Pitch Deck for Claira, a fintech that uses artificial intelligence to navigate contracts

• Claira is a startup that offers AI for financial contract analysis.
• It was born out of Exos, an investment bank founded by a former CTO of Citadel and CEO of Credit Suisse.
• The upstart scored Citibank as a customer and financing from the bank’s strategic investment arm.

It was a match made in heaven – at least the Wall Street type.

Joseph Squeri, a former CIO at Citadel and Barclays, had always struggled with the digitization of financial documents. When used by Brady Dougan, the former CEO of Credit Suisse, to build an all-digital investment bank in Exos, Squeri spent the first year being let down by more than a dozen tools that lacked depth in financial legal documents.

His solution came in the form of Alex Schumacher and Eric Chang who had the technical and financial expertise to build the tool he needed, respectively.

Schumacher is an expert in natural language processing and natural language comprehension, and specializes in turning unstructured text into useful business information.

Chang spent a decade as a trader and investment strategist at Goldman Sachs, BlackRock and AQR. He developed a knowledge of what kind of financial documents Squeri wanted to digitize, such as information on terms and conditions from SEC filings and listed securities and transactions, such as municipal bonds and collateralized liabilities (CLOs).

The three came together in Exos, Squeri as COO and CTO, Schumacher as a leading computer scientist and Chang as head of technology and strategy.

Squeri, who worked with Chang to find a supplier partner, asked Schumacher why there was nothing in the market that provided deep insight, openness and accuracy in time without training.

“He says, ‘Well, that’s because they all use the same open source libraries and the same approaches, and no one has thought about the problem again,’ Squeri told Insider about Schumacher’s response.” Eric and I looked at each other and said, ‘Oh, here lies the opportunity,’ “he added.

Two weeks later, Schumacher had a prototype and Claira was born.

And the opportunity was there – Exos continued to save 90% of time and effort on the investment bank’s LIBOR reorganization and has expanded the technology to other areas of use.

In the meantime, Citibank has since signed on to use the technology and make a strategic investment in the start-up.

A new approach wins over Citi

Claira’s underlying framework uses a field in computer science called computer linguistics that essentially breaks down documents into sentences. The sentences, units, and relationships between the units are translated into a map that machines can work with, Chang said.

Then, depending on who uses the technology – from a municipal bond trader to an investor – analyzes are adapted and relevant information is retrieved and summarized.

“Traditional approaches to digitizing documents have been the natural language processing of computer science, the machine learning approach, which really only gets you this far,” Squeri said.

This is because most systems work by matching patterns, or turning sentences and paragraphs into numbers. But there are shortcomings in the approach. When AI gives an answer in a black box, there is no way to trace back how the answer was derived, Squeri said. Legal language is also sometimes ambiguous, which means it does not translate to one or zero, he added.

Because Claira starts at the sentence and builds a map from there, each insight can be traced back to the exact sentences used, Chang said.

For example, the fine can take up a 500-page document, and instead of an analyst using keyboard commands to find specific terms or read the entire package, Claira will essentially highlight certain phrases that the user needs to read.

Exos was the first financial company to use the product to improve the LIBOR index at the end of 2020. The company saved 90% of time and effort compared to using external advisors to read the documents and send back an Excel spreadsheet, Squeri said. And the accuracy was higher with AI compared to using humans, whose accuracy rate for reading documents and commenting on agreements varies from 85% to 90%, Squeri added.

Since then, Citibank has signed on to use the technology in the capital market group to give a boost to the trading tables that work with CLOs and municipal bonds, Chang said. The bank’s traders use Claira to obtain data on the provisions contained in the offer memorandum for CLOs and offer statements for municipal bonds in order to improve the price and measure the risk for each transaction.

As part of the agreement, Citi’s strategic investment arm, SPRINT (spread products investment technology), invested an undisclosed sum in Claira. Chang refused to disclose the start-up’s total funding.

Here is the 14-page pitch tire Chang and Schumacher used to pitch Citi on Claira.