Ocrolus Raises $80M to Automate Document Processing | Fintech

Streamlining Loan Applications with Automation

Taking out a loan often involves navigating a complex web of documentation during the approval process. This can be a lengthy and cumbersome undertaking, frequently relying on manual procedures.

Ocrolus: Automating Financial Document Analysis

Ocrolus is an innovative startup aiming to revolutionize this process through its automation platform. Ocrolus asserts its technology analyzes financial documents with an accuracy rate exceeding 99%. The New York-based firm recently announced an $80 million Series C funding round to further its mission of automating underwriting for lenders.

Funding and Valuation

Fin VC spearheaded the financing, which values Ocrolus at “over $500 million.” This brings the company’s total funding, since its founding in 2014, to more than $100 million.

Participating investors included Thomvest Ventures, Mubadala Ventures, Oak HC/FT, FinTech Collective, QED Investors, Bullpen Capital, ValueStream Ventures, Laconia, RiverPark Ventures, Stage 2 Capital, and Cross River Bank.

Revenue Growth and Key Clients

Ocrolus demonstrates a commitment to financial transparency. According to co-founder and CEO Sam Bobley, the company’s annual recurring revenue (ARR) has increased from $1 million in the first quarter of 2018 to $20 million in the second quarter of 2021.

The company has secured several prominent fintech clients, including Brex, Enova, LendingClub, PayPal, Plaid, and SoFi.

This growth has been achieved with approximately $10 million in combined sales and marketing expenditure, as stated by Bobley.

Expansion into Traditional Finance

Ocrolus is now poised to extend its reach to more conventional financial institutions. The newly acquired capital will be used to aggressively develop products tailored for the mortgage lending and banking sectors, as well as to broaden its operations within the United States.

Technology Behind the Automation

Ocrolus utilizes a combination of technologies – including OCR (optical character recognition), machine learning/AI, and big data – to analyze financial documents. However, Bobley emphasizes that the company’s unique strength lies in its Human-in-the-Loop (HITL) component, which enhances accuracy during document processing.

The core objective is to empower lenders to make “faster, data-driven decisions.” The technology can categorize financial documents, extract crucial data points, identify potential fraud, and analyze cash flow, according to Bobley.

The Impact of COVID-19

The COVID-19 pandemic has accelerated digital transformation across numerous industries, with financial services experiencing a particularly significant impact. Bobley notes that prior to the pandemic, less than 1% of loans globally were originated online.

However, since the onset of the pandemic, the demand for digital lending technology among traditional financial service providers has “increased dramatically.”

Bobley explains, “As COVID-19 has compelled financial institutions to adapt, every lender and bank must now provide online options to their customers.”

Industry Perspective

Logan Allin, managing general partner and founder of Fin VC, agrees, highlighting that both fintech companies and banks continue to grapple with “substantial” volumes of digital and paper documents when extracting the financial data needed for loan application processing.

“Ocrolus has become a foundational element of the fintech ecosystem, addressing these challenges through OCR, AI/ML, and big data/analytics,” Allin stated via email. “We are confident that Ocrolus is only beginning to realize its potential in terms of use cases and platform scope, and we are enthusiastic about its expansive total addressable market.”

Competitive Advantages

While other companies operate in this space, Allin believes Ocrolus’s growth and differentiation are driven by its fraud detection and compliance features, as well as its customized analytics and benchmarking capabilities for its clients.

Origins of Ocrolus

Interestingly, Ocrolus initially aimed to automate the application process for long-term care Medicaid. The founders discovered that “highly compensated professionals” were dedicating their time to meticulously reviewing documents, page by page.

“We began researching the problem and found that existing technology on the market simply lacked the necessary accuracy to be effective,” Bobley explained to TechCrunch.

While technology giants like Microsoft, Amazon, and Google offer OCR products, they often struggle with reading text from PDFs and images, especially when documents are semi-structured or unstructured, Bobley added. The varying formats also present a challenge for machines.

“We sought to develop a novel approach. We created a machine learning-based platform that also incorporates human review,” he said. “Our goal was to accurately process any submitted document, whether it’s a pristine document from Chase or a blurry cell phone image from a community bank in Kansas.”

Ensuring Accuracy

Any tasks the automated system cannot complete are broken down into smaller components and assigned to the company’s team of analysts and quality control specialists for data verification. A series of algorithmic checks then confirm the accuracy of their work.

“Ultimately, we deliver perfectly accurate, structured digital data for every file we process,” Bobley stated.

Shifting Focus to Lending

Approximately one year after the company’s inception, the team recognized that “lending represented a significantly larger and more appealing market opportunity” than Medicaid.

“We entered the fintech lending space at an opportune moment,” Bobley told TechCrunch.

Product Launch and Early Success

By 2016, Ocrolus had launched its official product and begun generating revenue.

“A key benefit of our software is its ability to enable fintech lenders to scale,” Bobley said. “Our product is, quite simply, 10 times more efficient than manual processing. We began attracting significant fintech lenders, even without a dedicated sales team, as we could process loans instantly or within minutes, while others took hours or days.”

Financial Inclusion as a Core Value

For Bobley, the startup’s mission extends beyond simply accelerating the loan process. It is also about promoting financial inclusion.

“Our platform empowers lenders to automate underwriting and intelligently utilize cash flow and income data for credit scoring,” Bobley said. “By enabling lenders to analyze diverse financial data sources more quickly, Ocrolus creates a more equitable lending landscape, expanding access to credit at a lower cost.”

Future Plans

The company intends to use its new funding to continue expanding its workforce, with a particular focus on its machine learning and data science teams. It also plans to establish a new data quality control facility in Florida to serve financial institutions and government entities with onshore data requirements.