Many Sacramento residents are aware of the region’s strengths in industries such as agriculture, food, life sciences, and health innovations. But there is also a growing fintech (short for financial technology) community in the region that is gaining energy and momentum. Fintech is an emerging industry in which technology is used in innovative and disruptive ways in the finance industry.
One key startup founder and emerging leader in the local fintech arena is Joe Ciccolo, founder/co-founder of not one, but two local fintech startups. I caught up with Joe to learn more about his background and his two fintech startups, BitAML, and ComplyFit. Check out my interview with Joe below.
What’s your background?
I’m Joe Ciccolo, Founder & President of BitAML, and Co-Founder & President of ComplyFit. My professional background is in financial services compliance. Prior to launching BitAML and later ComplyFit, I held leadership positions with large and mid-sized financial institutions across various risk management disciplines, anti-money laundering (AML), fraud prevention, corporate investigations, and vendor due diligence.
What do BitAML and ComplyFit do?
Founded in 2015, BitAML is an AML compliance advisory firm exclusively serving the Bitcoin and cryptocurrency market. BitAML clients include cryptocurrency kiosk operators, exchanges, traders and trading platforms, cryptocurrency hedge funds, and other innovative solutions.
BitAML experts work closely with clients to develop and integrate custom written AML compliance programs designed to exceed regulatory requirements. We also provide independent BSA/AML auditing services, on-demand compliance support, and compliance project management for scaling for high-growth potential institutions in the Bitcoin and cryptocurrency space.
Members of BitAML‘s leadership team are frequent contributors at both cryptocurrency and compliance industry events, regularly consult with policymakers, provide cryptocurrency training to members of law enforcement, and consult with retail and investment bankers on both virtual currencies and the onboarding of cryptocurrency customers.
ComplyFit is a SaaS productivity tool that enables crypto and fintech companies to manage their state money transmitter licenses across each of the 50 states. Features include quarterly reporting, annual renewals and reports, advanced change notice requirements, and miscellaneous required reports. The platform is updated regularly by compliance professionals with the assistance of machine learning technology keeping licensees on top of regulatory reporting changes in near real time. ComplyFit saves licensees the tedious task of having to compile, update, and track this information manually.
Why did you start BitAML and ComplyFit? How did the idea come about?
In 2014, while working in traditional banking, I became interested in cryptocurrency and began to do some research. In my downtime, I consumed as much content as I could, sharing information and answering compliance questions both remotely and at in-person events. Within a short period of time, it became clear to me that there was no shortage of crypto regulatory questions and compliance needs, yet there were hardly any resources available. I enjoyed the opportunity to pay it forward by answering compliance questions while learning from those so eager to share with me their innovations and projects. The following year, I launched BitAML and the rest, as they say, is history.
ComplyFit began as the technical innovation hub inside BitAML, and was spun out in 2019 following the launch of our state money transmitter license monitoring tool. Prior to this time, we had several ideas and prototyped solutions each with the common goal of increasing the efficiency and effectiveness of our client’s regulatory compliance efforts. Many seemed to be mere iterations of existing solutions, while others would be competing in already over-saturated markets.
One day, my co-founder, Annelise, suggested that there was a problem no one had solved that we could help address. From her experience working at a large online cryptocurrency exchange, she noticed that a team of lawyers and compliance professionals were struggling to stay on top of recurring state regulatory reporting requirements and deadlines. While trying to figure out why compliance departments struggled to manage state reporting, the problem revealed itself to be a largely analog process of out-of-date spreadsheets sometimes-inaccurate calendar reminders, and believe it or not, sticky notes. We knew there had to be a better way. That’s why we created ComplyFit.
Tell us about the problem/challenge that you’re solving. Who is your customer and what challenge or pain point of theirs are you solving?
BitAML prepares written compliance policies and procedures for crypto companies, mainly early-stage startups, including cryptocurrency kiosk operators, exchanges, traders, and trading platforms, cryptocurrency hedge funds, and other innovative solutions. Preparation and implementation of these policies and procedures are required prior to launch under federal regulation and some state-level regulation. The documents form the basis for an institution’s compliance strategy, and how they will be measured by federal and state regulatory examiners. Throughout the process, we guide our clients through the maze of nuanced regulatory rules, expectations, and compliance best practices.
ComplyFit is a productivity tool that enables crypto and fintech companies to manage their state money transmitter licenses across each of the 50 states. Currently, most entities that engage in the exchange of cryptocurrency are money transmitters, which requires registration with FinCEN, a bureau of the U.S. Treasury, and state-level money transmitter licensure in every state within which they serve customers or maintain operations. In some ways, the 50 states are like 50 different countries. Each has a unique set of ongoing requirements, forms, deadlines, and expectations. This can be a nightmare to manage at scale across multiple states. ComplyFit saves licensees countless research hours, while simultaneously providing peace of mind as regulatory requirements and deadlines are met.
How did you validate that your solution was viable?
The test of viability is generally the marketplace. However, we felt the true test of viability was when an early client aced their regulatory exam and gave us a call to say “thank you” and to share their experience. While we are proud of our work and appreciative of the kind words, I’m the first to tell our clients that it’s them, by their actions, that deserve the praise for implementing the compliance countermeasures day in and day out.
For ComplyFit, after a fairly lengthy testing process to ensure that the machine learning and human component worked in harmony, we reached out to several select large crypto companies with a national presence to “test drive” the software. When we initially met, a member of the legal team from one of the companies began to share frustrations with the various state regulatory agencies irregularly updating their websites, moving forms, dead links, and other “hidden” recurring reporting requirements. After logging into ComplyFit, he couldn’t believe we’d made it so simple to manage everything from a single dashboard.
What are some of the biggest accomplishments, milestones, or wins you’ve had so far?
It’s amazing to look back and realize that BitAML has been operating for more than six years now, which I’m told is about 100 years in “bitcoin years.” In that time, we’ve helped hundreds of clients, adapted to the demands of a fluid regulatory landscape, and weathered various downturns in the marketplace. It’s been an amazing journey. We’re pleased to be the preferred compliance expert for clients of two of the largest bitcoin ATM manufacturers in the world, provide crypto compliance training for one of the largest banks in the United States, and work on some pretty amazing projects that I’m not allowed to talk about.
As for ComplyFit, at this relatively early stage, we’re celebrating the signing of each new client, including a major big name in the crypto space late this past year. As well, I’m proud that our team advanced to the “Elite Eight” of the Sacramento Kings Capitalize contest in 2020. We’re excited to see what 2021 has in store for us.
What were some key entrepreneurship lessons-learned you’ve learned so far?
If I can pass on a critical lesson that I’ve learned to a fellow entrepreneur, it is the importance of having a strong partner at home who is understanding and accepting of the entrepreneurial lifestyle. My wife has been amazingly supportive with the long hours, travel, and late nights in the office that come with the job. She is quick to point out that it’s amazing how many business problems I’ve solved just by stepping away and enjoying some down time with the family. Answers and breakthroughs don’t always happen in the office in front of a whiteboard.
At ComplyFit, we were demonstrating our product to a large prospective client who seemed incredibly interested. As a follow-up, they asked if we could add a certain feature set that would fit nicely with their use case. Rather than fully considering the merits of adding this feature set, I placed a rush order with our developer to implement the recommendations ASAP. After testing and then presenting the updated and enhanced software to the prospective client with much glee, they proceeded to nitpick the software before effectively dumping us via email. While we take pride in delighting and going above-and-beyond for our clients, it’s important to remember your startup can’t be all things to all people. We continue to welcome and encourage suggestions and ideas with open arms, but always take a step back to analyze the potential impact of acting on this information.
What stage are you at and what’s next?
We’re scaling. BitAML grew like crazy in 2020. We’re planning to add to our team in the coming months and have begun to offer both consumer protection and cybersecurity policies. These policies and their respective risk management disciplines have become points of emphasis among state regulators in particular. We’re excited to help our clients meet and exceed these regulatory requirements, which we see as a logical extension of our AML and fraud detection and prevention policy work.
With our closed beta now behind us, we’re eager to continue marketing our ComplyFit software to a growing number of new and innovative companies in the cryptocurrency industry. As well, we plan to branch into the broader fintech space to help regional and national companies that are providing a myriad of services through traditional financial rails.
What has been the biggest challenge you’ve had to overcome as a startup founder?
In 2017, we struggled through the “Crypto Winter,” a period of several months that saw bitcoin and other cryptocurrencies lose 70-95% of their value after hitting all-time highs. Investors and traders lost money and witnessed a dramatic decline in demand, projects were getting defunded, capital dried up, and entrepreneurs put their plans on pause. For a couple of months, we didn’t receive a single call or email. At one point, I emailed myself and Googled our company just to make sure people could still find us. It was a very trying time for sure. At one point, a close family member suggested that maybe it was time to give up the dream, but I insisted that we stay the course and that this was a hiccup for the cryptocurrency industry. Turns out I was right, and eventually business came back and we’ve been busy ever since.
Importantly, I used the down time to create and distribute more content, write blog articles, and even speak to students at a local university. It was important to stay mentally awake and keep my skillset sharp in preparation for when things turned around. You’ll never see me complain about a busy day.
How has Covid-19 affected your startup and what have you done to adjust?
We’re fortunate in that COVID-19 has not adversely impacted our business. I do, however, miss attending industry conferences and events, sharing face time with clients, strategic partners, and fellow startups and business owners. Hopefully, as things start to open up, these opportunities will return.
What needs do you have to grow and take it to the next level?
We’re currently in the process of scaling both BitAML and ComplyFit, which requires hiring more team members and acquiring more capital, though much more the former than the latter.
Earlier this year, we reached out to several local universities to learn more about what future graduates are looking for from prospective employers, and to share the opportunities we have to offer. We’re excited to add several new members to our team this coming spring and summer. Unsurprisingly, students are extremely interested in cryptocurrency and the broader fintech space and bring with them a fresh prospective and new set of ideas.
As for investors, the level of enthusiasm is not quite as strong. There is still a great deal of trepidation when it comes to funding crypto and fintech companies. For the most part, it comes down to what the investor knows and understands. At the moment, this remains a very niche cohort within the investment community, though I’m confident the number of investors and the overall level of investment will increase in the coming year as consumer adoption grows and these technologies become more mainstream.
What’s your take on the startup scene here in your area? What has been helpful?
The startup scene in Sacramento is fantastic! There are so many amazing innovators and startups here in Greater Sac. Add to which, there is a tremendous sense of community and regional pride. The startup scene is both large enough to connect entrepreneurs with valuable resources, yet small enough to foster a communal environment where startups collaborate, encourage, and support one another.
Over the past couple of years, our companies have benefited from attending various learning events, both in-person and remote, and from the connections made along the way. It’s a great feeling knowing that there’s an entire startup community in our own backyard that will offer advice, answer questions, and share information. It’s an amazing support network that will only continue to grow along with the Greater Sacramento community.
What do you think as an entrepreneur would be more helpful to have here in the region?
I’m tempted to say “capital,” but of course that’s what nearly every startup says. However, I would like to see larger and more established businesses collaborate and pair up with startups in their industry or field. The mutual benefit for both parties seems quite obvious, though sometimes a catalyst is needed to break the ice.
Do you have any words of advice, inspiration, or encouragement for aspiring entrepreneurs?
Work hard, be grateful and thankful for every opportunity, and never stop learning or asking questions.
Finally, listen to input from anyone and everyone willing to give you their time. In 2014, an analyst at State Farm recommended to the Bank’s President that the institution offer cryptocurrency-related services or make an investment in the industry. He was laughed at. Six months later their biggest rival invested in the Series C round of Coinbase, which today would represent about a 1500x return, and more importantly an opportunity to innovate and capture a whole new segment of the market across its product lines.
At first, most new and innovative ideas seem at least somewhat crazy. Allow yourself time to fully form your ideas rather than worrying about social pressures and social cues directing you to more conventional thinking.
How can people find out more about you and your startup?
Feel free to email me directly, anytime at joe@bitaml.com. I’m always happy to hop on a call or meet up in-person.
BitAML
twitter: @bitaml
ComplyFit
twitter: @complyfit
