A small Seattle startup is helping solve some of the most high-profile white-collar crimes.
Valid8 Financial sells a forensic accounting platform to lawyers, CPAs, and other enterprise and government customers that use the software to organize and analyze the flow of funds.
Common use cases include divorce disputes between high net-worth individuals, insurance companies auditing for Medicare fraud, and chapter 11 bankruptcies.
“We are in some of the largest cases out there already,” said CEO and co-founder Chris McCall. “If you watch the news, if you see anything come up, they’re likely using our system on those cases.”
Founded in 2017 and a graduate of Techstars Seattle, Valid8 recently raised $1.25 million in debt financing, a tactic being used more often amid a slowdown in traditional venture capital. That follows a $6.3 million seed round in 2021.
The company’s investors include Capital Midwest, which led the seed round, in addition to First Trust Capital, CPA.com, Green Cow VC and others.
The startup was co-founded by Tod McDonald, who led the investigation of a 2012 Ponzi scheme in which Frederick Darren Berg defrauded investors out of $100 million. The investigation took more than two years and $2 million on professional fees.
“The original idea behind Valid8 was, ‘Let’s just design a platform that makes it really fast to go get accounting evidence and assemble a database,’” said McCall, a former exec at Hewlett-Packard and NexGen Storage.
McCall said six states currently use Valid8’s software in white collar crime investigations. The company also sells its tech to CPA and law firms including Mazars Group, Baker Tilly, Armanino and RSM, among others.
There are currently three tailwinds propelling the tech’s adoption, according to McCall:
- Employers are looking to entice and retain employees with software;
- The proliferation of financial tech platforms like Stripe and Plaid are adding new layers of complexity to financial investigations;
- Recent AI advancements are making it possible to automate certain auditing tasks.
Asked if the company is using machine learning to analyze inputted financial data, McCall said the company is not letting AI make any judgments. He added that the company may leverage AI in the future to implement “anomaly detection” features.
“We draw a pretty hard line,” he said about letting AI make judgements of financial data. “We’re not going to do any assessment or disposition on anything. That’s the professionals’ job.”
The startup is built on Amazon Web Services, making it “much more secure than your average IT infrastructure,” McCall said. The added function of storing financial data in the cloud has been another selling point, he added.
Valid8 on Tuesday released three new features:
- Users can now aggregate accounting data from more than 30 different sources including QuickBooks and Microsoft Dynamics.
- There’s a new map that tracks the progress of various accounts the user it auditing.
- The company released a fully interactive Sankey diagram to illustrate a client’s funds flowing through various legal entities, financial statements and accounts.