Tag: Startups

Investing In The Future Of Fintech – Sila

Photo – Hope Cochran and Shamir Karkal, Founder and CEO of Sila

We are excited to announce our investment in Sila. Sila is taking on the challenging world of fintech infrastructure and building a platform to allow fintech developers to launch and scale their companies. We were joined in the Seed Round by our co-lead, Oregon Venture Fund, as well as existing investors Mucker Capital, 99 Tartans, Jerry Neumann, and Taavet Hinrikus.

When we look around at the areas of the economy – especially at this very disruptive time – that have the potential to offer more opportunity to people from all walks of life, one of those key areas of innovation is the flow of money: the speed of transfer, the fees involved, and how it is stored. This area of fintech has been growing, but not as quickly as SaaS and other B2B based businesses. Why is that? Regulatory approvals are challenging, the processes disaggregated and expense to get there is tremendous.

Building a new fintech startup is a difficult and often two-year endeavor. The existing regulatory frameworks make it difficult for new startups to quickly build, launch, and iterate products in the same way as other tech startups. The process is filled with regulatory hurdles that take years of time and deep expertise. The result is a company that cannot iterate and experiment on their new concept until the process of moving money can be solved – delaying proof of product/market fit much longer than in other areas.

Below is a non-exhaustive list of the steps required to build a fintech startup that handles money:

  • Compile know your customer (KYC) and anti-money laundering (AML) documentation
  • Create detailed fund-flow diagrams and specs
  • Find a sponsoring bank (often a white label bank such as Bancorp) to provide the banking backend and enter their compliance process
  • Find a processor for ACH/Wires/Cards
  • Apply for FINCEN (Financial Crimes Enforcement Network) registration
  • Apply for money transmitter licenses in all 50 states or where you plan to do business
  • Write custom code to connect your banking partner and ACH processor and your own product
  • Launch product as a beta

This process largely went unchanged from the late 90s to 2014 and was the process followed by the large original fintech players (Simple, Square, Stripe, etc.). On average, fintech companies take close to 2 years to work through this cycle before launching their product as a beta.

Our excitement in Sila began over a year ago after first meeting CEO Shamir Karkal and the rest of the initial team through Oregon Venture Fund – a long time partner and investor in the round. We met up again at one of our annual Portland area dinners. Shamir has spent his entire career in the fintech world: from co-founding and scaling Simple, the first neo-bank, and shepherding the company to a successful exit, to running the API and infrastructure platform for an international banking company, Shamir has developed deep expertise across the regulatory and infrastructure aspects of the industry.

Sila was founded with the core mission of fixing the problem of launching a fintech company or fintech features. Their main offering is a set of simple, secure, and compliant tools to help fintech developers launch their products and comply with financial regulations. The objective is to enable fintechs to get to market quickly and then be able to iterate on their offering, rather than working through ~2 years of regulatory and architectural challenges before being able to test their product. This is a problem that the Sila team knows in intimate detail.

Co-founders from left to right: Shamir Karkal, CEO, Alex Liption, CEO, Angela Angelovska, CLO, & Isaac Hines, COO

Via a simple API integration, developers can leverage Sila’s regulatory framework, send and receive funds, integrate with bank accounts, and seamlessly conduct KYC/AML checks, all while maintaining a single integration. We believe that Sila can significantly change the way fintech companies are built and can become the de facto platform in the space.

Sila represents everything we look for in our early stage investments: a dedicated and high caliber team led by an entrepreneur with deep industry expertise, a company committed to being built in the Northwest, a massive market opportunity, and true differentiated technology that solves a real problem. We are incredibly excited to start the journey with Sila and look forward to helping them build an amazing company that opens up massive opportunity across the fintech world.

The Finalists in Microsoft Ventures and Madrona Venture Group Innovate.AI Startup Competition

It’s been an exciting time since we announced the Innovate.AI startup competition with our partners at Microsoft Ventures last October. What started as an idea we shared with our friends there, evolved into a global competition generating interest from some of the most innovative companies in the ML/AI field. We’ve been thrilled with the enthusiasm and strong response we received and would like to thank each participating company for their submission and the judges for the countless hours they spent evaluating each application.

The competition showcased the breadth of problems and use cases that companies are addressing by applying ML/AI. A couple of interesting observations about trends from the applicant pool emerged:

  • Intelligent Applications are on the rise – as data become plentiful and easily available and accessible, using AI and ML to build a continuous learning system is a fundamental fabric of every application is the way of the future. Many of the companies are targeting a variety of industries with plentiful and readily available datasets.
  • Innovation follows data availability – most companies that are thinking about innovative ways to provide insights and predictive analytics focus a lot on their data strategy and how to best organize and use the data they have as an integral part of the value they can and want to deliver to their customers.
  • Business models are still evolving: most ML/AI companies don’t fit the traditional software model of selling licenses or software-as-a-service. We saw a combination of business models, some leaning towards pure professional services, others a hybrid between licensing and SaaS. It’s clearly an area that will evolve as the companies mature.

Additionally, we saw a concentration in the following verticals:

  • Healthcare & Research: personal and mental health assistants, drug research and diagnosis, and computer vision to spot patterns and abnormalities.
  • Financial Services: research summaries and insights for investment professionals.
  • IoT & Edge Computing: analyzing data from edge devices, predictive maintenance, security and autonomous vehicle applications
  • Sales & Marketing: optimizing leads and focusing sales people on top opportunities.
  • Retail: Using computer vision to automatically recognize and tag items in images and video, enhanced advertising & shopping experiences.

And finally, we’d like to congratulate all of our finalists and welcome them to the final stage of the competition. Here is a closer look at who they are:

  • Alpha Vertex: cognitive systems for the financial services community.
  • ConceptualEyes: accelerates the speed of pharmaceutical research and discovery with artificial intelligence.
  • Envisagencis, Inc.: uses artificial intelligence to unlock cures for hundreds of diseases caused by RNA splicing.
  • FunnelBeam: a customizable sales intelligence platform.
  • ID R&D Inc: next-generation authentication solutions including voice, behavioral, and fusion biometrics.
  • TARA Intelligence Inc: a SaaS application to scope projects, assign developers, and monitor ongoing performance to build software faster.
  • Uru: fusing computer vision and artificial intelligence to create better ad experiences for video.
  • Wallarm: an adaptive, intelligent, application security platform.
  • Waygum, Inc.: intelligent IOT platform and mobile app for manufacturing.

 

To see a list of finalists in Europe and Israel, visit Microsoft Ventures.

 

Announcing the Microsoft Ventures and Madrona Venture Group AI Startup Competition

Today we are announcing our partnership with Microsoft Ventures to launch the Innovate.AI global startup competition. We are thrilled to be working with Microsoft on this project to find the world’s most promising early stage startups tackling unsolved problems, at scale, using machine learning and artificial intelligence.

At Madrona we have been early believers and investors in the transformative power of Artificial Intelligence and intelligent applications. The convergence of cloud computing (massive amounts of compute and storage available on the cloud at reasonable price points), specialized chips for machine learning (e.g., GPUs and FPGAs), and new advances in machine learning algorithms has created a unique opportunity for startups to build high value intelligent applications powered by unique and proprietary sources of data.

We have invested early with several platform companies and are actively looking at vertical applications. Examples include Turi, purchased by Apple, Lattice Data, purchased by Apple, Xnor.ai, MightyAI, Amperity, SmartAssist, Suplari, Saykara, Versive and others.

In thinking about how we might reach companies as early as possible we came up with a couple of ideas including developing an “American Idol” like competition. In discussions with our friends at Microsoft – we saw that we were aligned on interests in finding, supporting and investing in AI focused startups in the early days and we worked together to develop the AI:Innovate competition which Microsoft is taking Global.

We believe that in the next five to ten years, the impact of these technologies will transform most industries, from education, to real estate, to manufacturing, to transportation, to healthcare and we have only begun to see the impact of machine learning on the economy and society.

Over the next six months, Madrona will work closely with Microsoft Ventures to select a batch of promising startups that are either building new products and platforms with data and machine learning at their core or using AI to build the next generation intelligent applications. These startups will compete for a $1M investment from Madrona and Microsoft Ventures as well as an Azure package of credits, Office 365 licenses, and technical support worth over $500K.

Additionally, startups may also win an “AI for Good” prize that will be awarded to one startup that is using AI to create a positive impact on society, which will earn $500K in funding from Microsoft Ventures and Azure package of credits, licenses, and support worth over $500K.

The qualification requirements for startups to participate in the Innovate.AI global startup competition are as follows:

  • Companies that have raised no more than $4M in equity funding and/or loans at day of application
  • Companies that offer or intend to release or build a product or platform which utilize machine learning; such product/service/platform must be based on a model developed by the company, and/or be trained with data obtained/generated by the company or a 3rd party, and/or make use of pre-trained ML/AI APIs
  • Companies can utilize any technology stack or cloud platform to build their product, but the intention will be to work with the winners to help them utilize Azure and MS technology through our BizSpark offers and portfolio development efforts

See Peggy Johnson’s (EVP, Microsoft) blog post for more details about this competition.

Madrona is excited to kick off the Innovate.AI competition with Microsoft Ventures to find the next generation of great machine learning and artificial intelligence companies. The competition begins this month with applications, and we intend to select a final winner by Spring 2018. To find out more about entering the competition or submit an application, please visit the Innovate:AI page to view more information!