🧠 From Disruptor to AI Category Leader
Founders Factory Startup Bulletin #51
This is the Startup Bulletin—written for founders, by founders. Each month we bring you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.
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To Dan Secretan, AI isn’t a replacer, it’s an enhancer. A “super strength”.
The proof is in the pudding. In teams which are using Xapien’s LLM-based background checking platform, researchers are now known as ‘strategic analysts’, advising the business on how to proceed based on Xapien’s research.
The story of Xapien is a great example of building ahead of a wave, becoming a category leader in a technology as it reaches maturity and widespread application. In this month’s newsletter, we look at the four steps that have brought Xapien to where it is today.
Also in today’s Startup Bulletin
Our recommended reading from this month
Highlights from our global startup portfolio
Opportunities, roles, events
Building Xapien in four steps
Xapien’s founder Dan Secretan shares the four key steps that brought his business to where it is today:
1. Identify a growing problem
My co-founder Shaun and I had spent many years combined working in financial crime, law enforcement, and security, seeing how technology can be applied to empower these sectors.
As the internet hit the mainstream, the types of threat and risk we saw emerging was unlike what we were seeing before. As business became increasingly globalised and online, it was harder than ever to understand who you were doing business with: and our due diligence systems weren’t adapting to keep up with it.
It was in dire need of a context layer—something you could map on top of existing systems to increase understanding, context, and accuracy.
2. Harness an evolving technology to solve it
We quickly identified two technologies—or technology phenomena—which could solve this. Shaun’s background was in open source intelligence, using the wide range of publicly available information on the internet to enhance decisions or data. I, meanwhile, was already seeing the potential of AI, in particular the lesser known technology of large language models (LLMs).
The combination of these two things could be gamechanging. There was so much information on the internet (news articles, blogs, reports) that could help you truly ‘know your customer’ better than ever before. LLMs fed on this information could provide comprehensive, and more importantly, accurate background checks.
And thus, Xapien was born.
3. Find your first buyer to start generating revenue
Given my background was in financial crime, we set out to target a huge industry: financial services. I had seen even just a glimpse of the money these organisations spend on background checks and due diligence: and if we could capture even just a fraction of this trillion dollar market, and make progress, we could see huge benefits.
The catch? Financial services are incredibly hard to sell to. They have slow sales cycles and procurement processes, especially given the rigidity of their existing due diligence systems. So we had to look elsewhere—one, to build confidence with other potential customers, and two, to start generating revenue.
What quickly transpired was that there we had a blindspot to an entirely different category of companies who used background check technology—philanthropic donations. Everyone from universities, to museums, to arts organisations, all investing money in understanding where the money they are being given is coming from. The additional context that Xapien provided meant that checks were tailored and nuanced to each company's needs.
One such example—a cancer charity, who wanted to flag donations from tobacco companies.
4. Balance future & present to develop your product
We've found significant benefits in separating core product development from exploratory research and development.
We have two distinct teams: an engineering team focused on building specific product components, and a smaller research team dedicated to exploration and experimentation with new models to discover advancements. The collaboration between these teams allows us to consistently deliver, while ensuring we are still pushing the limits of what we’re able to do.
📚 What we’ve been reading this month
Vertical AI: beware what you wrap (Matt Brown)
All At Sea (BLLNR)
The Truth Behind UK Startups (Entrepreneur UK)
🚀 Highlights from Founders Factory’s global portfolio
We announced our new Crypto & AI Accelerator, backed by Coinbase, Animoca Brands, and Fabric Ventures. Read about it here in Sifted
We closed our next six investments for our Mining Tech Accelerator, including Durin (fully automated drill rigs), Terra AI (AI modelling for exploration), and Rock Zero (zero waste lithium extraction). Check out our full cohort here
We also announced our latest Nature Tech Cohort, featuring six startups from Australia, the UK, and Canada. Check out the full cohort here
Ceto announced $4.8M in seed funding, as they build out their data intelligence platform for commercial shipping insurance
Lucy Adams, co-founder of Martee AI, was named in the latest Forbes 30 Under 30, in their social impact category
Durin, the automated drilling rig startup, announced their $3.4M seed round, led by 8090 Ventures with investment from a16z, among others
Gridshare launched their latest crowdfunding campaign, offering the chance to invest and co-own a newly constructed solar farm. Learn more here
📍 Opportunities
Roles
Founder Engineer at Ditto—AI-powered social network. Learn more here