D2's investment in Xapien

Today we’re thrilled to announce our investment in Xapien as part of their £4.5m Seed round, alongside YFM.

Risk reporting is a c.£100B global industry that looks much the same in 2023 as it did in the 2000s in terms of tech enablement due to its nuance and complexity. A step-change has been long overdue, and we believe that time has arrived.

Some background on risk reporting ⚠️

In any business, it’s best practice to try your best to make sure a person or company you’re about to work with is legit before you get started. Obvious statement, pretty easy to understand — but what’s challenging to grasp is just how enormous this activity is at the scale of modern commerce.

Every year millions of people open bank accounts or file claims for their insurance policies. Charities receive billions in prospective donations. Procurement teams within large organizations ink thousands of agreements worth billions, perhaps trillions, with new partners. Legal firms take on masses of new clients — the list goes on. Every single one of these transactions involves a function commonly known as Risk Management, and it exists within most companies across a wide variety of industries. Essentially, Risk teams are there to make sure that everything within any given transaction is above board and that the transacting parties are who they say they are.

Needless to say — this job requires a lot of data on your subject. While the availability and access to data in the digital age has skyrocketed, that hasn’t necessarily made things easier — quite the opposite. Someone needs to sort through all of that data in order to produce a report on a subject that will lay out the risks, if any, of working with the subject. In general, that someone is either:

1. A member of the risk team. They’ll often use some combination of Google for surface-level stuff and paid private databases for the harder stuff. In the case of a search on an individual, they may need to put together a report on John Smith, for example. They’ll need to type that name into Google and sort through the thousands of John Smiths to find things like their LinkedIn, Instagram, company affiliations, and more depending on the case. If they’re lucky, they’ll have more than one data point to go on to help cut things down a little. On average, these sorts of reports can take a risk team member 3–5 days to produce. Because of the time-intensive nature of the work, risk teams tend to scale significantly in headcount as a company grows.
2. A boutique search firm. Companies tend to outsource searches that could pose a high risk if something is missed. Think legal firms and government contractors. Boutique firms are incredible at what they do (these folks literally dig through bins to retrieve information if they need to) and they charge like that’s the case. A top 3 search firm will charge upwards of £14k per search.

Most companies use a combination of the two above search methods, with the majority of reports being carried out in-house to keep costs low. This puts risk teams under a lot of pressure which can lead to mistakes or broader company disruption. You’d think that as data become more plentiful, providers would release tools that make the ocean of information easier to navigate. While many have tried, disambiguation (the act of sorting through a million John Smiths’ digital data and returning only your intended John Smiths’ data) is an incredibly challenging and multifaceted problem to solve.

Enter Xapien 🦾

Co-founded by Chris Green, Daniel Secretan, and Shaun O'Mahony, Xapien automatically generates risk reports on individuals and companies that are fast, affordable, and comprehensive. The company represents the culmination of a 10-year vision to automate research using AI and NLP technologies and represents a true step change for the risk management space.

There are three primary pillars that made it easy to fall in love with Xapien:

1. Tech — as mentioned, disambiguation is a complex problem to solve. We were blown away by the leap forward that the team made here. They did the hard work that no one else wanted to do, and it has become one of their greatest assets.
2. Team — Previously; Chris, Dan, and Shaun all worked at BAE Systems Applied Intelligence, which specialises in advanced cyber security and data solutions to governments and large organisations. From day one, the deep sector understanding within the team was clear. What was also clear was the founding teams’ ability to surround themselves with great people
3. Customer Service — rarely do you come across a company where the CS team is rated so highly. Our reference calls with Xapien's customer base revealed that they have two enormous competitive moats: product differentiation (which we’d figured out by that point already), and unmatched Customer Service. This function is particularly challenging in SaaS models — you can’t offer a white glove service at scale, but you don’t want to leave your customers feeling uncared for. We believe that Xapien has struck a great balance here, and are making good headway at scaling their level of service.

In closing

We’re looking forward to supporting Xapien in their next phase of growth. If you’d like to get in touch with the Xapien team, you can reach them here. If you run a startup and would like to discuss it with D2 as a funding partner, please reach out here.