you by telephone, or in person to identify and confirm that the credit application is not a result of an identity theft. If someone else is trying to use your identity to get credit, he get busted.

Identity theft is a serious problem facing many businesses, during the past 12 months employers and their vendors lost 30 million employee names and Social Security Numbers to identity thieves. It usually takes around 170 hours over a 2 year period to recover and repair the problems associated with a single identity theft.

With the proliferation of online commerce and continued transition of existing desktop applications to the web these problems will increase. Google Calendar recently was at the center of a controversy, whereby important Corporate data got leaked as a result of users storing their ids and passwords in the calendar that were made public.

To top it, LifeLock offers a $1 million guarantee to all its users. The guarantee states that if some steals the personal information of any of its clients and successfully misuses it, LifeLock will reimburse any and all direct expenses associated with the theft, upto a maximum amount of $1 million over the life of the incident. The guarantee alone is winning alot of users for LifeLock.