Today, we are seeing SaaS companies increasingly use AI technologies to deliver a higher intelligence application vs. simply being a workflow tool or system of record. This evolution from cloud application (e.g., the internet) to intelligent application (e.g., early AI) to eventually autonomous application (e.g., AGI) will cut across industries and functions, including healthcare and fintech.
Just like software was eating the world 10 years ago, the next evolution is AI permeating every business model, function, and vertical. As AI as a service (AIaaS) moves into – and potentially takes over – the SaaS space, we see the potential for AI to move the SaaS category from a one-size-fits-most category to a more customizable set of tooling for customers. It will allow businesses to scale more than ever before and streamline infrastructure and systems in a way we’ve never seen.
The Oak team’s experience investing in the companies that have changed the way we think about software, SaaS, and technology began nearly 40 years ago. When backing category-defining organizations, we look for not only generational founders, but also companies that understand broader market dynamics and are best positioned to capitalize on shifting trends in how businesses and consumers fundamentally operate. Whether it was the advent of cloud computing or the mass adoption of AI, the investment team uses its intuition and experience to match these trends to exceptional founders so that we can find the companies we want to support.
In this two-part series, we are exploring what categories of companies we think are best positioned to win as SaaS and AI converge, starting with fintech. Fintech is inextricably tied to software – but identifying where SaaS and now AIaaS is best suited to unlock new markets hasn’t always been obvious, particularly as the fintech space cooled.
When looking across our portfolio, and specifically at what we think is best positioned to win in the fintech AI space in the near-term, we are most excited about three categories:
- Vertical Applications: Across both SaaS and AI, vertical applications still add meaningful value in highly regulated industries, where there is a high bar for understanding a complex set of ever-changing rules and related compliance. And, in a world where fine-tuning and reinforcement learning still is best managed by humans-in-the-loop, vertical applications offer a solid near-term bet of category stand outs in fintech.
- Horizontal Platforms: Within fintech, horizontal platforms that are exploring interesting ways to integrate AI into how they enable embedded finance, particularly those that offer low-code or no-code solutions, are best positioned to scale as companies get more comfortable with AI in the financial services sector.
- Fraud: Fraud is still one of the biggest challenges in financial services, with the sophistication of AI only increasing exposure for companies and individuals alike. Companies that can match the technological advancements of fraud attempts with their own use of AI are best positioned to win.
Looking across our portfolio, some of our software and AI investments in fintech map to these categories in the following ways:
Vertical Applications
Vertical applications in SaaS were able to transform industries and win against horizontal companies because of their laser focus on the end user. Vertical AI applications can take this progress even further – tackling the language-based tasks and workflows within verticals dominated by regulatory requirements and unlocking a new, larger TAM. However, unlike their SaaS predecessors, vertical AI companies need multiple moats to win, including proprietary training data, high-quality user feedback, familiar UI, and early market presence. Our portfolio includes a cross-section of companies with these qualities.
Auger, a new Oak portfolio company, is creating a unique software platform that will redefine supply chain management by helping customers manage planning, forecasting, and financing with greater ease. Auger is one of the first AI-native supply chain software companies, able to leverage the accessible cloud-based datasets for the ML and LLM solutions that will address historical pain points in the space and support real-time decision making.
Black Ore is an AI and automation platform that serves as the engine to accelerate core workflows for accountants and financial services businesses. Its initial product launches have been focused on simplifying the tax preparation process. By combining proprietary AI technology with federal and state tax codes and regulations, Black Ore’s core product offering helps Certified Public Accountants and accounting firms focus their time on the more complex elements of tax filing and expand their business.
Cart.com, a leading provider of omnichannel commerce and logistics solutions to help organizations with order and inventory management, uses enterprise-grade software, services, and logistics infrastructure to offer fulfillment as a software service. The company integrates AI and machine learning to make selling and listing products more efficient while delivering dramatically improved forecasting to drive precision in inventory planning.
CLARA Analytics offers AIaaS to improve casualty claims outcomes for insurance carriers, reinsurers, and self-insured organizations. The company’s technology applies image recognition, natural language processing, and other AI-based techniques to derive insights from medical notes, legal demand packages, bills, and other documents surrounding a claim. CLARA’s predictive insight gives claim professionals augmented intelligence that helps them reduce claim costs and optimize outcomes for the carrier, customer, and claimant.
Ethic is a tech-driven asset management platform that empowers advisors to personalize advice aligned with a client’s investment, values, and tax management preferences. Advisors can also differentiate themselves and forge deeper relationships with their clients using Ethic’s technology platform to deliver transparent impact reporting and leveraging its breadth of educational tools surrounding various sustainability issues.
Horizontal Platforms
A horizontal fintech platform supports multiple verticals by solving common problems those verticals share. From data infrastructure to embedded finance to service-focused software platforms, in an AI-native world, horizontal platforms still offer companies exceptional ability to add features and scale to their organizations.
Ocrolus is an automation platform that uses AI and reinforcement learning to analyze financial documents and provide actionable analytics for confident, high-quality credit decisions across small business, mortgage, and consumer lending. The company analyzes documents with over 99% accuracy regardless of format or quality, supporting a wide variety of document types including bank statements, pay stubs, and tax forms.
ZenBusiness helps small business owners start and run their companies by offering them tools to protect their liability, manage finances, and get customers. The company’s AI-first offering allows business owners to answer agentic-guided questions and support them in business plan and website development. ZenBusiness trains its models using historical customer data so that complex prompts or engineering knowledge are not required to utilize them.
Fraud
As financial institutions face increasing fraud risks, with 90% reporting fraud losses of up to 9% of their annual revenue, companies are looking to AI to combat the threats. In many cases, AI offers the only set of tools to keep up with the pace of threats and bad actors. Within the portfolio, we are focused on backing companies that take an AI-native approach to fighting fraud and supporting revenue recovery.
AU10TIX is an identity verification and management company that helps protect organizations against fraud. The company’s product portfolio helps businesses onboard and verify customers while adhering to complex regulatory requirements. AU10TIX offers the world's only 100% automated global identity management system, as well as the industry's only solution that can detect organized mass attacks by analyzing traffic patterns and cross-checking data in a consortium of more than 60 major companies.
Feedzai is an end-to-end platform that leverages AI-native solutions to prevent fraud and financial crime. By combining advanced analytics and machine learning, the API-based SaaS tooling helps other financial institutions detect and prevent fraud in real-time, while also ensuring compliance with anti-money laundering regulations. Feedzai’s client roster includes enterprises like Citi, Santander, and Mastercard, highlighting the scale and quality of the Feedzai platform.
Justt is an AI-powered automation platform that helps companies maximize revenue recovery and handle dispute resolution for chargebacks. Justt works by fully automating chargeback disputes and fraud on behalf of merchants through automatic flags that eliminate in-house mitigation programs. Unlike template-based solutions, it uses AI-powered automation and domain expertise to generate dynamic arguments and A/B testing to self-improve over time.