Flagright: How This YC-Backed Startup Fights Financial Crime with AI

When it comes to ideation and validation, action beats information. The information you need to shape your idea only materialises if you take active steps to gather it. This means you have to do something—talk to potential customers, build a feature (even if it doesn’t work), or put something in front of people to gauge their reaction. If you show them even a broken product, they might say, I understand this and I would pay for it, and that’s valuable feedback. But if you don’t put anything out there, you’ll never provoke the responses that give you the information you need.

You should never validate an idea with friends or family. They are completely useless for this, especially in B2B. They will tell you what you want to hear, not what you need to hear, which can be worse than getting no feedback at all because it can send you in the wrong direction. Instead, you need to talk to actual potential customers—people who will be brutally honest about whether they would pay for your product. If no one is willing to pay, you don’t have a business. Actions speak louder than words, so getting some kind of real commitment (e.g an LOI) would be more indicative of a good idea than if they simply say that they will pay for it.

I had a huge advantage because I was already in the AML compliance industry. I was on the buyer’s side before switching to the seller’s side, so I knew the exact problems and pain points. I wasn’t starting from zero—I was starting from one, which made a huge difference. I already knew who to talk to, what questions to ask, and what buyers were looking for. That industry knowledge gave me a head start in validating my idea effectively.

For us, the key was identifying the specific problem we were solving. In our case, there was no intuitive, real-time, risk-based transaction monitoring tool that was available for smaller companies. Once we identified the problem, we focused on understanding the necessary elements—what was missing and what needed to exist. This allowed us to define the minimum scope of the product and start building towards that. Afterward, it was all about gathering feedback and iterating based on what users wanted to continue polishing our product.

Personally, I find using specific frameworks for design and product development to be misleading. They often put you in a box and don’t work for all companies or people. When you follow a methodology, you’re just trying to play by the book without considering whether it suits your personality, your team’s culture, or the specific industry you’re working in. Execution capabilities also vary, so what works for one company might not work for another. It’s better to just do what makes sense to you rather than blindly following frameworks. In fact, I would advise against reading methodologies and frameworks altogether—they can be as dangerous as asking family for feedback.

Product-market fit is something you’ll never truly feel like you’ve fully achieved, no matter how fast your company is growing. There’s always room to sell faster and more. The concept of product-market fit depends on various factors, such as whether you're B2C or B2B, the type of product you're selling, how you charge people, and many other details.

For us, key indicators of product-market fit were things like

• the speed of our sales cycle,
• how fast we were acquiring customers,
• how we were generating prospects, and
• how people found out about us.

Metrics like revenue growth, retention, and net dollar retention (NDR) also helped us gauge where we stood.

Our business model and monetisation strategy changed around 20 times in the first year. It was very feedback-driven, with constant iterations. We’d propose a new model, and people would say, "That’s confusing," and suggest a different approach. We kept adapting based on this feedback. However, in the last 10 to 12 months, we’ve found more stability and maturity in our approach.

Now, we’ve settled on an annual payment model, where customers pay upfront for the full year. We don’t offer anything other than yearly payments. While this may seem restrictive, it streamlines our sales process by eliminating the need for customised payment plans. This allows us to close deals more efficiently, avoiding unnecessary negotiations that could delay the process. A straightforward pricing structure reduces friction in the sales cycle, eliminating lengthy negotiations and customisation that can slow down deal closures. Moreover, fewer payment options mean fewer customer enquiries, as too many choices can lead to decision paralysis. A clear, singular payment option makes it easier for customers to commit quickly.

For our go-to-market (GTM) strategy, it's a mix of both outbound and inbound marketing.

For inbound marketing, we invest a lot in building our brand and reputation. For example, we’ve sponsored the Singapore FinTech Festival, Money 20/20 events, amongst several others, created content like blog posts, and collaborated with external magazines such as FinTech Singapore and ACAMS. We also engage with regulatory bodies like the MAS.

On the outbound side, we have a team that conducts research to identify potential customers and reach out to them via email, LinkedIn, or phone. We fine-tune these efforts based on the specifics of each market we’re targeting. When it comes to outbound marketing, I find that warm introductions work best, but LinkedIn is also a very effective tool for B2B businesses.

Sales for us really depends on the industry and the specific product we’re selling, since we have several product lines. Our product is complex, specialized, and mandatory by law—meaning that failure to comply could result in legal consequences, which makes the sales conversation different compared to more general products. It starts with understanding what the customer is looking for. Since we offer a range of 10 products, including AI agents, transaction monitoring, and financial crime investigator software, we tailor our solution to meet each customer’s specific needs. Once we understand what they require, we set up a demo environment to show them how our product works. After addressing their questions and confirming their needs, we proceed with more formal steps, like non-disclosure agreements, customization requests, and contract negotiations.

The first step in fundraising is to ensure that you are an investable company. Fundraising should be a byproduct of having a strong product, a good market size, and the execution capabilities within your team. When you focus on building something of value, proving your ability to execute by generating sales and building the product, your metrics will naturally attract investors. Starting with the intention of simply raising money rarely works, as investors can sense when you’re more focused on the funding than on building something worthwhile.

When pitching, it’s crucial to communicate why you're building the product. Investors want to see if you have personal experience with the problem you’re solving, whether you and your team are capable of delivering, and if you are fully committed to the venture. If you’re not willing to take risks and work on the project full-time, it’s hard for investors to justify giving you a significant amount of money. Investors need to believe in your commitment as much as they believe in your business idea.

We were very strategic with how we invested our funds. We only deployed money when we felt confident that we could get a return on investment (ROI). We also ran many experiments, like testing out new channels by investing significant sums—such as $100k—to see if they would work. Having funds allowed us the freedom to experiment and learn, which sped up the process. Without money, that experimentation would have been much slower.

In general, we took a step-by-step approach, releasing funds faster once something proved to work. For instance, I was personally responsible for closing the first $2 million in annual recurring revenue (ARR). Once we achieved that, we expanded by building a sales team and bringing in a global head of sales to scale further.

In terms of the co-founder relationship, for me, it’s essential to not just be business partners but also friends. Starting and running a company is full of tough moments, and if you're not friends, it’s easy for things to fall apart. There will be hard conversations, and sometimes things will get heated, but if you have that friendship, you have a way to recover. If you’re just colleagues, there’s no emotional protection, and that can lead to breakdowns in the relationship. Many companies fail this way. Hence, having a strong friendship with your co-founder is crucial for handling tough situations.

We prioritise finding people who genuinely enjoy working and building things. For us, work isn’t something you do just to make money; it's a passion. We want people who take ownership and responsibility for their work. This creates a culture of high talent density and helps filter out those who aren’t a good fit. If someone isn’t up to the intensity of the team, they usually recognise it and leave, which is the kind of attrition we want. Intensity and ambition are key traits we look for in team members.

The way I manage the team depends on both my personality and the company culture I want to build. Our company hierarchy is flat, so anyone can voice their opinions, and if your idea is better than mine and you can argue for it, we’ll go with it. However, there are times when I have to make a decision, even if it’s not popular. It’s important to understand that leadership isn’t a popularity contest; sometimes, tough, unpopular decisions are necessary to move the company forward. You have to balance listening to good ideas with the need to make hard choices for the business.

Overall, it's about balancing fostering a flat hierarchy with exercising decision-making authority – at Flagright, we foster an environment where ideas can come from anywhere but ensure that the team understands when we as founders have to make the overriding, hardline decisions.

If I had to draw an org chart for our current team, here's how I would break it down:

• Co-founders – My co-founder and I oversee everything from engineering to operations.
• RevOps (Revenue Operations) – This is a specialised key department, and underneath it, we have:
• • Demand Generation (i.e Marketing)– Focused on generating inbound leads and building awareness.
  • Sales – The team responsible for engaging leads to close deals and drive revenue.
  • Retention – Dedicated to maintaining and growing relationships with existing customers. This is essentially our customer service department.
• Engineering – The team working on building and maintaining the products.
• Product Design – Focused on designing the user experience and the overall product.
• Operations – Includes multiple support functions like HR, legal, and accounting.
• Finance – Managing the financial health of the company.