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Ethos Secures $6M Funding to Revolutionize Model Risk Management

Ethos, a modern platform specialized in model risk management, has announced it has successfully raised $6 million through a seed funding round. The initiative aims to set a new standard in the management of model risks for financial institutions and fintechs alike. The investment was spearheaded by Canapi Ventures, with significant contributions from Capital One Ventures and Better Tomorrow Ventures.

In today’s financial landscape, banks and fintechs are increasingly reliant on artificial intelligence and machine learning technologies to inform critical operational decisions. These technologies are pivotal for tasks such as lending assessments, fraud detection, and anti-money laundering initiatives. However, the rapid adoption of generative AI and advanced modeling techniques introduces complexities and opportunities that financial entities must navigate. A recent survey conducted by the Risk Management Association underscores this sentiment, revealing that institutions are actively searching for innovative solutions to refine their model risk management approaches amid rising costs and technical obstacles.

The motivation behind Ethos comes from a place of experience. Jett Oristaglio, the CEO and co-founder, recognized an urgent need during his tenure as the Product and Data Science Lead at DataRobot, where he worked closely with customers in the financial services sector. He identified a substantial opportunity to create technology that enables financial institutions, regardless of their size, to scale their model risk management capabilities without compromising governance standards.

At Ethos, Oristaglio captures the vision by stating, “We are dedicated to empowering financial institutions to shape the future of the industry. Our goal is to ensure model risk management acts as a catalyst for innovation rather than an obstacle. Our platform is designed to facilitate the rapid and confident deployment of AI and other models that are crucial in today’s fast-paced business environment.”

Designed specifically for financial institutions, the Ethos platform enhances traditional risk management practices while simultaneously offering flexibility and efficiency required for scaling operations. It enables the integration of new models and products at an expeditious rate while ensuring strict adherence to risk management protocols.

Mike Fotinakis, the co-founder and CTO of Ethos, leverages over two decades of experience in developing software infrastructures that cater to enterprise needs. He emphasizes, “We have built Ethos from the ground up to address the unique technological, operational, and regulatory demands faced by the financial sector. Our fundamental aim is to transform exemplary risk management practices into a competitive edge for our clients.”

Further supporting the mission, Kristen Fisher, Head of Risk Innovation at Ethos, draws from her extensive experience in model risk functions within financial institutions. She elaborates, “Sound risk management goes beyond ticking a box for regulatory compliance—it forms the very foundation of profitability. An understanding of your risks is essential to understanding your business.” Fisher expresses her enthusiasm for developing solutions that enable risk teams to be strategic allies in the growth of their organizations.

Currently engaging with one of the largest financial institutions in the United States, Ethos strives to cater to banks, credit unions, and fintech companies of differing scales. Sheel Mohnot of Better Tomorrow Ventures reflects on their early investment in Ethos, stating how they were immediately drawn to the critical gap identified by the co-founders in the banking environment.

In discussing the funding, Jeffrey Reitman, a General Partner at Canapi Ventures, speaks to the significance of model risk management processes amidst the ever-evolving landscape of AI and decision models in banking. “We saw the potential in Ethos right away because for banks to successfully implement generative AI and utilize decision-making models, they require a robust handling of model risk management, something traditional systems often fail to provide,” he notes.

Capital One Ventures partner Phil Kim expresses similar optimism regarding the financial industry's capability to innovate responsibly, underlining Ethos’s potential to modernize model risk management. As part of their growth trajectory, Ethos plans to expand its engineering team and enhance their market introduction strategies to better cater to the dynamic needs of risk professionals.

In summary, with this seed funding, Ethos is positioning itself to transform the model risk management domain within finance, delivering a platform that promises to meet the complexities and requirements of the sector effectively.

For more insight into Ethos and its offerings, visit their official website at www.ethosai.com.