How A Young Politician Created A $100M Tech Giant - Tim Hwang (FiscalNote) l Coffee With Closers

I'm trying not to make the same mistakes. What is also very clear is that AI helps bad people do bad things more efficiently.

People try and make business really complicated. But at the end of the day, I think it's like quite simple. You've got to make things that people want and you've got to do it in a repeatable fashion. If it was easy, everybody would be doing it and everybody would be successful. When it comes to businesses, there's really only two things that matter. It's people and markets. Really focus on having a great product and the most efficient way to deliver that product to customers. Make sure that you have the right people. A winning culture that's focused on a distinct set of values around what your expectations are.

Yeah. Great to be on.

Yeah. I started off my career very far afield from this technology space in politics. I originally worked for a really interesting guy named Senator Obama. He was very unknown at the time back in 2006, 2007, and he decided he wanted to run for president, and I was about 16 years old at the time, and I decided that I was going to join the presidential campaign for the 2008 presidential election. Joined up with the president, and then obviously ended up doing pretty well, and I decided that I wanted to go into politics myself, and at the age of 17, decided I was going to run for office. Ran for the board of education in Maryland and somehow got elected. And so served there for one term managing 22,000 teachers, a 4 billion budget, 4 billion capital improvement plan and the like, and it's pretty interesting being in that position, but my parents were super unhappy about it. And so I decided to go back to school. So went back to Princeton to study public policy and really focused on things like technology and politics and whatnot. And my original plan was to go back to Washington to work at the White House or an FCC or something like that, but ended up entering into the startup world. Soon enough, ended up at Harvard Business School, and this is around 2014 or so, and decided to essentially drop out and start my own company. At the end of 2013 to 2014 started FiscalNote, my first company, and really FiscalNote was this intersection of technology and politics where we were trying to essentially build the Bloomberg Terminal for Law. I can imagine, for instance, instead of looking up stocks and bonds, you could look up laws and regulations and court cases and things like that. And we did that over the last, call it eight, nine years or so, scaled up the business. 5,000 plus customers, over a hundred million dollars of recurring revenue, profitable, and I took it public on the New York Stock Exchange. And in that time period, probably raised like a quarter billion dollars in the private markets from folks like Mark Cuban and Jerry Yang, Steve Case, and NEA, and then probably another, call it 200 million plus in the public markets to continue to scale our business. And about two years ago started a family office. And then with that, I've been doing a lot of venture capital investing, probably invested in 40, 50 plus companies. And then started investing in a lot of friends' companies as well. And most recently, looking at companies like Nitra in the healthcare space. We're building essentially Brex for the healthcare market. Jericho Security, which is a cybersecurity company focused on AI detection in cybersecurity, and then Amber Technologies, which focuses on building a vertically integrated car insurance product for electric vehicles. And really being involved in categories I'm interested in and engaged in and trying to make a difference in the world at the end of the day.

No, my parents are both academics and I think it was more just a desire to make a difference in society. And I think that in the previous generation, that difference would come from practicing law or publishing papers or making a difference from a scientific perspective. My father's a scientist. But I think from a kind of 21st century perspective, that same desire probably was manifested maybe originally through some politics, but most eventually through building companies and scaling technologies for the broader public.

It really came from my interest in technology and politics. And I'd always admired the business models of Bloomberg and Thomson Reuters and FactSet and others. But I think that the ability to really understand the world's laws and regulations was something that I was very interested in. The idea for FiscalNote was to essentially build a global digital repository of every law and every regulation in every country on the planet. One click, you can look up capital gains in Indonesia and another click, you can look up taxes in Japan. Another click, you can look up real estate regulations in Mexico. Just to understand what governments around the world are doing instantaneously felt would be a very powerful platform. So that's what we built. And this was really at the time of 2013, 2014, if you recall, the information in the news was around things like Uber being banned or Airbnb executives getting dragged off to jail and stuff like that. And it just seemed like this problem of private sector and public sector conflicting was only going to continue to increase in the future.

So we're essentially a Bloomberg terminal, right? So we sell data sets to our customers. We collect laws and regulations and court cases from 80 different countries, and then we'll go to DOD, FBI, CIA, FedEx, Blue Cross Blue Shield, Goldman Sachs, Chevron, whatever. And ask them, what countries are you interested in? And we'll charge you $20,000 a country per year. We have some customers that pay two, three, four million a year to access the world. And then maybe we have a local credit union or a hospital paying $15,000, $20,000 just to look up Nebraska legislation and congressional regulations or something. But that's like the main portion of the business. And now we're in Europe and Korea and Japan and Singapore and Australia, in parts of Latin America. And really just expanding the business quite broadly.

Yeah. We're fundamentally an AI company, I would say. We collect billions of pages of regulations from around the world in multiple different languages. We use everything from machine translation, categorization, summarization technologies to be able to analyze instantaneously the state of Mexican regulations or whatever the case is. And then we'll go out and use generative technologies to be able to generate summaries or reports around what's going on around the world. And so it depends on what that looks like, but I think we've been pretty successful at doing that. We've also partnered with OpenAI, Google Bing, Microsoft Bing, Google Bard, as we've taken our technologies and built out our own language models and the like. And so I think we've been pretty successful at establishing ourselves as the market leader in the legal AI space.

I had some college startups and stuff like that. Just stuff that I tried with my friends, little apps and stuff, but this was the first true venture company that I started.

Yeah. So I was an undergrad at Princeton and then an MBA at Harvard.

It wasn't all at once. We raised $1.3 million from Mark Cuban and Jerry Yang actually through a cold email. And then we raised the following year like $7 million in our Series A and then our Series B was like $10 million. And then we just kept raising more and more money along the way to expand our sales team and build more products and stuff like that. It wasn't, I don't think there's anything magical. We just worked every year to make the business a little bit better. And I can't remember the exact numbers, but I think we did $20,000 in our first year and then like $600,000 in our second year. And then like $2.5 million in our third year. And then $5, $6 million in our fourth. We just kept growing every year because it wasn't like there was this pivotal skyrocketing moment. We just every year hired a little more people, got some more customers, launched one or two new products and just kept compounding from there.

Yeah, no, of course. I literally had a Google spreadsheet where I was cold calling prospective customers and recording their feedback around what price points they'd be willing to pay and what their pain points were and what they'd like to actually see in a product. And it was quite direct, I would say, in terms of doing the market research myself. And then for the first customer, I can't remember exactly how we got that customer, but I think it was literally through a personal relationship with a professor or something, as a lot of first customers are. And then beyond there, we just kept cold calling and reaching out to customers and building a customer base.

Yeah, of course. They're great supporters of the business.

I think when it comes to businesses, there's really only two things that matter. It's people and markets. People try and make business really complicated, but at the end of the day, I think it's quite simple. I don't care if you're selling hamburgers or cars or software or whatnot, you've got to make things that people want. And you've got to do it in a repeatable fashion. So in my philosophical context of business, there's two main functions of business: product creation and distribution. Everybody else exists to basically support those two pillars. And when you look at that system of what a business looks like, what it comes down to is: do you have the right people building the right products? Do you have the right people building the right distribution mechanisms? And then you follow that up with: are we in the right market overall, one that's growing and scaling and creating new demand all the time? Those are the two main things. The main things that I look at is just having the right people in the right markets. And whether you're building a company or investing capital, at the end of the day, it's the same thing. Building a company is a function of investing time, and building an investment firm is a function of investing capital, but you're still selecting the right market opportunities and the right people to work with to get to the right outcomes at the end of the day.

Every mistake you can think of, I've probably already made. Picking the wrong executive, picking the wrong market to build in, scaling the wrong products. There's so many countless lessons along the way. You only learn that from making the mistake. And that's just something that you learn along the way.

I think it just comes down to what I was saying before, which is really focus on having a great product and the most efficient way to deliver that product to customers. And then make sure that you have a winning culture that's focused on a distinct set of values around what your expectations are. And then from a markets perspective, make sure to select a market that's growing very quickly in a problem set that people increasingly need solutions for. I think those are the canons of business. I think people try, like I said before, to make things too complicated in startups. But if you follow those principles, then I think more often than not, you'll probably be successful.

A lot of it was my own money personally. So just kept rolling that forward and scaling it. I never went out and raised any institutional money or anything like that, but having personal conviction in companies and ideas and markets and spending time with people that I want to spend time with, that's what it came down to. And at some point I sat down and said, here are the markets I want to be involved in. I want to be involved in healthcare and energy and cybersecurity. And maybe in the future I'll be involved in aerospace and real estate and things like that. Those are areas that I have a lot of passion and interest for. And even if it's not, I basically just want to spend a lot of time in each of those areas.

I think it just comes down to being around people that are really smart and hardworking. I don't think there's much more beyond that. If you surround yourself with executives and founders and other investors who are similarly passionate about the areas that you're passionate about and are working very hard, you have a very strong team around you to focus on the things that are the most important. I don't think there's any secret. Sometimes I watch these YouTube videos or Instagram things and people say, oh, you gotta try this time management technique or whatever. I don't subscribe to any of that. It's more just I literally have a blank sheet of paper in front of me and I write down the things I need to get done today. And that's my time management piece. But beyond that, I like to say that I surround myself with some really smart people who work really hard and make life easier for everyone around them.

Yeah. I think that's the process of getting those numbers and whatnot, but I would defer more to the core day-to-day operators. I'm not day-to-day, it's just not my forte to get in the weeds and figure out how to pull out metrics and stuff like that. I do think, to your point, the nature of business is everyone likes to talk about the hockey stick growth, but hockey stick growth happens when you have billions of dollars of capital and just blow it on marketing. And of course you're going to get growth. I think the nuts and bolts of business are when you're in a not great market and you need to eke out an extra 3% of growth, and you need to cleave out one or two million of costs to hit your profitability numbers for that quarter or that year. That's where you get really deep into the weeds and you start making some really nitty gritty decisions. So for me, I do align around metrics a lot. I will tell CEOs or general managers, I want to see X metric every day. And I want to know the drivers of those metrics. And the metrics themselves aren't that complicated: sales metrics or GMV or payment volume or whatever it is. But I think what I'm interested in, apart from the number itself, is what's driving that number. If it's higher than what we expected, why is it higher? If it's lower, why is it lower? If we're seeing low conversion rates in the middle of our sales funnel, is it because it's a product issue or a price issue, a competitive issue? If we're not spending enough time talking to customers, is it because our branding isn't resonating or our messaging? So I try and be very diagnostic about what the issues are. And that's what ultimately I've been driving to at the end of the day.

Honestly, I just assume there are people that are much better than me at most things. So I don't have an ego about things. If you're the best at demand gen marketing, you probably are way better than I am. So it's in the best interest for me to bring you onto the team and then have you go do it. I have no ego about that. I think my role in any situation is diagnosing the problem and then defining the milestones and then making sure that there's the right team to get it done and then getting out of their way. That's my management philosophy around people and solving problems. I'm not going to sit there and say I'm the best expert at everything because that's just false. But again, from the very beginning, I don't think business should be that complicated, especially in the early stage. You're building a product and selling it, and that's basically it. And you can increase in complexity over time. You can add agile systems and scrum systems, you can put in different web frameworks and whatnot, and you could put in place different SEO and demand gen tactics and content, all that stuff to build the business. But ultimately it just comes down to: are you building a great product and are you selling it to customers? And I think that in the early stages, when you're just trying to get traction, you just do whatever it takes to do those two things. If it means picking up the keyboard and coding yourself, that's what you need to do. If you're selling a direct-to-consumer product and you need to go and hand out flyers on the street, I will literally sit there, I'll go out with early team members and we'll go pass out flyers. Whatever it takes to get the distribution started. But beyond that, as you start to scale a system, the key is just building a really great team that's been there, done that and can scale a business.

So I think there's a positive and a negative, right? The positive is that you're going to see a lot more productivity. And we're already seeing that across the board in very small ways. I don't think that we're going to be in a situation where anyone's automated out of their job just yet. Maybe in the mid to long term, but in the short term, we're seeing a lot of AI agents and co-pilots and stuff like that, and seeing a lot of success there overall. I think that that'll probably improve productivity like 20 or 30%. So what that means is that what used to take a team of six to do, you could probably do with a team of three or four. And that's a pretty big leap forward in terms of productivity increase and being able to get more things done in general. I think the negative aspect of this is that, regardless of how you feel about automation or AI technologies or their advancements or whatnot, what is also very clear is that AI helps bad people do bad things more efficiently. Obviously, AI helps improve efficiency overall, but it's agnostic to whether you're a good person or a bad person. So you could be more efficient at serving patients in a hospital. You can also be more efficient at helping malicious actors hack into enterprise systems or to scam and phish and fraudulently steal money from individuals and the like. And I think that we need to be open-minded about where the opportunities are and then build the defensive mechanisms to be able to reflect the threats that may pop up over the next several years or so.

The government is obviously necessary for any new technology. I think it's foolish to think that the government isn't going to get involved at all. I think the government needs to set standards around responsible use of artificial intelligence. It needs to enforce some of the existing laws in our books. So I'll give you an example. Credit underwriting is obviously very large and people have been talking about automated mechanisms for using credit underwriting and the like. In the US at least, we've got pretty strict regulations around things like civil rights, around things like explaining to consumers why they were rejected for credit or why they were accepted for credit and the like. And things like explainability in artificial intelligence are very important for those purposes, which isn't always the case. So that's one big bucket of things. There's probably another big bucket around national security, around responsible use of artificial intelligence around things like ballistics or automated defense mechanisms for the way that we protect ourselves. So I think that ultimately the government is playing a very active role in these conversations, as they should be, in terms of the importance of leveraging responsible use of artificial intelligence.

I think I'm really proud of building products that our customers use, and then building teams that are building companies where people feel like there's a strong mission of what they're trying to accomplish. And the most amazing feeling as a founder is you have this idea, you put it on a PowerPoint presentation, and then you fast forward 10 years and then there's a thousand people wearing the company's t-shirt, working on this idea and this product that you'd thought up many years ago. The sense of responsibility and satisfaction of having created something from scratch, I think it's really a great feeling. And I think the title of founder is not thought about in a philosophical sense a lot. But founders have this vision of the future of what they want to accomplish, and then the ability to bring capital and people and resources and ideas and technologies and customers to make this happen. And so I have a lot of, just beyond myself, just a lot of respect for founders who are trying to build something from scratch and try and make it happen.

My parents are getting a little older and I think they just want their kids to be happy and not worry too much. It's different, but not too different, I would say.

I think it would be just to give people an open mind around where things may take them. I think at this point, I've seen a lot of different iterations of people that have been successful in their lives. And success doesn't have to come through some external thing. It's great if people are gold medalists and take companies public and whatever, but sometimes people are just very satisfied living great lives and happy lives. And so I think it's just a function of being open-minded about how people define what that is. And I'm not a parent, not yet at least, but I think my own personal philosophy would be to let my future kids explore a bunch of options and then really go deep on things that they're really passionate about.

I think it's actually quite similar. I think you're going to work on something for a really long time, and it's going to be very hard, and there's going to be a lot of people that tell you that you're wrong. And so you need to have a lot of conviction in it. The thing about business is, in my opinion, if it was easy, everybody would be doing it and everybody would be successful. And I think the best business opportunities may in fact come from an opportunity that only you see and where everybody is telling you that you're wrong. But in actuality, the market shifts and you're right. And I think having strong conviction in your ideas and then being able to work through that is something that I, in reflection, probably would play up a lot more.

There's a lot. Honestly, it gets really granular from focusing on the right people, spending time on the things that you care about and that you think are the most important. And then I think just learning to accept failure along the way. Not that I'm at peace with it, it's just that it's something that you have to do along the way to get to the next phase of your own development, I think as a person, as an entrepreneur.

I don't know if I regret anything. I think there's a lot of stuff that I would have done differently. Hindsight is 2020. And so obviously, the next time that goes around, I'm trying not to make the same mistakes and trying to learn from my past for sure.

Yeah, happy to be on.