KredosAI raises $7M, led by BMW, to use AI to help companies collect late payments.

KredosAI, a Seattle-area startup that uses AI and behavioral science to help companies chase down late customer payments, has raised $7 million in a new funding round led by BMW i Ventures, the private equity arm of automaker BMW Group.

The company, founded in 2021 by former T-Mobile executives Balaji Sridharan and Dave Thoms, is based in Issaquah, Wash. It focuses on the period after the debt expires but before the account is sent to collections or written off. Its technology is able to adjust the wording, time and channel of each overdue message based on the customer’s account history.

The bottom line, says Sridharan, is that most people don’t care about their tardiness but deal with something more common, like a forgotten date, a short-term charge, or some frustration with a service.

“Most of the buyers who are late in paying actually want to pay,” he said. “There is a very small group of people who are fraudsters, but most of them want to pay.”

New investors Motley Fool Ventures and Walter Ventures joined existing backers Okapi Venture Capital, StartFast Ventures, SaaS Ventures and Stout Street Capital in the Series A round. The company’s total funding to date is just over $10 million.

The BMW connection came about through an introduction from an existing investor, Sridharan said. Having the automaker’s business arm behind it is important, he added, as KredosAI moves deeper into auto lending.

Subprime mortgage defaults have risen to their highest levels since the 1990s. Lenders, says Sridharan, measure this problem the way mobile phones do – balancing the cost of getting a payment with the value of keeping a customer. That combination, along with BMW’s track record in the automotive business, made their business arm a logical fit.

KredosAI works with large businesses, including some in the Fortune 50, although it won’t name many of them publicly. It started in telecom, speaking to its roots: Sridharan and Thoms met at T-Mobile in Bellevue. Sridharan spent eight years there, first running a business strategy and later an IoT company, following a previous stint at McKinsey. Thoms has spent most of his career in credit and collections at telecommunications and financial services companies.

Watching T-Mobile deal with millions of delinquent accounts each month, they came to the conclusion that there was a better way to handle a backlogged customer conversation.

To decide what to send, the software measures a customer’s account characteristics (how often they’ve been late in the past, their average balance, how long they’ve been a customer) while picking out limiting signals like age. It reaches people via text, email and the latest RCS, and AI voice agents the company started adding over the past year.

The company claims that this method brings significant improvements: for all its customers, it reports that it reduces by 11.5% and raises the customer lifetime value by 13.6% compared to traditional collections. It says its platform has hosted more than 200 million customer interactions in the past two years, with revenue growing sixfold in that time.

KredosAI is also a partner of FICO – a well-known FICO credit statistics company – and integrates its expertise into the FICO Platform, software banks and other large companies use for credit decisions and collections.

The company competes with a range of software-group players, including the larger, more established Symend, a Calgary-based company that uses behavioral science to engage with late-paying customers. The field also includes online debt collectors and companies that sell debt collection software.

The company has about 25 employees, about eight of whom are in the Seattle area.

Sridharan said the funding will go towards sales and marketing, product development around agent AI and voice agents, and eventually global expansion. He expects the count to double next year, to 50 or more people.

The additional funding, he said, “gives us a little more fuel to go to market more slowly than in the past.”