Cerebro Capital started exploring the possibilities of artificial intelligence long before products like ChatGPT and MidJourney made the technology one of the hottest investments in the country. Now, the Baltimore startup is looking to capitalize on the AI trend after getting a patent for its technology earlier this year and raising millions in new funding.
Cerebro's technology uses AI to help middle market companies predict the structures and terms of loans from different financial institutions. CEO Matt Bjonerud hopes increased public awareness of AI can help boost commercial interest in the startup.
“Back in 2018, there wasn't anywhere near as much talk about AI as there is today,” Bjonerud said. “We're incredibly fortunate to get the patent in the midst of all of this excitement as the public becomes more aware of how much value AI applications can bring.”
The company pursued AI because it was the only technology that made sense for a business processing a massive amount of information and trying to grow at a large scale. Tracking the behavior of thousands of lending institutions is nearly impossible for human beings because it involves a multitude of complex factors, from a company's quarterly goals to federal policy, Bjonerud said. It took five years for the U.S. Patent and Trademark Office to grant the patent to Cerebro Capital after the company initially filed an application in 2018.
The AI is based on the company's insights from facilitating billions of dollars in loan commitments over the past five years. Cerebro improves its software as it gets more customers by analyzing the difference between what Cerebro predicted would happen when a company pursued a loan and the terms a bank actually gave a firm, Bjonerud said.
"The technology revolution that has changed the way that we shop and live is starting to penetrate middle market lending and business-to-business operations," Bjonerud said. "I'm really excited because it's a big opportunity, and it really has been left untouched. The biggest evolution in corporate lending that has happened technology-wise has been the Excel spreadsheet. There hasn't really been much since then."
The increase in federal interest rates boosting the cost of borrowing is a great opportunity for Cerebro since it gives chief financial officers more options when trying to find loans. Most middle market companies have limited sources of information on possible lenders, usually turning to accountants or law firms, who cannot provide as wide of a view as the tech platform, Bjonerud said. The platform also provides complete anonymity for borrowers and lenders until the later stages of the negotiating process, according to the patent.
“Most companies can name the top five commercial banks, but very few can name the top five non-bank lenders,” Bjonerud said.
Cerebro Capital has a little extra capital to enhance the technology after raising $3.4 million, according to a filing with the U.S. Securities and Exchange Commission on Aug. 4. The 17-investor round, which includes a $1 million investment from the Maryland Technology Development Corp., will go toward preparing the technology to handle a larger customer base once Cerebro launches a larger sales and marketing push, Bjonerud said. The company has grown from a 10-person staff in 2020 to a 20-person staff in 2023 and has raised a total of $11 million since its founding in 2018.
Several local companies are also expanding their use of artificial intelligence. Software developer Mindgrub has begun to use the technology to save time when producing computer code and showcased a suite of AI-generated music at the Baltimore Symphony earlier this month.
