Building a YC-backed IDV startup from scratch - featuring AiPrise founders Chaitanya Sarda & Rushabh Shah
Steve interviews Chaitanya & Rushabh, co-founders of YC-backed identity verification orchestration startup AiPrise
FEATURING: Chaitanya Sarda & Rushabh Shah, Co-founders of AiPrise
In this episode, I speak with Chaitanya Sarda and Rushabh Shah, co-founders of Y Combinator-backed identity verification startup AiPrise.
Rushabh and Chaitanya discuss how they met, their founder journey, their experience applying and joining Y Combinator, getting their first customers, and their plans for the future.
Originally recorded back in December 2022, they highlight why they’re focused on Latin America and Africa as their beach head market, what they’re building at AiPrise, and the future of KYC in emerging markets.
Chaitanya and Rushabh were also recently featured on Episode 317 of Liminal’s State of Identity podcast: https://liminal.co/podcast/emerging-markets-of-latam-amp-africa/
Connecting with Chaitanya & Rushabh
Y Combinator: https://www.ycombinator.com/
FULL EPISODE TRANSCRIPT
Steve Craig: Hello, thanks for tuning in to the PEAK IDV EXECUTIVE SERIES. I'm your host Steve Craig, and I'm super excited about today's guests. They are co-founders of the YCombinator-backed startup AiPrise, Rushabh Shah and Chaitanya Sarda. These guys are enthusiastic product builders and their energy is infectious.
They're making identity verification simple by harnessing the power of all of the different identity verifications through a single platform. Chaitanya has over four years of experience in the trust and safety space as a tech lead at Google. And Rushabh brings in-depth experience in building developer focused products while he was a staff engineer at Meta.
Welcome guys. Thank you for joining the podcast today.
Chaitanya Sarda: Thank you for having us, Steve. We are excited to be here.
Steve: Let me kick off with some questions. I'm really interested in how you guys know each other. What's your meet story? Were you working at the same company? Like how did you connect?
Chaitanya: Actually, I would like to thank my wife for the introduction. My wife and Rushabh were like very good friends since the last 10 years, and they have known each other since college. I met Rushabh four years ago when I actually met her. And we actually became very close friends during the COVID when we were part of the same social bubble.
I would let Rushabh tell us the story about how we actually came up with the idea and what's the story behind that?
Rushabh Shah: Yeah I think. Earlier this year like Chaitanya and I then got to talking more about our career plans. And that's when we realized we had similar career plans, which was to quit our jobs.
I, think we both wanted to work on a more meaningful problem statement and have a more direct impact on people's quality of lives. So that's when we started workshopping a few ideas and mentioned the YC application deadline was coming up. So we just met over a weekend. Scrappily built something, applied.
And everyone's surprise and to our surprise we got in. I think that was the final push. I know we, we went more than what you asked for, but I think that was the push which actually got us to just starting something together.
Steve: Was it identity verification focused from the beginning or did it revolve around some other concepts?
Chaitanya: So the idea when which we applied to YC was different. But there were two ideas which were in the mind at the time we applied, we were of two minds, identity verification or the other one is content moderation.
We got two months before actually YC started. We did a lot of homework during that time and we realized that we actually are both interested in FinTech. We have experience in the space, and we also wanted to make sure that we are building something which is required by the next generation of technology companies.
We always wanted to build something fundamental, and that's why everything ID verification, it starts with FinTech, but I think in the future it's gonna be economic like gig economy, companies like AirBnb, DoorDash, digital health, digital platforms, including education. Everybody will require this platform.
And then we did a lot of customer research and came up with the idea.
Steve: Wow. Did you work on identity related projects at Meta or Google, or were you adjacent to some of those projects?
Chaitanya: So actually I was adjacent to some of those projects. In fact Trust & Safety, I was in phone number verification, so imagine if you get a call on, Google phone.
My team was responsible for marking it as not spam and doing a lot of analysis. So we worked very closely with a lot of internal teams including Google Pay and that's how I got interested in the idea of ID verification.
Steve: That's great. And I think it's good to get that experience at that level with a large company like that.
Rushabh: Yeah, I was just saying I think once we started narrowing down on the space Even I had, I got the chance to just chat with the Facebook payments team. They were releasing WhatsApp payments globally a around that time. We, just got a chat with a lot of interesting and like domain experts in this space who all aligned on one thing that global compliance was the biggest headache in everyone's mind, so I think that helped.
Steve: Yeah, it continues to be a, fundamental need in today's digital economy and more and more companies that weren't traditionally looking at identity verification like the ones you mentioned in sharing economy or marketplaces. They're have pretty robust trust and safety programs, but they're starting to look at the know your customer regulations that are in banking and say, how do we apply some of those to improve our business.
That's it's great that you've stumbled into the space and, now you're firmly in it with your company. I understand you started it in June. So did that align to the YC application? So you, founded the company at the time you applied. Is that how that went?
Chaitanya: Yes. So developed at the restrictions as well because of visa issues that I have.
So because of that, we could not open the company beforehand, but honestly, like it was still like we were half of the time discussing just about the company even before starting up. And yeah, June is ideally the first day we start working for AiPrise.
Steve: Got it. Okay. You, told a little bit about the story of applying that you, pressing deadline. You submitted your application, you were pleasantly surprised that you were accepted. Can you tell me more about the program itself, like what that experience was being in that cohort and what you learned and, just that experience?
Chaitanya: Yeah, sounds good. I think I would say like YC was, if you're opening a B2B company, YC is a founder's dream. You get access to so many good quality companies. There were like 400 companies in my batch, so I would just look at, look to my left to my right. There were like 50 FinTech companies around the globe, so I had wealth of information on day one. So the community is absolutely amazing, very helpful.
The second thing I would say is advisors. I think they have wealth of knowledge about what's wrong, what's missing in today's like startup, what's the right thing to do? What's the right thing to focus on? So I learned, learned probably everything about how to run a business from YC today. I think Rushabh also, like both of us are engineers and I think it's just as an engineer, you have no idea what goes behind running a company.
Because on a day-to-day basis, we are just coding, designing stuff. But running companies actually a lot more than that. Yeah. Rushabh
Rushabh: Yeah I think you nailed it. As engineers, we had, we knew how to build a product. We knew how to write right code and get that working, but we had no clue how to build a company and how to build a business around it.
Like, how do you even get started? I think YC gave us that boiler plate that now you can just pick up any idea and convert that into a business, like through a methodical process. I think that's, what the framework gives you.
Steve: Phenomenal. The admission to YC is a huge milestone, right? They're very selective in the types of people they bring into that. So congratulations on that. But I'm curious about post YC. You're graduating in the cohort. What are some of the, proudest moments you had either in those days that you're learning or after you left and you're out there on your own now to, make it work?
Like what's something you really are proud about?
Rushabh: For me, I can go first in this one. So I feel there have been a stream of small but meaningful milestones. If I, look back, we've come a long way during YC post YC like from having our first production request to our first launch, to our first hire.
I think all of those were moments when we felt like I feel immensely proud about and like now looking back. The entire journey like that's been amazing so far.
Chaitanya: Yeah. I think for me, the proudest moment was going from zero to one. Like in my previous jobs, I've always added Delta to the work that has been done in the past at those companies.
This is the first time actually I'm building from scratch. I logged into like AWS learning about, oh, what's easy to, how to deploy changes. And like it was the first time ever that we built a website, we built a product, getting live feedback from customers, getting us, giving us feedback. The next hour we are deploying the production push.
So I would say that moment of creating something of our own and going from zero to one is the proudest moment for me and obviously ending the first customer. You, can never like that's the happiest moment for any founder, I would say.
Steve: Tell me about that, because I know as part of the YC program, you're doing a lot of primary market research or speaking with potential customers, probably getting a lot of No's and rejections.
So tell me about that experience of those conversations and how you got to that, that first Yes.
Rushabh: Yeah I, think it, it was definitely, an interesting ride, and it continues to be when I, think like adding more customers to the funnel is always the biggest thing on everyone's mind, and it should be, I think for our first customer it, was a few iterations. I feel like there were a lot of No's initially where we were also still trying to figure out where are we placed?
What, target geographies are we going after? Like those things evolve organically. But I think once we had some of that pitch nailed here is what we are building, KYC, here are these geographies that we are going forward. And, that came through iterative feedback from our potential customers.
That's when I remember like we had this first call with a company, and I was just like, this is what we are building. And they said, yep, makes sense to us. Let's do it. Like that, was the easiest possible call. And we were so surprised that sales can be this simple. It's not anymore. I, think when you just hit the ground running on exactly the problem statement that you want to nail down it, it, changes the process.
Steve: Absolutely. One of the key components of your business is connecting to identity verification providers. You're providing a single platform to orchestrate those other solutions.
So can you tell me about those initial conversations when you reached out to companies and said, "Hey, we'd like to work in this space and we wanna leverage you as one of our signals." As a startup, I know that can be challenging.
Chaitanya: Yes, I can take that up. Honestly, like it's been a rollercoaster, right?
Talking with the providers initially, obviously you are on the back foot because you are starting up, you have no one else on the platform. So we had the strategy of let's reach out to those companies, which are the kings of the local geographies. But very few people know about them outside of these geographies.
So in Africa we, landed a few providers in Latin America. We landed a few in India, we landed a few. And after that, these other providers, which are like well known, they started take us seriously. Okay, these guys are building something and it makes sense to be on their platform. And after that it was very smooth.
And now if we reach out to somebody, people are now reaching out to us, "Hey, can we be on your platform?" So it's now the other way around. Also, the other thing that we realized is talking to investors, that was very helpful in other ways as well. Every time we would chat with somebody, they're like, so how are we different from this company?
And we are like, okay, so we have one more provider to add to our list now. And that way we got a list of a hundred providers in different geographies. Okay, so there are these many just KYC providers and you, if you look up, look at like fraud, email validation, phone validation, and the entire ecosystem. There's more than 400 providers out in the market.
Steve: How do you go about prioritizing which geographies or use cases to pursue with a stack of 400 and, now with plenty of intros from investors and, some traction? What, is your thought process?
Chaitanya: I think Rushabh already alluded to that in the past conversation. So we are going with the flowing of the customers. So honestly the best sales call is when you, it's just in the first call, let's say the customer says, I need this. And what you have built is actually what they need with maybe very small deltas. And we realize that competing in the markets of United States, North America, and Europe, it makes less sense for us at the moment. The customers are actually facing huge struggles in Latin America and emerging markets. So now the sales calls are very smooth as well. Hey, we are building for these geographies and we have these amazing providers. We can get you a better conversion rate. And that's it. It helps us in a lot of different ways. Plus the providers of the other geographies, like the North America and Europe, they also think, oh, we want to be in these geographies as well. So AiPrise could be a platform for them to expand to these geographies.
Steve: That's great. Would you say that your target use case is mostly regulated, Know Your Customer for fintechs or we, talked about some of the large sharing economy platforms that aren't necessarily regulated to do those checks, but still they value that process. Could you describe some of those initial use case focuses?
Rushabh: Yeah, I think I can speak to that. So our target segment is definitely the regulated market more I think it just helps when you have a gorilla sized regulatory authority sitting on your head, like trying to ask you to figure out what's your compliance? It's just that those companies are definitely more motivated to figure out a solution versus the other industries do need a solution for them. It might be a nice to have for regulated companies, it's a must have.
So I think it just makes natural sense for us to focus on those companies. While also like the solution, the platform is good enough for any other industry too. But we want to keep it laser focused in terms of our outreach. So I think that's, on the customer segments. I think you had one more question and, that it was a two-parter,
Chaitanya: I think, what's the initial set of customers you are targeting also was part of this?
Rushabh: Yeah, sure. So I, think like within FinTech, any company which is multi-country, so I would say remittance companies, crypto companies, cross border payments, like all of these, this umbrella is a natural fit. Like we are a natural fit for them because as soon as you start expanding beyond one country, you no longer have one solution. Especially on as Chaitanya like slightly touched on this also, which is these emerging markets have no industry accepted solution. Which is not, which is actually not like the United States and Europe. Over there, you can still some find two or three solutions, which are good enough. But in these emerging markets, no one provider is like perfect, so you end up needing multiple providers and a as a company trying to support users from like multiple geographies. Let's just take LatAm for an example, right? You would need the CURP check for Mexico, checks for Brazil like local voter IDs for Argentina and it's just a mess out there.
So I think companies which want to onboard from those countries, like that's, like the perfect fit.
Steve: And your, solution is cloud, is that correct? Or do you offer on-premises installations of the orchestration?
Rushabh: So far it's cloud.
Steve: And have you looked at when you get to some of these markets, like Latin America or Africa or the Middle East do you see demand for more control of the data in the country or region or perhaps an AWS or Azure instance is not available and, say, "Hey, we wanna keep data sovereignty."
Are you seeing that as you go into the different countries?
Rushabh: There are countries for that for sure. So for example, I think Egypt has strong regulatory requirements of having sensitive information within the country and there is no AWS coverage over that region so far. If last, we checked. So I think it's definitely more difficult to go into those geographies.
We have been mostly riding on the back of AWS for our data. So I think over time we will definitely need to go more local and figure out solutions in those regions too.
Chaitanya: Yeah. At least for the countries that our biggest focus are right now, Latin America and Africa, which is like Brazil, Peru, Argentina, Nigeria, Kenya, Ghana we are completely covered.
And that's why like those are, there are some edge cases, obviously like Egypt and there are some Middle Eastern countrie. But apart from that, we should be good for the cloud solution.
Steve: Great. Great. If I'm hearing correctly, your unique selling proposition in the market is that you're offering the orchestration in countries or regions that have historically not had that coverage or have required multiple solutions.
So you're going into those smaller markets, but providing better coverage than what you could get from a, let's say a, larger identity orchestrator that's focused in a more developed country like the United States or the United Kingdom. Is that good summary of the approach?
Chaitanya: Yes, absolutely. I would say if you pick a provider from United States, which claims to be global and you use that in these geographies you are missing a lot of things, including first is coverage. The second is government look up. The KYC as we know in the United States is very like simple in the sense do you do the OCR of the identity front and the back and you match it with the selfie of the user? That's it. You never do a lookup of the driver's license in the government's database to figure out whether this actually exists or not. In a lot of these countries, it's possible to look up whether the government's database has the identity document that was collected and what's the name associated with it?
And in geographies we are trying to see, there are innovative ways of doing KYC. So for example, in India, you no longer need to collect the document. You just give the number, the user gets a one time password with registered with the, with that particular ID number. And that's how they do KYC.
That was very fascinating. And like smarter and bigger companies like Binance, they actually went into these small, regions and they, made their KYC very streamlined. In Nigeria, you no, no longer need to give a passport or driver's license. You use something called a BVN number. So it's a BVN number and a selfie.
So what we are trying to do is imagine what these giant companies have created by putting in hundreds of engineers and three, four years of work. By simply plugging into AiPrise and which is a very simple two day long integration. That's the promise that we are deliver.
Steve: You make a great point and when you describe some of the government databases, one of the challenges I think in the market is it takes a lot of curation to reach out to those entities and obtain access.
Do you see government data, especially when it's still controlled by the local government as another angle or party that you're approaching? Or do you go through sort of local aggregators to get access to that data?
Chaitanya: So right now we are looking at local aggregators to access to that data, but in some countries we do see the value of directly having connection with the local government itself. And also you're saying something,
Rushabh: No, I think that's exactly on point. In certain regions we feel that there are good providers, so it just makes sense. In certain regions we see that there is still work required, like government has some data, but the government data sources could be down, so you need to build a better layer on top. That's on our mind too, or on our radar, I would say. Not on our minds.
Steve: When I look at the market for orchestration, and there are a few very successful companies out there. Again, usually in more developed markets, there's two camps. They're either. Just providing the plumbing where they make the connections and you have a single API and you make use of those signals.
And then there are companies that are emerging that, that help you with decisions and configuration where it's not put on the enterprise, oh, here's the connections. You figure out how to use them. But they're, applying knowledge through sort of their network on here is the best configuration set for this region.
Which model do you focus on? And do you have plans in either direction?
Rushabh: Yeah. I would say, I think personally, and I, would let Chaitanya comment on this model two is what makes sense to us because we, see that already. If I give you a list of 20 providers and just say, go figure. You are gonna have a terrible time to just ensure what's gonna happen and yeah, we, we make that mistake too.
It's very difficult to come up with the right workflow just given a list of providers. So I think currently we are manually serving as the intelligence layer between our customers and the providers. Like we create the workflows for them. But over time we do see this evolving into you. Either automated or either some automation or just having some more expertise in our team itself.
Steve: That intelligence is very, powerful to be able to help clients be turnkey on the tech side, which being able to integrate in a few days and having a singular API is necessary to speed to market an implementation. But then there's the business side of, okay, how do you make use of these signals and, how do you optimize them over time?
So that's, great. You're, thinking in that direction.
Chaitanya: Yeah. And I would like to add to that customers have two biggest problems. The first is, how do I know what provider is best for which part of my workflow? The second one is, do I need to change them every year? So
Steve: Change the vendors out as?
Chaitanya: Change, change the vendors out, and because. There's a flavor of the year , and I usually joke, what's the flavor of the year right now with the FinTech companies. So I think and, the last part is decisioning itself. Do lot of compliance officers have their own agenda, obviously, and we respect that. So our platform, we want to make it as flexible as possible, but also give them an out-of-the-box solution. So if a FinTech company comes with, Hey, you know what just give us a decisioning platform with pre-plumbed everything we can give them that. Or if a compliance officer says, Hey, I need this X provider instead of what you are providing and I want to use this threshold, we say, yeah, go for it.
You have the decisioning platform. Everything is configurable. You do your own decision. . That's the way we are trying to think of the platform.
Steve: I'm thinking about your, advantage that you have listed on your website where you've got A/B testing. What if runs? And those lead to cost optimization and, future proofing the solution because changing out vendors every year, which is about the time it takes within a contract and they get data is pretty painful.
And at the end of the day, like, how do you know if making that change is, really gonna help you achieve your goals? Get more customers through and, prevent fraud and other things. So that's it's an interesting model. What have you found to be the biggest challenge with, of conveying that vision to, customers?
When they're used to a, vendor recycle model where they're, they might even think of you as, okay, we'll connect to them and maybe a year we're gonna move to a different one.
Chaitanya: There is this concept of revisiting vendors every year, especially in a lot of US companies. Every December they're like, okay, let's reevaluate what we have.
Do we need them? Are they good enough? So our goal is very simple. We want to add value so that we are not changeable. So the biggest value add that we see is the case management tool which we are actually building as a very powerful add-on to apart from just plumbing various vendors together.
Imagine a case management tool, which is, which gives you the right flow of what actually happened with this user during the onboarding process. Your analyst can come look at different data points, comment things out. A compliance officer can come, a risk compliance officer can come, and then the regulator also have access to it in the future. So what we are imagining is that to be an edge or for a platform, a smart compliance package, case management tool. And the second thing that we see is even though the platform is being integrated by the developers, it's the officers of these companies who come and try to test things out and they don't understand APIs.
What they need to have is a simple test bench where they can simply add names, data points, and see what the result looks like. So we are that very seamless as well. So and, continuously we keep on adding newer and newer features to make the platform more relevant and more next gen.
Steve: It is very interesting what you're building because you're, approaching several key pain points. One is a number of vendors that a client would have to connect to, to the ability to for orchestrate with decisions. And then three, allow a little bit faster of a test model where you can input the data to spot check, but then you can also do simulations and test runs, which there's not a lot of that in the market currently. There are certainly processes that companies have in which they can test data, but being able to put that at the fingertips of the users is something that haven't quite seen. So very cool. Very cool.
We've got just a few minutes left and I wanna point out another phenomenal milestone that you guys hit, which was raising a $2 million seed. So congratulations on that. During a very tough economic climate, 2022 has been challenging on a number of fronts, but I'm curious about, that sequence of events for you and, what you found to be great in this time of economic uncertainty. But what was maybe more challenging for first time founders?
Chaitanya: Yeah, I would say, so there's obviously two parts to raising. The first is how challenging it was and at the end, were you able to raise it? So like, the first part, was it challenging? I would say it was a lot. It was the most difficult thing I've done to convince a lot of people like, Hey, you know what, we are building is going to be a billion dollar company.
It's, it was a completely new experience for both of us. And I would say, like, it took us two months to, to raise the money, and there were two weeks straight where like around 30 to 40 investors rejected us saying, you know what, like this, makes no sense. And they're definitely, as founders, you get dejected by such responses.
But we, knew that what we are building made sense. We never changed our pitch per se. And actually like it was those two, two to three yeses, which counted at the very end. And I would just say to the other founders raising funds at this time keep at it. It took us two months to raise $2 million, but at the end it was worth it.
It was an experience of a lifetime. We learned a lot. We also learned about how to pitch to investors, how to polish your pitch we also learned what was missing in the product itself, so we traded some of those parts as well.
Steve: Rushabh, would you agree? Was it just as challenging or maybe as super easy for you? You just uh, rolled with the punches?
Rushabh: No. No. I, think that's exactly, exactly what we keep discussing. Once we are done, it looks like all fairytale oh, we've got our 2 million round, we are done. We can go back to product building. Let's just focus on that. But I think those two weeks or when you are going through that phase, it's definitely a mental adventure. It's a challenge to all founders like how do you deal with emotions? Keep focusing on customers. You cannot just be like, oh, I'm fundraising so bye-bye . So you keep at it at the, on the customer front, you have fundamental questions. You're questioning yourself also that what are we doing?
Like we, we've quit our jobs. We are here and, we are just like trying to figure out things as we go. But then as long as you just Chaitanya mentioned, you keep at it. You focus on the things that you've learned so far from the customers, in a way, I think that's what YC also teaches you. Like to build something that people want is the key if and that's, what you need to keep iterating on, keep focusing on and the rest just falls in place. I wouldn't say that we, are done and sorted already. This is just the beginning. But with respect to this fundraise that we went through that's what I would say.
Chaitanya: There's gonna be many more fundraises. So let's see how it, how those go.
Steve: Many more each time you'll iterate and improve upon the process. And I think about the, number of balls that you're juggling in the air. When you've, you're working in investor conversations, you're building a product, you're pursuing customers to use your signal. You're pursuing the partners that you want to bring in to your platform. And then you have things like info security, a saw that you, got a SOC 2 already, which is a key certification in this this, market space. Yeah well done on rallying around that.
But it is the ticket to entry. To now the, the move up in the game. I'm curious what, can you share about 2023 your plans the use of the seed round. What would you like the audience that's listening or watching this to know what to expect from you guys in this next year?
Chaitanya: What's up in 2023, I think the biggest use of funds is going to be in increasing the team size. There are a lot, many things that our customers really want. And right now it's the two of us and two more employees that we have struggle to keep up with them. And at the end of the year, we think that the platform should be more or less evolved for the larger FinTech companies as well to come and play. And we want to be the first platform which has the largest set of providers from the emerging markets.
And that's the goal that we are that we want to achieve and we want to tackle. The, biggest market segment for us is Latin America. Rushabh and I have been discussing recently, we want to become the single biggest orchestrator platform for that region. So that's, the goals in terms of what we want to achieve.
In terms of like product itself, I think onboarding is still going to be the biggest focus in the coming years, like 24 and 25. We also want to focus on transaction monitoring because that's the next logical step. The first thing you, a, as a FinTech company you do is onboard the user. The second thing that you want to do is help them transact either crypto or your normal currency.
And you wanna make sure that they're AML compliant. That also involves in adding a lot of different providers, creating rules. So what we are building also extends to that.
Steve: That sounds amazing. I wish you both, a lot of luck in that journey ahead. You're gonna be hiring up, you'll be building, you'll be traveling to Latin America, making those uh, customer hopeful connections. Yeah. To close out for our audience how can they get ahold of you and what types of conversations are you looking forward to having?
I'll put links to your website, but yeah, let's close it out.
Chaitanya: Yeah they can write to us at firstname.lastname@example.org and we definitely will leave our LinkedIns with you and that you can also publish wherever you publish the video. And in terms of what kind of conversations we are looking at Rushabh, we are looking at obviously customers, the more the merrier.
But apart from that, if like good providers or just in case like how your K Y C has been happen. In these geographies. Happy to like, discuss, learn, share what we have learned in this space so far. Rushabh, do you wanna add anything to that?
Rushabh: Yeah, I would say if you are excited about this space in any shape or form, we can have a chat, at least we would love to chat.
It could be because we are looking to hire, we are looking for customers, we are looking for providers, and we are looking for ideas too, honestly, to keep evolving. If you're excited about this space be it an expert, be it someone like us still learning feel free to reach out.
Steve: Wonderful, thank you Rushabh. Thank you Chaitanya, I appreciate you taking the time to be on the podcast. This audience is super excited about the identity space and your passion around solving tough problems is very infectious. Thanks again. I'll leave links to the LinkedIn profiles for these guys, their website and please reach out to them as they grow and build AiPrise. Thank you and have a great day.