The idea for Seattle startup Valid8 came from a Ponzi scheme — but not in the way you might think.
Tod McDonald was appointed Lead Forensic Accountant to investigate a 2012 scam in which Frederick Darren Berg defrauded investors out of $100 million through the Meridian Mortgage investment funds he ran. McDonald spent more than two years and $2 million on professional fees trying to figure out where the money went.
“When he started, you couldn’t trust the books and accounting systems or financial statements, so Tod had to go to the source of all monetary inflow and outflow bank activity to get conclusive answers,” said Valid8 CEO Chris McCall.
They knew there had to be a better way. Together, they began building Valid8, a platform that provides insights into complex cash flow networks and validates financial documents. The tools are designed to simplify the process for auditors, lenders, and other professionals who need to make objective decisions based on bank statements and financial records.
“When we recognized the value of applying a high level of scrutiny and understanding up front before bad things happen, Valid8 was born,” McCall said.
The two-year-old startup is currently working through the Techstars Seattle accelerator. McCall shared what they’ve been working on for this Startup Spotlight, a regular GeekWire feature. Continue reading for his answers to our questionnaire.
Explain what you do so our parents can understand it: “Valid8 de-risks financial statements and helps identify fraud.”
Inspiration hit us when: “We realized that almost all of the entire $100 billion dollar accounting service industry, regardless of what type of project they engage in (financial statement audit, bankruptcy/restructuring work, financial investigations, quality of earnings and proof of cash reports), all require using bank account transactions to validate internal accounting records. Shortcuts like statistical sampling and looking at account balances versus considering every single transaction meant the CPA firms and their customers were exposed to unnecessary risk and ambiguity. Eliminating the shortcuts by using big data analytics and data processing algorithms to consider every single banking transaction not only provides a comprehensive picture of reality – but automates and accelerates a vast array of existing procedures.”
VC, Angel or Bootstrap: “Bootstrap to revenue, then smart VC/Angel money that adds credibility to the company.”
Our ‘secret sauce’ is: “The ability to aggregate all bank activity, match them to accounting records, and report on the differences.”
The smartest move we’ve made so far: “Applying for Techstars and then joining the class in Seattle this year has been a great move. We’ve seen significant progress in our product development and feel great about our opportunity to continue to build Valid8 as a result.”
The biggest mistake we’ve made so far: “I think we worked on Valid8 part-time for too long. We should have quit our day jobs sooner and focused earlier than we did. We’re motivated to give it our all now more than ever.”
Would you rather have Gates, Zuckerberg or Bezos in your corner: “It’s a tough call, but we’d choose Bezos. We’re fans of his ability to be steadfast about his vision and staying focused on it in the face of immense uncertainty and criticism.”
Our favorite team-building activity is: “Having a few pints at College Inn Pub while poking fun at our CTO’s ‘top hipster accessories’ is always a good time!”
The biggest thing we look for when hiring is: “We value initiative and desire to take on big challenges that require creative problem-solving.”
What’s the one piece of advice you’d give to other entrepreneurs just starting out: Just start! Quit thinking about it and do it!
Editor’s note: GeekWire is featuring each of the companies in the Techstars Seattle 2017 accelerator as they prepare for their Demo Day April 19.
