According to a recent McKinsey study, one large bank estimates that 85% of its back office operations could be at least partially automated. The same bank also estimates that less 50% of these processes were automated at all. Banks often lack the internal capabilities to introduce these automated processes. Ocrolus steps in to solve this problem. The company’s AI-driven platform automates data verification and analysis for bank statements and a variety of other financial documents. The solution is well suited for lenders, auditors, attorneys, and accounting firms among others. Financial documents are analyzed with over a 99% accuracy rate improving pricing risk, by introducing efficiencies in speed and cost, in a scalable manner without adding staff.
AlleyWatch chatted with CEO Sam Bobley about the company, its origin, innovative solution, future plans, and Seed round of funding, which brings its total funding to $7.3M over two rounds.
Who were your investors and how much did you raise?
We raised a $4M Series A. The round was led by Bullpen Capital with participation from QED Investors, Laconia Capital, Riverpark Funds and ValueStream Ventures.
Tell us about your product or service.
Ocrolus is a technology company that automates data verification and analysis for bank statements and other financial documents. The Company’s products, PerfectAudit and Medicaid-Genius, analyze e-statements, scans, and cell phone images of documents from every financial institution with over 99% accuracy. By replacing tedious, imperfect human audits with sharp, AI-driven analyses, Ocrolus modernizes financial review processes in lending and a variety of other industries.
Though we operate primarily in lending, Ocrolus was actually inspired by the inefficiencies of Medicaid application processing for long-term care. Medicaid coverage for a nursing home is very expensive, costing the government over $100K for the typical tenure at the nursing home. The application process involves a manual audit of 300+ pages of bank statements. When we learned how inaccurate and inefficient the status quo of human manual review was, we set out to automate the process with technology.
How is it different?
The accuracy of our solution sets it apart from anything else on the market. Our AI will intelligently parse financial statements and pinpoint instances of potential inaccuracies. Any data that cannot be validated by machines alone is efficiently routed through multiple layers of crowdsourced human micro-validation. Additionally, Ocrolus has developed cutting-edge analytics for underwriting loans.
What are some interesting use cases and outcomes you have seen that you can share from your clients using your technology?
Customers in the lending space have leveraged our technology to build more sophisticated credit scoring models. While most lenders are using cash flow analyses in their models, they are traditionally constrained by manual processes and thus are forced to only pull a handful of data points from bank statements. Our technology has enabled lenders to perform retroactive analyses on previously reviewed deals to identify areas for improvement. The retroactive projects enable lenders to (a) find errors in their manual processes, and (b) experiment with more complex credit scoring models, which factor in dozens of data points from bank statements. Certain lenders have already reported that they’ve been able to reduce delinquency rates by more than 20% by launching next generation credit models that our data fuels.
What market you are targeting and how big is it?
PerfectAudit is Ocrolus’ foray into the lending industry, which is the target market for Ocrolus. Underwriters use PerfectAudit to automate the processing of financial documentation for loan applications. In addition to providing AI-driven credit assessments, the technology can be used for retroactive analysis and due diligence processes throughout the lifecycle of loans.
The market for the lending industry alone is over $1B. The market for financial reviews more broadly is north of $10B.
What’s your business model?
We sell our software service on the basis of the volume of financial processes that we automate. This ensures that our value proposition of our software is directly proportional to its cost.
What was the funding process like?
The funding process was grueling, but overall a great experience. We pitched many investors and it took a significant amount of time for us to receive our first term sheet for this round. But once the first term sheet came, the process accelerated dramatically and became very exciting. We ended up signing the second term sheet we received and ended up creating an outstanding syndicate of investors. Overall we couldn’t be happier with how the round shaped up.
What are the biggest challenges that you faced while raising capital?
The biggest challenge of raising capital is having to do it at the same time as building the business. It is imperative to demonstrate continued growth while investors are performing due diligence on your company. But it’s difficult for an entrepreneur to balance day-to-day management responsibilities and efforts related to the capital raise.
What factors about your business led your investors to write the check?
The clear value proposition of our company is what made it so attractive to investors. We’ve had clients who, upon seeing a product demonstration, look at us like they’ve just discovered fire. The overall need and product-market fit, especially in the lending industry, are highly apparent.
What are the milestones you plan to achieve in the next six months?
In the next six months, we plan on rolling at least two new products and doubling the amount of business we are doing.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Start the funding process early, and target for investors who can provide strategic value beyond capital. Stack your meetings so that all the VC’s you’re speaking with are at a similar stage. The funding process will be faster and more fruitful if you are talking to the right people, and doing so in an organized fashion.
Where do you see the company going now over the near term?
We want to further establish ourselves in the lending market, where we will systematically increase the scope of our AI to automate more elements of the underwriting process. Our traction has primarily been with small business lenders thus far. We are now expanding into personal and mortgage lending as well.
What’s your favorite restaurant in the city?
L’Artusi, 228 W 10th Street.