How RiskScout CEO Justin Fischer grew RiskScout to $654.2K revenue and 4 customers in 2024.

hey folks my guest today is justin fisher he's helping financial institutions bank higher risk businesses the company url if you want to follow it's called riskscout.com justin you ready to take us to the top let's do it all right what's that mean bank higher risk businesses uh well essentially banks bank you know consumers and regular businesses all the time uh the higher risk businesses in our world are thc so cannabis hemp cbd uh msbs which are money service businesses they move cash uh atms and there's about 30 other types but basically they require a lot of additional due diligence and compliance before the bank can ensure that they can bank them appropriately give me an example so i'm an investor that owns a bunch of atms i want to bank with jpmorgan chase jp morgan won't take me why don't they like atm revenue yeah that's a great question so uh atms are heavy in cash right doesn't mean you're doing criminal activity but because you're dealing with a lot of cash uh the source of funds can be obscured right so the other side of atms is they can be kind of dangerous especially if you decide to fill them yourselves so between those two concerns the banks um you know generally shy away from banking atm operators is what that's called a little little fact people don't know 60 of the atms in the country are actually run by independent operators and when all this pandemic and surplus cash came out like that's where people got their cash was in you know rural areas or even urban areas where a bank logoed atm isn't there so they they do provide a really important service i mean we're all down on six streets sometimes and we need cash right that's an independent atm you know is that a good business can you make a lot of money running an atm yeah there's great fees on it right i mean it depends on where your atm is uh and the funny side point to that is you put an atm and a cannas cannabis dispensary because they're so cash based hopefully you don't rake people over the coals with fees but they can be very lucrative about 15 times um the profitability as a regular atm wow how many atms are there in the united states oh that's a good question um hundreds of thousands i don't know the exact answer to that but definitely the larger percentage is non-bank atms why has anyone rolled up independent operators a good question a lot of these operators are long-time family uh owned businesses um a lot of them are um like one of the guys i spoke to runs a bunch of arcade machines and you know uh you know all that kind of work so it's just kind of an in aging industry and it also brings to the point they've been doing this for decades why is it a banking issue right um just to kind of compound on that a little bit the banking industry is um really led by uh federal regulators right and state-based regulators but a bunch of different acronym agencies that enforce compliance and in the last probably decade or so their guidance has been very convoluted and difficult for banks to follow so it ends up making ridiculous things come out when the examiner sits and talks to the bank so nathan you've got 300 atms you know what i'm going to decide to make you have to open up three dif 300 different bank accounts for every atm just so i can separate cash easier and an examiner actually told a bank that and forced the bank to not be able to bank that that that business right and they they they force them through saying hey this could be an enforcement action to you so now if i so if i open one atm i don't even know how much like every monday morning i have to take a slug of cash and stick it in the back of the machine how much cash is usually in an atm like how much would i be carrying down 6th street to restock my atm uh hundreds of thousands of dollars it depends on how you do your your process but mostly most atm machines will only have about 20k or less in them but i mean i'm sure you've seen in the news where people pull up trucks and drag these atms out and do all kinds of crazy stuff you know you take a you know an ounce of intelligence and you watch someone feed it you know not not advocating crime but that's unfortunately a very sensitive area and so that's why you'll see more armored car services but every time you use those other third parties they're cutting in on your fees right that's fascinating and i'm wanting to go i'm wanting to go roll up a bunch of atms now okay okay so how do you help how do you make money so we help make uh we make money by helping uh the institutions do compliance right so uh when a let's just say let's take a different market like a thc dispensary right you know and oklahoma has a ton of them texas we're not quite there but you know an oklahoma thc dispensary says hey i have to have a bank account i gotta make payroll i gotta you know i gotta do something with this cash you can't sit in a safe which is also unsafe and so um they will bring it to the bank well the bank has to do all this due diligence where's your license like you know um you know what is your criminal background all that kind of stuff they've got to do and all that due diligence ends up in like word documents uh you know back check background check systems and all these disparate places well then imagine if you if you have pretty much the only bank that's banking thc in oklahoma there's only a handful and you've got hundreds to thousands of those customers right they're hugely profitable for you you got great fees but you're just a you know person in their mid 50s who's like literally trying to do this with manual processes we come in and we automate all that process and so when the examiner then comes in and says okay nathan show me where you did everything you said you're supposed to do you can say right here inside risk out we have every you know every t crossed and every i dotted like ice is all our compliance stuff so who who is who's paying you the owner of the cannabis business or jp morgan that wants to bank the cannabis business the banks the banks and credit unions themselves in fact most of them are community banks and credit unions so not even at the jp morgan level like there's 8 000 community banks and credit unions in the us right 98 of them are under 10 billion dollars meaning they're like everyone you see around austin or anywhere you know where they've got a handful of branches and they're just trying to bank their community interesting okay what is it what does an average banker credit union pay you per month to use your tech yeah no so the great thing is we start off small so we have a five thousand dollar minimum so it's enterprise software right uh but we have a five thousand dollar minimum but very quickly annually monthly uh monthly mri yeah and what's great about it is um our banks end up growing we had a customer who was at that in november who's now over 20k in just uh you know a matter of months right um and part of that nathan is because we we actually charge off of each business that's under compliance so as their businesses start growing even if those businesses are just buying multiple products or working in multiple markets those are all individual pricing for us so uh here's the model right so you are a bank and you want to bank someone okay well you're going to charge them 250 a month because it's hard to bank their kind of industry and they're happy because they have consistent banking so 250 a month is kind of expensive in the normal banking world but in high risk it's actually really cheap you know they'll pay us say 150 right for that compliance work and then as they grow and the more products they stack on top of that customer like maybe i'm gonna do merchant processing for you or insurance then now i get to stack more and more fees and plus i'm getting all the deposits all the loans all of the additional financial products so we manage and open all that up and all those apps just come through our system and all the ongoing maintenance of the compliance is between the bank and you over electronic means now right over the phones and online so much so how many how many total banks pay you at least a dollar per month pay us at least a dollar per month um so we have 100 under a dozen banks we have over a thousand businesses on the system um we have like i said probably an average of usage right now is averaging in the 15 to 20k a month mrr you're that's where you're at right now 15 to 20 kmr yeah as a business no no no no no no so average of our of our customers is uh as a business we're right under 500k of ar okay this is great well what a story okay got it so just to be clear you've got 10 banks paying you for a thousand seats and a seat is a cannabis business that they're trying to bank right right right and you're talking they're paying you know well i don't know if you have oh you got it under a dozen so if you have like five or six customers paying sort of 10 15 grand a month that's where you get your 500 000 arrow correct correct i see okay really interesting how did you tell me the story of how you got your first customer uh yeah well also this isn't my first rodeo i've been doing this for 20 years i was with a company here in austin called q2 now everybody knows who q2 is because we're literally on the mls...