AI-for-auditors startup MindBridge scores global deal with KPMG

Originally published here in The Globe and Mail

MindBridge appears to be back on track to becoming one of Canada’s most promising AI companies, two years after Leyton Perris took over as chief executive.

Accounting giant KPMG International Ltd. is set to add the power of artificial intelligence to its financial audits globally, incorporating software from rapidly-growing Ottawa AI company MindBridge Analytics Inc. into workflows.

The professional services giant has struck a global deal with MindBridge, whose AI software helps auditors by automatically reviewing all accounting entries in an assignment, flagging irregularities or questionable entries for them to examine. By comparison, human auditors review just a fraction of entries and may miss mistakes or misdeeds.

MindBridge’s AI “will be part of our KPMG methodology” and built into its digital auditing platform used in 143 countries, said Kristy Carscallen, head of audit and Canadian managing partner with KPMG, in an interview. “It will become how we do an audit. When we looked at our objective to deliver high-quality audits, MindBridge ticked a bunch of boxes.”

Kevin Kolliniatis, national technology leader, audit and assurance with KPMG Canada, likened traditional auditing to “trying to find a needle in a haystack using sampling techniques. Now we’re identifying those needles out of the gate.”

The deal is a big win for eight-year-old MindBridge, which began working with KPMG Canada several years ago and used its input to expand the capabilities of its software. “It’s a combination of years and years of slowly gaining confidence with key people on one hand, and on the other refining the sales pitch,” said MindBridge director John Stokes, managing partner with investor Real Ventures.

It’s also an indication that MindBridge is back on track to realizing its early potential as one of Canada’s most promising AI companies, two years after veteran software sales executive Leyton Perris took over as chief executive officer and focused its efforts on aggressively pursuing sales.

Its business has grown more than sixfold over the past two years and revenues surpassed $20-million in 2022, as MindBridge added dozens of corporate clients.

MindBridge, which hasn’t raised capital since 2019, is also in “active talks” for new financing, Mr. Perris said in an interview. “It’s financially prudent when you’re growing at the rate we are” to pursue funding. “We’re not laden with debt and our growth narrative is solid.”

The company was founded by Ottawa-based entrepreneur Solon Angel in 2015, who was convinced AI could help auditors detect fraud and other accounting anomalies. Mr. Angel was soon flooded with calls from companies that wanted to see his software. It was still little more than a concept, so he called veteran Ottawa tech entrepreneur Eli Fathi for help.

Mr. Fathi was smitten by the opportunity, convinced MindBridge could become a giant. He joined as CEO and recruited seasoned leaders including chief technology officer Robin Grosset, former chief architect with IBM’s Watson Analytics Group (Mr. Angel is now chief impact officer). By 2017, the company had 20 audit customers and partners in Canada, the United States and Britain.

The timing was good. Canada was attracting huge foreign investments in startups and research labs, drawn to its reputation as an AI hub. MindBridge raised $42.3-million in investor capital and government funding from 2017 to 2019.

But MindBridge lacked focus figuring out which part of the market – internal auditors, external auditors, corporations or governments – to pursue, and cautious clients were often hesitant about adopting new technology.

MindBridge also experienced turnover, including the quick exit of two high-profile executives recruited for top posts in 2019. COVID-19 hit revenues in 2020 and prompted a 10-per-cent staff cut that April.

The company’s fortunes have been on an upswing since Mr. Perris took over for Mr. Fathi, who is now chair. Mr. Perris told The Globe and Mail last June he brought “a sharp focus on quick commercialization, trading less off the motion and more off results.”

Mr. Grosset said “we have tightened our focus as part of this product-market fit conversation. We know who our buyers are and we know what our product does well. We’re being recognized for what we do. That has helped us.”

MindBridge also didn’t crank up hiring prior to the tech downturn that began in late 2021, as many tech companies did, only to make wrenching cuts later. “We’re in a healthy commercial position where we are sustainable as a business and cash flow positive,” Mr. Perris said of the 130-person company, which hasn’t had to reduce its work force during the downturn.