'The perpetual evolution of financial crime necessitates an equally dynamic response from anti-financial crime and identity technologies.' 

This paper examines the importance of having domain expertise at your disposal as a founder and executive through the build and scale of your fraud, AML, and/or risk management software business.

1/  Introduction

The anti-financial crime (“AFC”) software market is at a critical inflection point. With regulatory demands and sophisticated financial crimes on the rise, financial institutions are urgently seeking help in the form of advanced solutions.  They need to improve their risk management capabilities.

While some software-as-a-service (“SaaS”) startups flourish, others falter.  The unheralded factor?  Deep-rooted domain expertise embedded across the foundational, growth, and scaling stages of development.

2/  Development Stages

I.  Foundational Stage: Building on Expertise

At inception, the focus is on ideation and the initial development of the product.  Note the singular of ‘product’.  For anti-financial crime (“AFC”) software companies, this means not only building a technological solution but also ensuring it addresses real-world challenges faced by their buyers.

• Embed Domain Knowledge Early:  Assemble a founding team with extensive, yet complimentary backgrounds.  If that background does not include deep, practitioner experienced knowledge, go get outside help with exactly that to compliment your team’s ability on a fractional, operating partner basis.  

• Avoid Technological Myopia:  Technology built without context misses its mark.  Address prospective market pain points.  Understand their world and build to address the risk management needs they have.  Do not build towards ‘compliance’ - that will come naturally if the technology enables the end user to optimally manage their risks.  

• Informed Decision Making:  Do not waste time, resources, and lose disciplined focus by trying to understand something you do not.  Bring folks into the fray early who can fast-forward through that process and immediately inform your decision making.  Not the ones with the deep rolodex who can introduce you to the CxO of an FI tangential to the target market you’re trying to operate, only so you can inflate your pipeline with a deal that will never happen.  Hire the ones with the scars to prove their credibility, if only for a set period to time.
  
  

II.  Growth Stage: Align with Market Needs

As you transition to the growth stage and seek product-market fit, get more nuanced in addressing the needs of your clients. This involves refining the offering based on market feedback and scaling initial successes.

• Deep Client Engagement:  Leverage domain experts to decode the intricate challenges financial institutions face. They interpret client needs in a non-assumptive manner and guide our product evolution accordingly.  They speak your clients’ language.
• Credibility:  Establishing your organization as a trusted player is challenging in a market where there’s a great deal of regulatory, legal, and PnL at stake.  Domain experts bring credibility to your product, client engagements, and your organization.  It differentiates you from your competition.
• Strategic Talent Acquisition:  You’re now in a stage where it makes sense to acquire domain expertise full time into the team.  Resist the allure of high-profile hires lacking sector-specific knowledge but can introduce you to the 2nd cousin of the nephew of the CEO of Citi.  They may bring the illusion of a polished business acumen, but their lack of foundational domain knowledge leads to misdirected strategies and missed opportunities.
  
  

III.  Scale Stage: Expanding with Precision

With product-market fit achieved, scaling effectively is your next challenge.

• Intelligent Scaling Strategies: Balance rapid growth with evolving compliance and security expectations.  A misstep erodes trusts, derails momentum, and caps your ceiling.  Your domain experts should be scaling up their team, their external engagements, AND their internal engagements.  A rising tide lifts all boats.

• Sustaining Domain-Centric Culture: As teams expand, maintaining a core of domain expertise to ensure your solutions remain cutting-edge and appropriately enable risk management.
  
  
  

3/  Domain Expertise as a Competitive Edge

Startups that integrate domain expertise throughout their journey tend to outperform their peers. Just ask my former employer.  They offer solutions that not only meet technological standards but also align closely with the risk and operational realities of their clients.  Domain expertise:

• Accelerates time to product market fit
• Reduces burn rate in resources spent to learn the industry, or cycle through partnerships that bring no value, or higher 5 people to complete an objective it would take 1 domain expert half the time to achieve.
• Mitigates the risk on product development
• Accelerates early customer and valuable partner acquisition
• Solidifies market and investor trust in your growth prospects

4/  Actions for Founders, Executives, Investors, and Operators

There is a significant amount of capital poised to invest in the right teams within this ecosystem. Seize the opportunities available to you.

• Founders & Executives: Seek help early with domain experts that understand the product, operational, and market needs.  These individuals do not need to be part of your full-time founding team, but they should be integrated as an operating partner throughout your three stages of development in some capacity.  Know your strengths and weaknesses.  Plug any gaps with the appropriate partner to help achieve your growth objectives.  Scale strategically.

• Venture Capital and Private Equity:  Actively seeking firms that demonstrate a strong blend of technical prowess and domain knowledge.  If their team doesn’t understand the world they purport to serve, but are asking for your funding, raise the topic.  And look in the mirror - as you place your bets and execute due diligence in the fraud, aml, and risk management sectors, do you have the requisite capabilities to make the most informed decisions?

• Operators:  Be weary of software providers who purport to have great technology but can not empathize with the challenges you face.  A big red flag is when the solution provider asks for money to address your challenges but hasn’t asked you what your challenges are.

5/  Conclusion

The path forward is clear: Invest in expertise, align with your clients' needs, and scale with intention. 

In the high-stakes arena of anti-financial crime software, domain expertise isn't just beneficial—it's imperative. Commit to embedding domain expertise at every stage of your development.

The substantial capital waiting on the sidelines is seeking teams that demonstrate depth of knowledge in solving their clients’ challenges.  Deliver exceptional value to clients, and make a meaningful impact in the global fight against financial crime.