62. A Founder's Journey: From Cornish Roots to Global RegTech Rockstar | Ben Richmond

0:00Welcome to The Difference Engine, the show for tech founders, investors and innovators.

0:09so um back at board wave live we have got another episode in the can and i think you're going to enjoy this one we're talking about a journey from the darkest deepest cornwall to the city and new york city yeah i think he's a guy that proves that a massive success and category domination in tech doesn't need an auspicious background absolutely not and also a man who's made what one might regard as quite a boring topic, compliance, or in his case, reg tech. Super interesting and has just infused the sector led a category. Yeah, and a classic example of doing the right thing at the right time for the right reasons.

0:48He spotted that after the global financial crisis, regulation was going to be increasing and you had to be able to manage that. And again, you'll hear about timing and when or not to put the rocket fuel that so many people around on BoardWave Live are talking about, meaning funding, when to add the rocket fuel and when to hold off. So without further ado, here's Ben Richmond, the founder of Cube. And the rock star of reg tech.

1:17Ben Richmond, welcome to The Difference Engine, live at BoardWave Live. And we wanted to take you back to start off with, with a period that none of us can remember because it was so long ago, but that is the time before regtech. Now, as a man who we think pretty much invented regtech, what gave you the conviction to build a company around this category that didn't exist at the time? So first off, great to be here. Thanks very much for having me. It's a great question. I think for me, the problem statement was so compelling and it was clear that at the time, in the world of regulation, something had to give you know there had to be a better way that you could understand read consume disseminate regulation and and that was clear and so then you know what's the answer it's technology um what form of technology so lots of you know data tooling and data skills and then you know early stage of ai this back in 2011 and i think for me it was just very much that i could crystallize the vision.

2:24I could see exactly what we had to build. And so I didn't kind of need there to be a category to say that's what it looks like. It was just problem statement clear, vision clear, now can we go build this thing? Right. So there's just basically a problem there. Yeah. That's the problem. We're going to solve it. Absolutely. And a problem that wasn't yet recognized to be a problem, but it was apparent that that was fundamentally why the regulatory frameworks were failing is because of the way that we were trying to disseminate this information to the masses across financial services in this incredibly books and manuals and archaic way, basically.

3:01Right. And I'm sure we're going to get into a few things from back in the day. This was an interesting period of time. I mean, this was a period of time when it seemed like they gave it a name, the financial crisis. That's right. Yeah. So interesting timing, even though you didn't know where you were going, the timing felt right? I think so, very much. I mean, obviously the financial crisis. So I wasn't a regulatory guy, you know, I wasn't from that world. And I knew a bit about the financial services world, but it was like that crisis was, you know, one, it was global. The other, it was so impactful and everyone in every way that there had to be fallout from that in different forms, different ways, you know, reform and rethinks of kind of how the financial frameworks work and how regulation is even considered and implemented at the supervisory level.

3:49And did you have like a little, did you have a way to get into that or did you have to fight your way into the world? I think it was, yeah, it was just, it was very much saying, okay, well, you know, for me, it was, if we can build this thing, you know, there's that adage, isn't it? Build it and they will come, which I love. And if we can build this thing, then I believed that we were going to identify very, very quickly a better way to manage regulation. And that customers would say, that's a no brainer. There were customers at the time, you had to go find them? Absolutely, no customers at the time.

4:25No, so I started the firm in 2011. So that was the founding of Cube. Well, my first customer in 2012, first tier one bank in 2013. which was Barclays and then went from there. So build it and they will come. I mean, that's a phrase from Field of Dreams, isn't it? That's right. Kevin Costner films, weren't they? Where the superstars of baseball come and haunt him in a field. Now, we understand that, and you are not to blame for this. I do understand that it's all your EA's fault. Good. Glad we got that clear. Right, so you are known, get this listeners, the rock star of reg tech. Is it reg tech or reg tech?

5:08We're clear on that right? It's definitely reg tech. Okay, reg tech. Definitely reg tech. Reg tech sounds like some landlord from the East Ends. When it first came out, it was always talked about as reg tech. And it used to drive me crazy. But actually, apparently it was the FCA who coined it back in 2015. Right, solved for all time. And regulatory technology, so reg tech. So listeners, it's reg tech. Now, for those of us who aren't in regtech, we might think, hmm, maybe it's just a little bit dull. But we are with the rock star of regtech here. So I've got to ask you, Ben, how do you bring, you know, what I think people have realized is your characteristic energy and vision to what is essentially compliance?

5:49That is a great question, because I think there is definitely a stigma to the world of compliance and risk and it being a bit dull and a bit conservative and maybe a bit boring and so on. But actually, you know, fundamentally, if you really think about the impact of it, it doesn't matter if it's financial services, whether you're sat in an airplane or whether you're about to go eat something at a restaurant. it's all underpinned by legislation and regulation you know whether it's health and safety whether it's food standards whether it's how you know um you know trading is operating on the trading floors and you know equities you know it's being traded and so on and so it's all very much um the fabric of the society and if we get it right generally you know then people shouldn't lose their houses like the financial crisis we should be safer we should be in a better place so when you look at that way it's not it's not like we're on some you know some philosophical crusade or something like that but you look at it in that way and it's hard to find much else that's more impactful and more systemic than actually the the world of regulation and so i think it's pretty cool as far as that i have to come back on this as far as the rock star thing is concerned there's a journalist that i blame for that then plus my ea who put it into a name badge in my office so that's good well i'm I'm glad we're all clear on that.

7:04And I don't blame the guitar. It's not some massive over-inflated ego then. It's not, no. No, good. But it has caused many a chuckle at different discussions and conferences. Right. But, you know, I'm afraid we have to say, you know, you are the category leader in what you do. And so we have to ask you how important was the idea of defining regulatory intelligence on your route to dominance in your market? Super important. Really important. And I think I, you know, we created Cube, we created this platform. You have to be able to call it something. You know, you can't, you know, what's your elevator?

7:41And then three minutes later, somebody's switched off because they don't really get what you've done. So you have to be able to sort of say, right, this is what this is. And there wasn't a sector. So RegTech, I started Cube 2011. RegTech was a great thing for us. it came 2015, it became a recognition that firms could use technology to go solve regulatory challenges. That's what it did. And it really did. And it sounds so obvious when you say it now, but we know putting those thoughts together, and you can tell you spent so long on it, it's just, it sounds so obvious in retrospect. 100%. Yeah. I mean, we definitely were trailblazers for what is reg tech today.

8:20But I think the fact that the industry then coined a phrase was really helpful because then you can start to build an ecosystem around it. And then to your point, we really then said, okay, we need to define what we do within that. And that's where regulatory intelligence or automated regulatory intelligence, as we referred to it, became a thing. And that was very important. Let me take you to a time before all of this. We've just heard an amazing life story sort of thing on stage at the show. And so, you know, when you're talking about where this all came from, the name Mysis came up. Now, we're here at BoardWave celebrating all things European tech, which is truly amazing.

8:59Mysis may be a name. I mean, I'm old enough to remember it. People may not. Can you just take us back to your Mysis days and really, you know, what sparked all of this journey? Yeah, absolutely. Yeah. I mean, Mysis back then was, you know, the UK powerhouse in tech. And, you know, those days have changed quite a bit. But in the days of Kevin Lomax and, you know, in the stock market and, you know, it was an incredible, you know, firm that we could boast about here in the UK. Yeah. And with, you know, later followers, you know, Ptolemy and so on. But these were the firms that sort of defined sort of the bigger tech ecosystem in UK and Europe.

9:34And so for me at Mises, I didn't get into tech intentionally. I got a job there, you know, working in the dispatch area, QAing software, making sure it got to the right customer. And I, you know, really then started to learn for the first time what this world of tech was all about. And it was really, we had, you know, hardware and software. We had the 12-inch diskettes at the time. Yes. Put them in the drive. And it was all COBOL, which is fascinating stuff. And you still runs half the financial. Someone tried to get me to code that once. I used to know a lot about Kerbal compilers, most of which I've now forgotten.

10:13Actually, it's a rare skill now, but it's still in demand. Although there's a lot of AI refactoring that going on. So, yeah, so it's really like I became very interested in what this was. I learned an awful lot about it, spent a lot of late nights sort of reading the manuals. And that was really when I started to get into tech. But then really from there, it was the whole millennium thing that really then got me into the world of data. You have to tell us the transition story that we just heard on stage. Oh, okay. Yes, indeed. Yeah, indeed. So yeah, that's a good one. So yeah, so I'm in dispatch and I'm QAing the software and, you know, obviously looking as to where the next, you know, next opportunity would come from.

10:55And then these guys turned up, this team sort of rolled up in their white cavaliers. We were just down in Farrington Road. White Cavaliers and blue double-breasted suits and big Motorola brick phones, the very first ones. FOMO, FOMO, FOMO. You can't have to go on that. Complete FOMO at this point. And I'm this fairly naive Cornish lad who's sort of stood there in the middle of Farrington Road in this huge tech company, not knowing a lot about tech. And I said to Norbert, who is this big Jamaican guy worked with and really like apparently you know big endearing figure and i said uh who are these guys so he's like he's like ben these are the sales guys and at this moment in the movie that's all slow mode when they get out their cavaliers yeah that's right yeah literally it was all of that and i was like yeah i want to be one of them and then um it took me from that point about a year to get into technical i learned enough to go technical and it took me about another year to get into sales and then and then the rest is history as they say but yeah yeah yeah and talking about history you know a lot of water has gone under the bridge since then and in the presentation we've just seen you're incredibly uh positive about the prospects for european software firms to dominate on a world stage and we should not be apologetic about wanting to do that absolutely i I mean, in your opinion, what is it that we need to do to create and scale tech giants in reg tech, particularly as I think you now have about 70 % of your revenue coming from the States?

12:34That's right. Yeah, I am passionate about this. I think we're a great example. Cube is a great example of what you can build here in the UK and actually have the greater proportion of our revenues coming from the US and overseas. A truly global company, we have 800 people in 20 countries. Amazing. You know, and we, our product, our software, our data is consumed in just about every regulated country and territory in the world. So when you look at it that way, there's nothing holding you back. Sometimes people say, is it access to capital? Is it, you know, the accessibility of customers? Is it the, you know, the infrastructure or the rules that are in place?

13:15and I think you know I think that if those barriers did exist I don't see them today I really don't and I'm sure we'll talk a bit more about this but I think you know it's really about and particularly in reg tech I think the UK is already quite an epicenter of that and is one of the you know sort of the really sort of fast growth you know global ecosystems of reg tech but I don't see that there's anything that we're disadvantaged by being you know UK Europe versus US I genuinely don't. So some other podcasters are available to talk about tech are very down on the UK. And some people comment that, you know, Brits in particular don't have the right work ethic.

13:55But clearly you shared some stories about how much you love work, which is fabulous. And also, along with that vision, you've got a very good results driven ethos. You like to look at results. You sort of, you know, my observation having just met you is details. Yeah, absolutely. Yeah. So I'm very detailed. that's definitely a trait of mine and slightly photographic memory which helps as well with that which again my team finds quite embarrassing sometimes but no I think so I'll give you an example so we're very obviously we're very ubiquitous in the enterprise space we have half of the tier one financial institutions that are customers today we're very proud of that and we're constantly innovating and driving forward new capabilities and either through acquisition or through organic build-out.

14:46So having, to your point, driving through an agenda of where it's about, okay, can we get these customers that are big to change, big organizations, take time? Can we really go solve the next use case? The next problem is some of that innovation. Can we automate this workflow? Can we deliver a view or a visibility of their data in some way that is going to help them do better, you know, in terms of managing their regulatory obligations. Just having those milestones where you see customers take on that innovation, that's, you know, there's metrics there. And obviously you get your MPSs and you get the usage of the product, everything else.

15:23But just seeing it in operation, that drives you phenomenally. And it's very tangible when you actually, you know, I'm a great believer of spending as much time as I can with customers and the team, like always, and, you know, walking the corridors within the customer organizations and seeing Cuban operation, I think that makes it very, very real. I mean, in that journey and in building this global regtech platform, which you have done, I mean, apart from the usual sleepless nights that anybody who's running a firm suffers regularly, what have been the moments when you thought, maybe we need to change the way we're running the company or we're at a step change here in terms of our growth?

16:07Definitely, you know, it's been a few of those times. I mean, fortunately, no one's chosen to change to CEO or anything like that. So it's a good thing. There's three key moments, you know, that stick out for me. One is winning your first customers, right? You're bootstrapping the business. You think you've built something of value. The validation is, is somebody going to buy it, you know, to try and solve a problem? I think that's a huge moment. And then you recognize at a point you're an owner-operator. the business is growing, you're bootstrapped, but you need a management team, right? You need people around you that are actually going to...

16:42And rocket fuel. Yeah, and rocket fuel and everything that goes with it. And so you need that and you need to build that out. And that's kind of a stage. It's a bit like going from one person, a one-man baton to two people. When you've got like 50 people, you need to start implementing a management team. That's the thing. But then also then that transition that we had over the last sort of year, when you're sort of a three, 400 person organization, you almost still know everyone, not quite. You put about 300, I think is the number. And then all of a sudden, you know, in one year we doubled from 300 odd to 700.

17:16And all of a sudden the firm changes dramatically. And at that point you have to take a step back and say, there's different ways that we now need to execute and operate. You can still say, you know, the foundations you get in kind of building a business and bootstrapping everything else remain. but you just don't have to take a step back and you have to put the right processes in place, the right governance, the right systems, think about how all of these things integrate together so that you can expand and you can grow. And that's the step change. And then with that, you need capital. Talking about capital, you mentioned earlier that you actually bootstrapped this business for 10 years now.

17:57That is not what most people do. No, a bit more sense. So why did you do it? And what was it that eventually convinced you that perhaps you should take some other people's money? Yes. For me, I didn't really think to do it any other way, to be honest. When I set out, I'd started running businesses just from the age of 21. And with no capital, phone in a desk, fax machine at the time and it's you know go go you know sell the solution implement the solution so but it that wasn't building a product that was capital intensive that was really you know selling services and solutions other people's products so but with cube it was going to be much more capital intensive because we were building a software platform you know building a product but to me i just felt like the right it was as i said it was almost a non-decision for me which was let's just make this happen.

18:53Let's find a way to do it. Let's build it. Obviously, the implication is you can only go as fast as your cash flow will allow. Right. I seem to be quite comfortable taking on debt and that kind of thing. You say cash flow and bank. Yeah, that's right. Yeah, so heavily leveraged in multiple ways. And I seemed to just feel okay with that and the knowledge that I truly believed of building something that was going to ultimately really impact the market, become something much bigger. And so then when you're on that journey and you start, you know, being successful, you then get opportunities to take money.

19:30And I did take some debt through the business, you know, some venture debt and what have you. But no equity transactions or anything like that until, yeah, over 10 years into the business as bootstrapping all that way. But there is a step change then. And it's, to me, it really comes down to product market fit. you're just like you you you come to a point if you've been defining a category which we had you're always educating the market you're always trying to help people understand what you can do twist them to your viewpoint well the sales cycles are sales like it's so long and there's and and people are unaware of what you're doing it's like you need to really sort of help educate and then talk about okay well this is how we can solve for this when a market really turns on you know you this notion of RFPs coming in, you have this notion of inbound inquiries.

20:20And then when you start to really see that ramp, you see the addressable market is large, which is in our space, you see the activity ramping, and then you have to step back and say, do we have a product here that really solves the problem? And so at that point, if the answer is yes, yes, and yes, then you've got two choices. You either have a great product and you carry on as you are quite happy and you get cash flow generative and make a profit and continue to bootstrap but you will not scale and you will not grow something big. Somebody else will grab your category. And you will be a Me Too player and somebody else exactly will grab your category so you'll be a number four or five or whatever.

20:59The alternative is you say now's the time and I'm going for it because that's what you want. You want to build something big and you want to be the number one player. and that was it, it was literally that and it was that moment of time where now's the right time and then we went at it and then we started raising money Clearly that's a really, really important and fundamental decision and you eventually chose I think HG Capital as one of your backers Yeah, so we had Brigale Milestone came in in 22 great partner so again, European funds Yes. They do high net worth family in Europe. Yep. CNA days and all those things.

21:42Actually, they're saying in Portugal and elsewhere. Yes. But they've got Regal Milestone Fund in the UK. They've got SageMount in the US or in Europe, Milestone. And so, yeah, went with them in the first instance because we weren't big enough for HG, really. Right. We were at that stage where we needed growth capital, but we weren't at a size or shape that we could court the big PE firms. but we had plenty of interest at that level great partner but you know fundamentally the market was going so hot my appetite my ambition for the business was was is you know remains significant and the m &a opportunity was was was right there right there and it was clear to me that the market was was massively fragmented because reg tech is actually it's a it's a very if you're in the enterprise space a very high cost of sale it's very laborious you know sales cycles and also you need to build a lot of infrastructure to serve properly so therefore what you found is you had a lot of innovative companies but couldn't break through yeah yeah and so there was loads of them there still is and so to me it was obvious it's going to consolidate so we needed a bigger brother we needed somebody yeah who could really come to the table and say go for it and as good as we go well hg were that partner right and that's where we went to hg And that Uber category of reg tech, if you think about it today, we're aware of large, and I'm sure you're aware of large European players that do a different type of reg tech, more to do with health and safety, as you mentioned, and less to do with the focus on financial markets.

23:12I mean, there's still a long, potentially a very long way to go before reg tech reaches its full potential, right? I think totally, yeah. I think there's a huge way to go. I mean, if you look at it, so talking about, you know, Europe and the UK is sort of a world stage for this. I mean, the FCA came up with the term that's pretty good because it's used globally now, you know, RegTech came from the UK. We're all writing a few things like GDPR, a few things like that. Yeah, there you go, GDPR. There you go. Exactly. Yeah. So, so we've got all of that. But then if you think about the evolution, you know, when I started CUBE, we were doing rudiment, you know, a lot of data wrangling, data work, you know, you sort of come up from expert learning, you get into, you know, then we're doing computer vision and NLP and so on, and then machine learning.

23:52So obviously then, you know, a few years ago, Gen AI hits the stage. And that obviously is massively disruptive in this space, because this space is all about data and books and manuals. And then, you know, more latterly, Agentec AI, which enables us to automate and deliver, you know, true automation for the customer. And so I say to my team, I say, I'm not even sure we're halfway there. Right. And their eyes sort of go quite watery, not through the fact that they're just so enjoyed. You have to just kick them somewhere. They just say, please, no, no more, not another 15 years. Well, I hope you don't give them a break.

24:31Yeah, but in all seriousness, there's just so much to be done. It's incredible. I mean, you have built Cube through a combination of organic growth and acquisition. Yes. So can you talk us through how you make that decision to acquire and what, in your experience, are the potential pitfalls for others to watch out if they're considering doing the same? Great. Yeah, great discussion, actually, that one, because it's, you know, there's no sort of right or wrong with this one. I think there's a couple of things. I think, first of all, you've got to say, right, if you go in organic, you are going to get distracted.

25:06okay that's you can't say we'll do everything we were going to do and we're going to buy some companies it's just not real okay there's only so many hours in the day there's only so much thought time you can put into it so you really have to look at it and you have to say is the market right for acquisition so our growth our organic growth rates are very very good you know top of market and so it's like is the market right for acquisition is there a threat if we don't do this to our position uh is this going to enable us to accelerate add value build customer share and and you know can we execute on this well it's not taking our eye off the prize even though you're going to get a bit distracted and dilute so you have to look at the market you have to look at your position in the market and then you have to say right okay then do the economics make sense right because it might look great going out and buying all these companies but if you can't get the financial engineering right and the construct right you know where does it really take you know the firm and where does it take the you know the the the you know the kind of the overall sort of shareholder um consideration in the firm as well and so it's like you have to get the balance of all of those things right and and so with that you know for us we it was clear that we were in a market that was heavily fragmented we had already assumed number one position um really through the organic growth that we had.

26:27But it was interesting because when HG came in, I think I bought with Cube six or seven companies now, but with HG in the last 18 months, we bought four businesses, right? And they get sort of bigger and bigger generally. But what was interesting is we had, when I was, we were out really pitching Cube and selling Cube, the firm we always used to come up against was thompson reuters yeah so the big orange right and they're always the ones to beat and so the first acquisition i did with hg was bought the two businesses out thompson reuters that we used to compete with uh which was a regulatory intelligence business and and then there was another business that they had which was in um odin which was insurance intelligence intelligence business and and so we kind of we had got to the number one stage but the big orange was still seen as the big orange.

27:22And so that probably cemented us into that leadership position and we sort of became the big blue. And then with that, it was very clear. So that gave us great customer share, which was very impactful for us. But then also put us in a position where there was another firm and independent that we could then take out. And that really helped us amass clients that we could then start to bring onto the platform. clients are very happy because our platform frankly is you know is is is better in terms of the tech and the data and capabilities and we're very happy because it gave us even more acceleration in terms of bringing those clients on the queue yeah so yeah so it made total sense but for us you know it came to those things but you have to look at it in in that way i think i mean the one thing you didn't mention in while you were talking there was in you you've acquired 10 companies or something around that by now.

28:15Yeah, I think about seven or so. There's also the issue of the integration of those companies. When you've acquired them, they may look great on paper. The numbers may look good. They may add to your bottom line. The people look good. The tech looks good. What actually happens when you're racing to dominate a world market, you're buying these companies and you're having to integrate them at the same time you're running very, very fast? Yeah, absolutely. I mean, that is certainly what all the investors worry about is that you trip over yourself. And my learnings are the work starts at the point of the press release.

28:51That's truly... I know there's all this work to get the deals done and the lawyers and advisors and everything else. But the real work is, okay, we've done the deal. What's next? And people integration, process integration, technology integration, let alone things like finance operations, HR and so on, let alone the long tail of the actual product integration. And so you have to kind of build a machine. First of all, you have to be really clear, right? People and customers are what matter in that situation. You just cannot, it's an obvious thing to say, but you cannot take your eye off the ball.

29:33And I personally make a point of getting around and seeing everybody on the firms that you know coming into cube and meeting people and spending time with them and just and just being part of that process is so important and same with my management team and then it's the customers and i sat down with uh with a very important customer of ours told them about an acquisition um one time and he's very straight talk of this guy american guy And he sat there and he went, so what? And I was like, yeah, and I was like, well, da, da, da. And he's like, but so what? And the point he was making is he was like, tell me how this helps me, what you're saying.