Buried within FiscalNote's recent Q1 2024 earnings call transcript (NYSE: NOTE) lies a revelation that's gone largely unnoticed: the company is aggressively betting on the future of AI, not just as a product feature, but as a foundational shift in how legislative, regulatory, and geopolitical risk is analyzed. They're not just building AI tools – they're creating a "Copilot Creator" platform designed to rapidly churn out specialized AI agents, aiming for nothing less than the creation of the "world's most powerful AI lawyer."

This is far more ambitious than simply incorporating ChatGPT-like features into existing workflows. FiscalNote envisions a future where their AI agents handle complex tasks currently performed by human experts: summarizing legislation, conducting compliance reviews, drafting legal memos, even negotiating deals. This could fundamentally change not only FiscalNote's business but the entire information services industry.

The strategy rests on three pillars, meticulously built over the past decade:

A Mountain of Data: FiscalNote has amassed a gargantuan database of legislative, regulatory, and geopolitical information from over 80 countries, investing heavily in data acquisition, cleansing, and organization. This forms the "training ground" for their AI models.

FiscalNoteGPT: A Verticalized LLM: Recognizing the limitations of generic LLMs, FiscalNote has built their own, specifically trained on their massive proprietary datasets. This allows for greater accuracy and minimizes the risk of "hallucinations" – AI generating inaccurate or misleading information.

The Copilot Creator: An AI Agent Factory: This is the game-changer. The platform allows FiscalNote's developers to rapidly build and deploy AI agents, leveraging both the vast database and FiscalNoteGPT, essentially acting as a factory for new AI-powered products.

This three-stage approach gives FiscalNote a unique advantage. They're not just plugging into someone else's AI. They control the data, the models, and the agent creation process, ensuring accuracy, security, and customization for specific client needs.

So, where's the billion-dollar opportunity? FiscalNote is targeting two primary avenues:

Existing Customers: Their thousands of clients, spanning government agencies and Fortune 500 companies, represent a built-in market for their AI-powered tools. Each Copilot has the potential to drive both upsells and increased retention. For instance, their Global Intelligence AI Copilot, launched just last week, is already being deployed to existing geopolitical and macroeconomic intelligence customers.

New Markets and Partnerships: FiscalNote envisions an expansive future, with AI Copilots for virtually every legal, regulatory, and strategic risk persona. They're also exploring data licensing deals with LLM companies and potential partnerships in sectors like public relations and media training, leveraging technologies like their StressLens AI agent for tasks like witness preparation.

The early results are promising. StressLens, designed to analyze human emotions in real-time, has already garnered interest beyond its initial regulatory use cases. The Global Intelligence Copilot is seeing rapid adoption. And FiscalNote is promising an "AI Showcase Day" in the coming weeks to unveil even more Copilots and their multi-year roadmap.

Financial Performance and Valuation

Here's the hypothesis: If FiscalNote can successfully execute this AI-centric strategy, they could see their growth accelerate dramatically. Consider this:

Their recent divestiture of Board.org fetched a 7x ARR multiple.

FiscalNote is currently trading at roughly 2x ARR.

They're aiming for $250 million in run-rate revenue within the next five years.

If they achieve this revenue target and the market re-rates them closer to the multiple achieved for Board.org, their valuation could soar well beyond a billion dollars.

Source: FiscalNote Holdings, Inc. Q1 2024 Earnings Conference Call

Growth Drivers and Challenges

FiscalNote's growth is being driven by a number of factors, including:

Strong demand for AI-powered legal and regulatory solutions: As businesses and organizations face increasing regulatory complexity, they are turning to AI-powered solutions to help them navigate this landscape.

FiscalNote's unique AI capabilities: FiscalNote has developed a number of unique AI capabilities, including FiscalNoteGPT and the Copilot Creator, that give it a competitive advantage in the market.

Expansion into new markets: FiscalNote is expanding into new markets, such as Europe and Asia, which is creating new growth opportunities.

However, FiscalNote also faces a number of challenges, including:

Competition from established players: FiscalNote faces competition from established players in the legal and regulatory information services market, such as Thomson Reuters and LexisNexis.

The need to constantly innovate: The AI landscape is constantly evolving, so FiscalNote needs to constantly innovate to stay ahead of the competition.

The need to attract and retain top talent: FiscalNote's success depends on its ability to attract and retain top talent in AI and other areas.

Conclusion

FiscalNote is a company with a bold vision: to create the world's most powerful AI lawyer. The company is making significant investments in AI and is seeing promising early results. However, FiscalNote faces a number of challenges, including competition from established players and the need to constantly innovate. If FiscalNote can successfully execute its strategy, it has the potential to become a billion-dollar company.

Fun Facts

"FiscalNote's AI agents are already being used by some of the world's largest companies and organizations."

"FiscalNote's AI technology is being used to help draft legislation and regulations."

"FiscalNote's AI technology is being used to help businesses comply with regulations."