Last week, MindBridge Analytics announced that Reciprocal Ventures had participated in their $8.7M Series A financing. We are excited to partner with this very promising young company out of Ottawa, Ontario. MindBridge offers a powerful artificial intelligence (AI) platform and the first application of their technology is revolutionizinghow internal and external audits are conducted.After being in market for 18 months, they are seeing tremendous traction, a strong endorsement for this new market opportunity.
Artificial Intelligence is no longer confined to the realm of science fiction. It’s here now and it’s all around us, from voice assistants like Alexa, to suggestive search and driverless cars. We are particularly excited about an emerging class of AI applications which are built to augment what humans do, not replace them. AI can speedily and accurately perform repetitive tasks, freeing our workforce to focus on higher value work whichrequires critical thinking and the ability to make judgements.
How man and machine interact has been a focus for Garry Kasparov since 1997, when he lost the most famous chess match in history to IBM’s Big Blue. In the following years he pioneered “freestyle” chess, a competition where players partner with computer programs in matches against other players, and also against supercomputers. Using chess as a backdrop, Kasparov’s research proved to him what he had long suspected — that the things computers do best are those where humans are weaker, and vice versa. “Human plus machine isn’t the future, it’s the present,” he said in a TED Talk last year.
The symbiosis of man and machine which Kasparov champions so eloquently, is what MindBridge is all about. The firm’s AI-based technology enhances an auditors’ capacity to ingest, process and analyze financial data, allowing them to carry out their tasks in less time and with a greater level of assurance.
As anyone who has ever been through one knows all too well, a financial audit is a time-consuming and expensive process akin to getting a root canal. Even a small audit today will take several months and cost tens of thousands of dollars. Yet, despite the time and expense involved, that traditional audit is inherently flawed, since the auditors only examine a random sample of a firm’s transactions, usually around 10%.
This current probability-based model leaves a lot to chance! A finding of an “absence of issues” doesn’t mean there are no issues — just that none were found in the sample. Obviously, the manual, statistical sampling processes and rule-based tools which many firms use are outdated and ineffective. And they are costly. Estimates show that financial loss, due to human error and intentional fraud, total $3 trillion annually. What’s more, traditional audit best practices only identify about $200 billion of those losses.
Using the latest advancements in data science and machine learning, MindBridge’s AI Auditor can quickly and accurately examine every transaction, detecting anomalous patterns of activities, unintentional errors and intentional misstatements, freeing the auditor to focus attention on potential issues that have been identified.
One of the most compelling features of the MindBridge AI Auditor is its user-friendliness. Virtually any businessperson can use the system, without additional degrees or a background in computer science. Competing systems are overly complicated, built on proprietary, closed codebase. It’s not really much of an exaggeration to say that in order to use them, you need to be a data scientist. Offerings from incumbents are only getting more complex — and while they claim to be embracing AI, with their large installed bases, they are not incentivized to drive innovation in a material way.
MindBridge’s goal is not to replace the CPA, but rather to augment the CPA’s efforts, taking the rote reconciliation work out of the hands of humans, enabling them to focus on higher-value processes like analytics. MindBridge’s products shave weeks, or even months off the process, at a fraction of the cost.
While machines cannot yet think creatively, they can learn. The AI Auditor is designed to be recursive, so as the platform is used it ingests more data, allowing its accuracy and precision to improve. MindBridge’s visionary CEO sees the end result of this synergy of AI and people as creating co-bots, not robots. Or as Kasparov says, “We’re not being replaced by AI. We’re being promoted.”
We believe that vertical AI solutions will replace rules-based, legacy technology in data rich industries. The financial audit market is massive, estimated at $20 billion annually when both internal and external applications are included. We are on the cusp of a “wave of replacement”, when incumbent, legacy rules-based systems will be supplanted by new AI-based auditing tools. MindBridge is well positioned to capitalize on that transition.
MindBridge has rapidly penetrated this antiquated market by using a collaborative approach that combines human and artificial intelligence. They already have 130 customers in six countries, including the Bank of England and audit firms MNP, BDO and Grant Thornton, and a partnership with Thomson Reuters’ tax and audit accounting division, to offer the product to their clients.
The best ideas are nothing without the right people and the MindBridge team can boast a unique combination of outstanding business acumen and tech innovation. CEO Eli Fathi is a serial entrepreneur who is well-known in the Canadian tech ecosystem for his successful track record in building companies. Companies he founded or co-founded currently employ over 400 people and have generated over $500 million in salaries and net benefits to the economy.
Eli was recruited to run the business by MindBridge founder and visionary Solon Angel who serves as chief strategy officer. Solon’s deep knowledge of human fraud-detection make him the perfect technology strategist to reshape how organizations around the world detect and prevent corporate risk while deploying capital.
One of Eli’s first key hires was CTO Robin Grosset, who has over 20 years of experience in business, having worked in and founded successful software startups, which were acquired by Cognos and IBM. At IBM, Robin ran a team of 200 which built Watson Analytics, the famed AI platform. He knows the strengths and shortcomings of competitive offerings and has built an easy-to-use solution that performs better at a lower price point.
We believe MindBridge has the opportunity to rapidly become the standard solution in financial audit. It’s an incredibly effective solution that promises to deliver massive gains in productivity and a competitive advantage for forward-thinking CPAs. And financial audits only represent the beginning of the firm’s potential. In addition to capturing the current opportunity in financial audits, MindBridge’s technology can be applied a myriad of additional applications. To quote Kasparov one last time, “That is the real promise of this new generation of AI: creating new knowledge, not just good results.”