Melbourne-based Affinda cracks world AI market

John Durie, The Weekend Australian, 25-26 May 2024

Illustration: Sturt Krygsman

Right place at the right time is how Ben Toner explains the success of fast-growing Melbourne AI start-up Affinda.

The company earns over half its revenue from offshore, has carved out a growing slice of the high-volume document processing space sorting unstructured data, and it has a separate arm Draftable used by global law firms in a group serving more than 1500 customers in 75 countries.

Ben, a PhD and Master of Science in quantum physics from the California Institute of Technology (Caltech) and brother Tim started the company 12 years ago with the aim of creating a global artificial intelligence business.

The plan in part was based on concern about AI safety and just what the consequences of AI were when computers were used to develop more AI, keeping humans out of the equation.

The brothers also saw AI as a key emerging trend with the potential to disrupt every industry.

Cousin Helen Toner, who worked with them in the early years of the business, has similar concerns. She hit the news last year when she was part of the not-for-profit board at ChatGPT when founder Sam Altman quit briefly over concerns about the fast commercial growth of the company.

Industry behemoth IBM backed Altman and he returned to ChatGPT.

Toner is the director of strategy and fundamental research grants at the US-based Centre for Security and Emerging Technology.

The Toner brothers come to the table from different backgrounds. The 44-year-old Ben, Affinda’s chief scientist, read maths textbooks the way most read novels at school, while 42-year-old Tim had a more typical Melbourne upbringing kicking a football around the backyard, and a strong background in investment banking.

One of Affinda’s aims was to be self-funding, and for the first 10 years this came from the work of Vesparum, an independent advisory firm which helps founder-led Australian businesses raise capital.

It was led by Tim who learned the game at the feet of some of the best names in Australian investment banking, with his first job at Macquarie working in its private investment arm led by Ben Brazil, before moving to the industrial team, led then by Robin Bishop.

Brazil now runs the London-based private investment firm FitzWalter Capital and Bishop is a principal at BGH.

After his Macquarie years Toner moved to Lazard under former boss John Wylie, who now runs Tanarra Capital.

It was here he met Affinda’s chair Peter Halstead, a stockbroking veteran who now runs Paul Little’s private office, and prominent director and State Library of Victoria president Christine Christian.

One of its backers is Mark De Ambrosis, who runs growth capital company Armitage Associates backed by Carol and Alan Schwartz.

In his early years with McKinsey, De Ambrosis shared a Sydney home with Tim Toner, who had just started at Macquarie.

Affinda earns more than half its $10m-plus in revenue from referrals or inbound calls.

Without a big capital headwind, it earns 90 per cent gross margins.

The low-profile company’s strategy was to be both self-funded, avoiding the boom and bust strategy of some technology start-ups with big cash piles, and to run an open door model with its proprietary products sold online to some 77 different countries.

While it now has a global sales team, the products essentially sell themselves, but the inbound calls enable the company to learn more about future opportunities by seeing what customers want.

Any company that processes documents and wants to cut costs and errors is a potential client.

Affinda now has three arms including Vesparum and Draftable, a document comparison vehicle for lawyers that makes it easier to compare document terms and has clients among the top global law firms, with over 750 customers in 65 countries.

The algorithm is based in part on advances in human DNA sequencing and was developed by a team from CalTech, MIT and Stanford.

The product for side-by-side comparisons is aimed at reducing errors, cutting costs and improving turnover by making it easier to identify changes.

Its main competitor is the acquisitive Chicago-based software company, Litera.

Draftable is aimed at the legal sector but Affinda has a wider target for general use, focusing at present on the financial services and insurance sectors.

Affinda provides AI technologies for the automation of high-volume document workflows.

It helps process unstructured data, removing the need for high-cost and error-prone manual processes used by the likes of Seek for what is called resume parsing or converting unstructured data to a structured form which can be more readily used.

The company now has around 65 people of which 10 work with Vesparum, which is staffed by former professionals from investment banks and management consultants.

Ben Toner is scouting the world for more staff, with the aim of building up to 100 people in the short term.

Sales executives include former Herbert Smith Freehills lawyer Yulia Gosper and US-based Bob Moore at Draftable.

Former Isentia executive Brendan McGreevy is head of strategy at Affinda and Andrew Bird head of AI.

Affinda’s AI platform combines over 10 years of IP in document reconstruction, with the latest advancements in computer vision, natural language processing and deep learning.

Its customer list includes global names like Seek, Harvard University, Worley Parsons, Toshiba, Honda, Bloomberg, Fidelity, PwC and Siemens.

Toner has no plans to hit the public bourse any time soon. Affinda has a $100m-plus valuation and plenty of sources of alternative funds. Its first external fundraising was for $10m from family offices in 2022.