🦄 Unicorner Startup of the Week:

Hadrius

✍️ Notes from the Editors

A happy (and hopefully restful) Labor Day (if you’re in the U.S. or Canada).

Exciting news: we’ll be releasing information this Wednesday about two major events we’re hosting for SF & LA Tech Week. Follow us on LinkedIn and X to learn about it when it first comes out. Otherwise, be on the lookout for an email with details soon. If you’ll be in either city in October, we’d love to have you. 🚀

In the meantime, we hope you enjoy today’s coverage of Hadrius! Financial compliance failure is costly, and Hadrius is making it easier.

- Ethan and Arek 🦄

Making financial compliance effortless

Finance is a heavily regulated space with a lot of compliance required by the Securities and Exchange Commission (SEC). Any public communication from a financial company has to follow SEC compliance, and a singular financial institution will have different paperwork for its marketing materials and its communication around disclaimers. Hadrius is an AI-enabled tool that helps financial companies automate all of their SEC compliance. Its platform has four major features, including an automated compliance calendar that indicates what needs to be done and when it needs to be done, a tool that archives all communication in case of a later audit, automated monitoring of employee trading accounts and automated marketing review to verify honesty and SEC compliance in marketing materials.

🔗 Check it out: hadrius.com

💰 Business Model

Hadrius sells to financial companies, including registered financial advisors, broker-dealers, and robo-advisors. There are three major “modules” that Hadrius helps automate: marketing review, communications review, and firm oversight. Hadrius charges its users based on the financial company's number of modules and seats required.

📈 Traction and Fundraising

• Participated in Y Combinator W23 batch

• Used by over 100 compliance teams

• Helped to secure over $200 billion in assets under management (AUM)

👫 Founders

• Thomas Stewart, Co-Founder/CEO

• Som Mohapatra, Co-Founder/COO

• Allen Calderwood, Co-Founder/CTO

📖 Founder Story

Hadrius CEO Thomas Stewart had an idea for a company that became Quantbase, an SEC-registered robo-advisor for cutting-edge but volatile assets and strategies, such as NFTs, memecoins, and social media sentiment-based investing. Initially, he wrote a post about his investing strategies on LinkedIn and saw a lot of traffic and engagement. After validating the demand for automated investment strategies, he looked into starting a company to support his vision. He connected with COO Som Mohapatra, with whom he had gone to the University of Virginia, and CTO Allen Calderwood, who had an extensive technical background. Once they got some initial traction on a more developed product, the three went full-time with Quantbase.

Hadrius was an idea that stemmed from a pivot from Quantbase during Y Combinator. Stewart, Mohapatra, and Calderwood were accepted into the Winter 2023 batch for Y Combinator with Quantbase. However, because Quantbase had to be SEC-compliant to get to customers, they found themselves constantly filling out tedious paperwork. Given that this was a regular and painful problem they encountered but had to do because of regulation, they started thinking about how to streamline and automate the process. They quickly realized that this was a universal problem for financial firms and saw an opportunity, which led to the creation of Hadrius.

💼 Opportunities

Right now, Hadrius has a small team (less than 10 full-time employees) and while the team has no active listings on their careers page, they are looking to hire and grow in the near future. Keep an eye out for opportunities soon!

🔮 Our Analysis

SEC compliance is required for any financial company selling investments, services, or products. With the frequency of marketing-related communications, big and small firms can spend multiple hours per day on average doing SEC compliance for their marketing materials. For example, the company has a case study on Arrived detailing how it was able to reduce its marketing review effort from 8-12 hours a week to under an hour each week using Hadrius. (For more on Arrived, a promising startup enabling fractional home investing, check out our coverage here). However, all the various types of compliance are required, tedious, and take away from what companies really want to be doing: investing, selling products and services, or advising others. SEC Compliance isn’t going away anytime, and given that it is required for any financial company, Hadrius is addressing a very real pain point with a massive addressable market.

With that very large opportunity and obvious pain point comes competition and a crowded space. Many companies, from bigger companies to other startups, are tackling the same problem, and even more are in the general space of leveraging AI to add better automation to compliance and/or finance. However, while it is a crowded space, Hadrius is off to a great start and having the backing of a brand/network like Y Combinator only helps. Aside from maintaining compliance for clients that have over $200 billion in assets, it has grown quickly and has been able to be cash flow positive with limited seed investment. 

As a seed-stage startup, Hadrius is focused on growing its customer/user base and also continuing to improve its models to automate as much of the compliance process as possible. Early on, it was dependent on OpenAI’s ChatGPT, but as it has found product-market fit, the team has been able to develop its own models that are less reliant on ChatGPT and can serve as greater subject-specific “experts” for SEC compliance. With models built in-house that are specialized in SEC compliance, the company has created a self-reinforcing flywheel. As Hadrius gets more feedback and iterates, it becomes a better product, and as the product gets better, financial companies are more likely to use and trust Hadrius. For an early-stage company using AI, having this product market fit and flywheel without overreliance on external machine learning models is an advantageous starting point, even amidst heavy competition.

Early-stage startups are always difficult, but Hadrius has seen some real early momentum. In addition to its YC backing, it has also become cash flow positive recently just on its seed funding and team of 10. With this early momentum and product-market fit, paired with a strong founding team, Hadrius is well-positioned to become a major player in creating a financial compliance copilot.

📚 Further reading

• YC LinkedIn Post about Hadrius [Y Combinator LinkedIn]

• Hadrius cofounder Som Mohapatra on FinTech Regulations [JustPaid YouTube]

Written by Matthew Huo

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