AI-for-auditors Ottawa software startup Mindbridge scores venture financing deal

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One of Canada’s most promising artificial intelligence startups, Mindbridge Analytics Inc., has raised $8.4-million in a venture financing deal to fund its efforts to transform the auditing business with machine learning.

“Last year was about market validation, and 2018 is a year of starting to scale the company,” said Sam Haffar, a partner with Real Ventures, which is leading the financing a year after backing the firm’s $4.3-million seed round. Other investors include New York’s Reciprocal Ventures, National Bank of Canada, Toronto-based The Group Investment and past backer 8VC, the San Francisco venture-capital giant.

Philippe Daoust, vice-president of venture capital with Montreal-based National Bank, said: “The view of the bank is we like to support companies we work with or that have extremely high potential, and in the case of Mindbridge, I think it will be both.”

Ottawa-based Mindbridge has had a quick start under the leadership of chief executive Eli Fathi, a veteran tech entrepreneur and executive. Together with founder and chief strategy officer Solon Angel, he has assembled a seasoned leadership team – including chief technology officer Robin Grosset, a former chief architect with IBM’s Watson Analytics Group – that investors said is unusually experienced for a company that has been in the market for just one year.

Mindbridge’s software is not intended to replace auditors, but to help them improve their effectiveness by using self-teaching algorithms to automatically review all accounting entries within a particular assignment, such as an annual audit. That compares to the typical practice of auditors sampling just a small percentage of transactions. The firm’s software flags irregularities or questionable entries that auditors can then examine more closely.

“We were able to identify an area that has not been disrupted for 100 years and we are providing a different solution,” Mr. Fathi said. “Not all AI companies are equal. The question is, can you solve a real problem? We are solving a real problem.”

Michael Steinberg, general partner with Reciprocal, which invested US$2-million in the round, said: “We think Mindbridge has the opportunity to rapidly become the standard solution in financial audit.”

Mr. Haffar said almost all Mindbridge’s initial customers have renewed and expanded the scope of their engagement, using it for several times more auditing projects than their first contract. “That gave us validation this was something that was hitting a really strong nerve in the market. There was a real demand for it and everything we thought would play out kind of did, and went above and beyond our expectations.”

Mindbridge now has 130 customers in six countries, including the Bank of England and audit firms MNP, BDO and Grant Thornton, and its product is offered by Thomson Reuters’ tax and audit accounting division to its clients. Mindbridge did not disclose revenue, but Mr. Haffar said the company went “above and beyond” the typical standard for top-performing enterprise software startups, which achieve a run-rate of $1-million annually by their 12th month in business. “I would say it’s in the top 1 per cent of enterprise software companies at this stage“ based on revenue to date, Mr. Haffar said.

Mr. Fathi has said his goal is for Mindbridge to generate $100-million in annualized revenue by 2021. “When we went to market a year ago, the biggest [customer concern] was, ‘AI is a black box, what am I going to do with a black box? I don’t understand it and it worries me,’” Mr. Fathi said. “Nowadays, there is no longer this challenge.”