HNC Mafia Part 1: From Senior Scientist to Future Unicorn

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By Andrea Siedsma

In 1989, a young scientist named Krishna Gopinathan was working in symbolic computation at the University of Waterloo in Canada when he came across a book about the concepts of neural networks that he felt were visionary and far-reaching. That quickly led him to jump into the neural networks field.

“Fascinated and intrigued by neural networks, I started researching companies and universities focusing on neural networks and found an article in Inc. Magazine about Hecht-Nielsen Neurocomputer Corporation, as HNC was known back then. It talked about how the company was applying neural networks to image processing, optical character recognition, medical diagnosis, and multiple other fields, including financial services.”

Gopinathan continued. “I sent my resume to the company and after a few phone interviews and a wonderful trip to San Diego with my wife, I was asked to join Hecht-Nielsen Neurocomputer Corporation as a staff scientist (in 1990).”

That turned out to be a win-win-win for HNC and Gopinathan, as well as for San Diego’s data analytics community, which has blossomed tremendously since HNC’s pioneering efforts. In fact, HNC fueled dozens of local entrepreneurs and companies, many of whom are still working in the analytics space today. 

Below, we take a closer look at HNC’s famous beginnings, as well as Gopinathan’s important role in the company’s flagship technology and what he has been up to since, including trying to build San Diego’s first data science unicorn (since HNC).

HNC History: Before we dive into Gopinathan’s time at HNC, it’s important to give a big shout out to the company’s late co-founder Robert Hecht-Nielsen, whose pioneering work in neural network technology at the University of California, San Diego (UCSD) was central to HNC’s first products and services.  As a former adjunct professor of electrical and computer engineering at UCSD, Hecht-Nielsen co-founded HNC in a garage in 1986 along with the late Todd Gutschow, who was Hecht-Nielsen’s Teaching Assistant (TA) at UCSD. (They also worked together at TRW.)  

The pair eventually grew HNC to over 1,200 employees and expanded into international markets. Hecht-Nielsen, who became a vice president of R&D at Fair Isaac Corporation when it acquired HNC in 2002 for about $810 million, is remembered as an influential neuroscientist and entrepreneur who set the stage for today’s data science/analytics industry in San Diego. In fact, many key HNC employees went on to launch their own analytics startups. (Follow this series through our newsletter to find out more).

For Gopinathan, working under Hecht-Nielsen’s visionary helm set a precedent for his successful career. “I met Robert during my first week at the company. He struck me as a highly visionary person with a mind bubbling with ideas,” Gopinathan recalled. “We frequently talked about how neural networks were going to transform the world, and how to apply neural networks to applications ranging from the simple to the complex – numeric data, symbolic data, audio data, image data, video data, data from sensors – almost all of which the company was working on. We also discussed how the hardware of the day was not fast enough to run neural networks, which was why the company was building custom hardware to accelerate neural network development. His views on neural networks resonated with me.”

“Robert was an inspiring figure to me and many other young scientists in the company. We didn’t officially work for him, but many of us would drop by his office and brainstorm with him about technical problems. He was very creative and always visionary. These conversations would stimulate our thinking and drive us in interesting technical directions.” 

When Hecht-Nielsen passed away in 2019, Gopinathan wrote this to his fellow HNC alumni: “Very sad to hear of Robert’s passing. In the mid-’80s, Robert had a vision that the world ultimately caught up to, with AI based on neural networks becoming ubiquitous. At the end of his life, I’m sure Robert was proud that he got it right and his vision correctly anticipated the AI-centric world of today.”

“We were all beneficiaries of that, and I look back on my HNC days with nostalgia and thankfulness for the opportunity to work with him and all of you,” Gopinathan wrote. “We owe a debt of gratitude to Robert and Todd for creating a great company that launched the careers of so many of us.”

HNC’s late Co-Founder Gutschow, who spent his time after HNC as a local K-12 education advocate, also had visions for the future while pushing the technology envelope.  

“Todd Gutschow ran the R&D group at HNC, winning numerous government contracts that pushed our technology base forward,” Gopinathan said. “Highly approachable, Todd was a wonderful person to talk to about any topic, and he always had good advice for me.”

Both Hecht-Nielsen and Gutschow are sorely missed, but their footprint on the local analytics/data science community will be forever imprinted, and many others continue to push the boundaries of this fascinating and quickly changing field. 

“Robert’s and Todd’s impact on the AI community and the San Diego tech sector is enormous and will continue to be felt for a very long time,” Gopinathan said.

Pioneering Technology: HNC, which developed predictive software solutions, was an early pioneer of neural networks, allowing computers to recognize patterns in the same way a human brain does. The company first focused on defense-related R&D, but as defense budgets shrunk, HNC expanded its technology for other uses. These solutions allowed companies to make more intelligent and profitable decisions and were marketed to industries – including financial, insurance, retail, telecommunications, and the Internet. The most successful deployment of HNC technology was the detection of potentially fraudulent credit card purchases.

This is where Gopinathan comes in – he was the brains behind HNC’s breakthrough Falcon fraud detection algorithm, which used neural network technology and pooled regional credit card transaction data across the country to construct predictive models with enhanced accuracy on a national level. 

“I was the lead scientist who did the initial proof-of-concept with two credit card issuers in 1991. Then, in early 1992, one card issuer, First USA Bank (now part of JPMorgan Chase), decided to move forward with a production implementation of Falcon,” he said. “With that validation from the market, HNC decided to make me Director of Fraud Products and put me in charge of Falcon. The Falcon team, consisting of me, another scientist (Steve Biafore), a software engineer (Will Ferguson), and a brilliant summer intern (Anu Pathria), worked tirelessly to meet the deadline and deliver the 1.0 version of the product. We then worked with First USA to get it running in their environment and we met that deadline too.”

“First USA started using Falcon in production, and it was a good news/bad news situation. The neural network was catching an amazing number of frauds, but since the implementation was a once-a-day batch system, most of the money on the credit cards was gone by the time the system ran at night. We had told them that the best way to run Falcon was real-time, but the cost of putting it into real-time was too much for them to spend on a hitherto unproven system.”

It wasn’t until the third implementation that Gopinathan and his team got a client willing to invest in a real-time implementation of Falcon – Household Finance. “I still remember the first day when Falcon went live at Household and they caught five times as many frauds as they usually caught in a day. We were onsite at the client’s location that day for go-live, and the Senior Vice President came by asking about ‘those guys from some AI company who were catching tons of fraud.’”

Turned out that the fraud manager at that company was friends with lots of other fraud managers around the industry since fraud was viewed as an industry problem to be solved cooperatively. He started calling all his friends around the industry telling them about Falcon’s amazing performance, Gopinathan said. 

“Our phones started ringing off the hook,” Gopinathan said. “That year, 1993, we implemented Falcon at about half a dozen banks. Revenue grew at a massive rate. I was only 28 and was promoted to Vice President and P&L manager of Fraud Products (which I later changed to Fraud Detection Products).”

HNC grew with its Falcon product and went public in 1995, posting revenues of $44 million that year. Over the next seven years, HNC invested in several analytics companies to diversify its reach beyond financial services and fraud detection.

“That was an incredibly exciting, rewarding, and stimulating time. HNC was one of those companies that would allow scientists to lead entire projects and products rather than always having a businessperson in charge. So, I got the opportunity to lead Falcon from day one,” Gopinathan said. “I recall that the CEO of the company, Bob North, told me, ‘Krishna, you may never experience something like this again,’ referring to Falcon’s incredible growth. I am happy to say that I have had the opportunity to experience such incredible growth once again, right here at Applied Data Finance – ADF.” (More about that later.)

Success Breeds Success: Looking back, Gopinathan reflects on HNC’s biggest impact on the local tech ecosystem. HNC, he said, was the first company in San Diego to create a highly successful commercial business centered on what has now come to be known as data science. 

“HNC’s success seeded the local tech ecosystem with numerous highly capable people who understood data science and had experienced a successful startup. One of the most impressive things about HNC was the people. HNC had assembled a team every bit as capable as the initial teams at Google, Facebook, Amazon, or any of today’s technology giants. After HNC’s success, these people had the experience, confidence, and wealth to create new startups along with the detailed knowledge of what worked and what didn’t.”

“The success of HNC, and of Falcon in particular, set me up for all the success I’ve had since then since it gave me the experience and credibility of having built a highly successful business at a young age,” Gopinathan added. “Over the last 20+ years, this has enabled me to raise capital and launch multiple companies. That, in turn, gave me the opportunity to make mistakes and, importantly, learn from those mistakes. All this led to my success both as a scientist and a business leader. I have HNC and all the amazing people from that ecosystem to thank for many learnings that led to my success as the CEO of ADF.”

Serial Entrepreneurial: After spending more than eight years at HNC, Gopinathan went on to launch multiple predictive analytics and data science companies in San Diego. His first startup, Burning Glass Technologies, was created alongside two other HNC alumni (Ted Crooks and Anu Pathria) in 1999. The company, which developed text mining associated with resume and job posting data, has become one of the world’s leading labor market analytics firms focusing on supply/demand. 

“When President Obama wanted to understand why the country had high unemployment, yet also had so many unfilled jobs, Burning Glass worked with the administration and quantified what came to be known as the skill gap in America,” Gopinathan said. 

After Burning Glass Technologies, Gopinathan moved on to found his next company (in 2003) Global Analytics (now Gain Credit), a US/India binational startup focusing on data science applications in financial services. Gain Credit ultimately focused on online lending using data science. It spawned the creation of subsidiaries Lending Stream in the UK and Oye Loans in India, along with spin-out Zebit in San Diego. 

“I was able to bring more than a half dozen colleagues from HNC to Global Analytics, one of whom is now the CEO of the company (Chris deBoer),” Gopinathan said. 

LeadCrunch: In typical successful San Diego entrepreneur fashion, Gopinathan has also invested in and advised local startups. In fact, he was one of the earliest outside investors in hot San Diego startup LeadCrunch and serves as an ongoing advisor to the senior management and data science team.

“LeadCrunch started with the idea of using data science to create rich profiles of every company in the US and to use these profiles to enable a much more efficient and effective approach to B2B marketing,” Gopinathan said. “When I first met them, I felt that their core idea was very powerful since B2B marketing had not yet benefited from the vast amount of unstructured data available to be mined using modern data science. That led me to invest in them at a very early stage – when they were just a five-person team (in 2015). I also joined their board, helped guide their strategy and introduced them to my friend and fellow HNC alum Steve Biafore, who took the role of Chief Scientific Officer at LeadCrunch.”

“Now, more than five years later, their incredible growth has proven that their initial concept was correct. They’ve successfully raised Series A and B rounds, and with a giant market and powerful differentiation, I fully expect them to continue to grow at an amazing pace.”

“I want to help other startups be successful, sharing my experiences with other entrepreneurs to further grow the San Diego technology and data science ecosystem. LeadCrunch is my first foray in that direction,” he said.

 

Applied Data Finance: And, now the moment you’ve all been waiting for. Remember that possible data science unicorn I mentioned earlier? Here’s the 411:

Gopinathan launched Applied Data Finance in 2014 to “focus on data science-based online lending in the US in the underserved middle market between banks and payday lenders. This consumer segment is rejected by the banks and mistreated by payday lenders. Through our consumer brand, Personify, consumers can apply online for fully amortizing installment loans with affordable payments. These personal loans can help them build their credit and escape the debt trap of payday loans. Only five years old, ADF has been highly successful, booking $325 million in loans in 2019 directly and through its bank partner, with revenues of over $100 million.”

Gopinathan’s goal is to continue to grow ADF and turn it into a unicorn. “To my knowledge, since HNC, San Diego has not had a true data science unicorn – I hope to create the next one.”

Stay tuned.

Local Talent Pool: “San Diego has numerous top-quality analytics professionals and data scientists and many companies have opened offices here in San Diego to tap into our analytics and data science talent. In fact, a recent article in the New York Times ranked San Diego among the top five cities for innovation,” Gopinathan said. “The demand for data science professionals has even driven Google and Amazon to open satellite offices in San Diego; it’s a hotbed of talent. HNC was a key starting point for that. At HNC, back in the 90’s, I hired an analytics team of 30 Ph.D. scientists, and I like to joke that much of the San Diego data science community consists of my hires, my grand-hires, and my great-grand-hires!”

San Diego: There are a couple of reasons why Gopinathan has remained in San Diego throughout his career. “The fact that San Diego is a top analytics hub full of incredible talent, including many brilliant people I know personally, figured prominently in my decision. Each time I started a company, the talent available locally was a very strong consideration in deciding where to locate the company. Secondly, it’s San Diego, with arguably the best weather in the world and all the other reasons so many of us call San Diego home. But most importantly, it was about my family, who had developed strong ties in the community that I didn’t want to disrupt by moving to a different city.”

Editor’s note: This series is dedicated to late HNC co-founders  Robert Hecht-Nielsen and Todd Gutschow, who set the stage for San Diego’s vibrant analytics and data science community. 

This multi-part series will take a look at several of the subsequent entrepreneurs and data science companies that still call San Diego home today and their impact on the ecosystem and our daily lives. Read part 2 & part 3.