Amazon is turning to the startup world to tackle a persistent logistics challenge: fraudulent product returns. This scam, where shoppers request refunds but return empty packages or unrelated items instead of the original product, cost retailers an estimated $103 billion last year, according to Appriss Retail.
Innovative 3D Imaging for Package Inspection
Sunnyvale-based startup Cambridge Terahertz has developed a compact 3D imaging system capable of scanning inside unopened packages. This technology enables retailers to quickly and accurately identify return fraud by verifying package contents without opening them.
The startup recently closed a $12 million seed funding round led by venture firm Felicis, with participation from Amazon’s $1 billion Industrial Innovation Fund and other investors.
“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, how efficiently they’re packed, and whether returns are genuine.”
Launched in 2022, Amazon’s Industrial Innovation Fund invests in companies developing technology that can enhance its vast logistics and delivery network. Franziska Bossart, head of the fund, said Amazon plans to build commercial relationships with portfolio companies, ranging from pilot programs to potential acquisitions.
Cambridge Terahertz’s technology “aligns well with Amazon’s needs” and could improve how the company screens for damages or defects in returned goods, as well as before packages leave warehouses.
“The compact, integrable system allows deployment at various points in our operations,” Bossart explained.
Track Record and Industry Connections
The fund has backed 20 companies so far, including orchestrating Amazon’s acquihire and licensing deal with AI robotics firm Covariant in 2024.
Cambridge Terahertz connected with Amazon via a 2024 pitch competition focused on packaging visibility. The startup, founded in 2023 by MIT researcher Nathan Monroe, miniaturized airport-grade terahertz scanners into a hand-held pyramid-shaped device. Initially designed to detect concealed weapons, the technology now attracts interest from supply chain, manufacturing, aerospace, and medical sectors.
The company has secured four government contracts and engaged with U.S. Customs and Border Protection about using the technology to detect fentanyl shipments at borders—a major focus of the Trump administration’s recent crackdown on the longstanding de minimis trade loophole.
With Amazon and other investors’ support, Cambridge plans to expand its team and bring its 3D imaging solution to market.
Author’s Opinion
Amazon’s embrace of startups like Cambridge Terahertz highlights the importance of innovative tech in solving longstanding industry problems. Return fraud drains billions annually, and non-invasive 3D scanning technology offers a promising, scalable solution. This partnership exemplifies how major companies can leverage emerging technologies to protect their bottom lines while improving operational efficiency.
Featured image credit: Wikimedia Commons
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