During RiseConf in Hong Kong in July, we interviewed a number of thought leaders in FinTech, among whom Mr. Tim Hwang, Founder and CEO of FiscalNote.
Q: Tell me about FiscalNote. How did the company start and what is its mission?
Tim: We are the largest privately held company in the RegTech space. We aggregate legislation and regulation, company documents, court cases from multiple countries around the world. We use artificial intelligence to structure and normalize that information and then make that legal information available to about 1300 companies globally to use our information every day to monitor how laws are changing and how they may potentially impact their businesses. So when Cargill or Uber is dealing with blockchain regulations or safety regulations, they are the ones going onto our platform to look up the regulations and then change their businesses internally.
Q: You mentioned, you guys are the largest in this sector. How do you differentiate yourself from the competition? What is your competitive advantage?
Tim: We are pretty much the only provider that uses artificial intelligence. So, a lot of our competitors say like LexisNexis or Thomson Reuters may use manual approaches to technology where it may be manually classifying documents or manually creating summarizations. We do the entire process automatically.
Q: What is the difference between LawTech and RegTech? Is there any?
Tim: Legal tech is more focused on case law, operations, and some other traditional branches. RegTech is more focused on the enforcement actions, the regulatory agencies and things like that. So, sort of an executive branch of the government. Basically RegTech helps regulators apply those laws using technology.
Q: Do you have any tips for other FinTech startup founders?
Tim: For me, the biggest thing for the FinTech companies we see (we work in a lot of FinTech companies, all the way from bulge bracket investment banks down to early-stage companies) is: Don’t ignore the regulators. And, whether you are doing online lending or a cryptocurrency startup, it doesn’t matter if you have a product market fit or if you have a regular market or great branding. If the government wants to shut you down, they will shut you down. That has happened multiple times.
Q: Sometimes startups go from ‘too-small-to-care’ to ‘too-big-to-fail’ in a really short space of time and the regulators can’t really adapt to that. It is a pretty big challenge for the regulators as well to keep track of all the developments and the fast pace with which the technology is moving.
Tim: It is the job of a lot of startups to engage with regulators, especially if you are in a regulated space. If you are starting up a hospital, I would probably want to talk to the regulators early, the same thing goes if you are lending out money to different companies, I would want to make sure that you talking to financial regulators from an early stage.
Q: Your operations are mainly focused in the United States now, right?
Tim: We have customers globally. Two-thirds of business is focused in the U.S.
Q: Asia is a pretty heterogeneous region and there exist a lot of opportunities here. Do you have a strategy of scaling here?
Tim: We have acquired a couple of companies in the region. Our biggest acquisition is a company in Korea, so our Asia headquarters are based there. The idea is to continue to grab more data out of Malaysia, Indonesia, Singapore, China, Korea and bring all of that into place and make the data sets available to our customers globally. We also have a decently increasing size of enterprise customers out of China, Japan, and Singapore especially.
Q: What do you see as main challenges of scaling in Asia?
Tim: Just finding good people, I would say. We are trying to look for good regional leaders and country leaders that have expertise in specific departments. This is always a constant challenge, finding the right team.
Q: Have you encountered any specific regulatory challenges in Asia?
Tim: When we enter a region, we typically have a good number of partners in the region. So, we haven’t had any major issues. We either create a joint venture or make sure to bring our strategic investors from the region.
Q: Can RegTech promote financial inclusion?
Tim: I am sure it can. I think that by lowering the barriers to regulatory compliance, you could actually increase the rate of entrepreneurship, particularly in heavily regulated industries. One of the biggest challenges for FinTech companies is being complaint with regulators. We are making it easier for companies to be compliant and that I think is encouraging more and more people to start their own business and change finance. I think there is a big opportunity there.
Q: What were the three main challenges you encountered in starting your company?
Tim: The beginning was probably around finding the right people. It is the same thing with any company, whether you are in RegTech, or any other business. Creating the executive team and then the management team beyond that and the broader employee base that is talented, committed and motivated, is tough.
Second is probably capital formation. I wouldn’t say it was terribly difficult, but I would say there is some challenge in terms of navigating through different types of capital, different costs of capital at each stage of business.
And the last is probably culture, making sure that within the context of all the different moving parts of the business and different products, you are constantly maintaining the right culture about the business.
Q: What is the next big thing in FinTech, in your opinion? Is there one thing you think holds a lot of potential?
Tim: I think I am biased. I think RegTech is pretty big. If we take a look at a bank, and look at where the majority of cost is going, certainly there is a lot of money on the core business unit lines, in investing continuously. Asset management is a big area that is getting disrupted; online lending of course is still getting disrupted. But, I think that the fastest growing expense within the income statement is compliance and risk. There are a lot of opportunities to reshape the way banks view risk, manage risk, mitigate risk, be it from a regulatory perspective or a business perspective.
Q: If you had a superpower, what would it be?
Tim: Probably, the ability to fly. Teleport actually.
Q: What motivates you to get out of bed every morning?
Tim: Trying to accomplish the mission of the company. Our goal in the mid-term is to try and create a repository of all of humanity’s laws and regulations in one, singular place and we want to do that across every country on the planet. I think we are getting close. We are onboarding a new country every two to three weeks. The idea is to hopefully be in every country on Earth by the end of 2018 or so.
Q: Will FiscalNote displace lawyers’ jobs?
Tim: I don’t think we will replace lawyers’ jobs, but we probably will augment a lot of what they do.