Anish Parikh was running a startup studio, helping entrepreneurs get their ideas off of the ground, when a friend came to him, knee deep in a controversy about communications at his bank job.
The harmless message, Parikh said, set off compliance alarms and triggered an investigation that cost the company millions in legal fees.
“I wish I never would’ve written this damaging communication in the first place,” Parikh recalled his friend saying.
That comment got Parikh’s entrepreneurial spirit racing and he began developing a solution that could stop occurrences like this from ever happening again.
Then, in 2015, he launched Honcho.
“We prevent and detect damaging communications before they happen and retain the ones that happened after,” he said.
Honcho's software runs in the background, alerting users as they are typing if a word choice can be interpreted as inappropriate or risky. Honcho's dashboard also tracks and scores each alert for management, taking into account the full context of the communication occurring before and after the alert.
Even with his friend’s story guiding the business and a product that could help eliminate future issues, Parikh wondered about the fit and need for Honcho in the early days.
“When it first came to me, I didn’t come from compliance myself. I thought to myself, ‘do we as human beings need this?’” he said.
After speaking with compliance professionals from across industries, Parikh realized that as digital communications rapidly advance, compliance is being left behind.
“Technology has proliferated to where communications are created everywhere, anytime and on any device. For a lot of folks on legal and compliance teams, they’re really looking for help getting a handle on this. Each one of those communications represents a liability for the company,” he said.
Now, after years bootstrapping, Honcho closed a $4 million Series A round this week, led by FINTOP Capital and joined by Peter Thiel, co-founder of PayPal and Palantir Technologies.
The round will primarily be used to grow Honcho’s 10-person Colorado team, as Parikh said the company plans to double its staff in the next year. Honcho will bring on additional staff in engineering, product, marketing and sales and account management.
To date, Honcho’s primary customers have been in the energy and commodities space, and Parikh said the company is eyeing new market expansion, including in financial services, following this round.
“There’s a much broader audience for this and what we’re doing now is reshaping the product so that it is less compliance-y and surveillance-y and more helpful to each individual employee,” he said.
Honcho can identify potentially troublesome communications pertaining to market abuse and manipulation, insider trading, workplace harassment, breaches of confidentiality and more related to HR violations.
As more and more companies are forced to evaluate permanent remote strategies amid Covid-19, Parikh said Honcho is positioned well to help keep compliance.
“Strange times are still ahead,” he said. “But what we’re seeing, is some hypotheses that we had about the future of work years ago, are proving to be correct about how people work, the risks companies face and the way in which they’ll need to mitigate them.”
