accounting
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Pry Financials raises $4.2M to make startup accounting more approachable
Pry Financials wants to make startup finances approachable for its entire team, not just the people in charge of its accounting spreadsheets. The Y Combinator alum announced today it has raised $4.2 million from Global Founders Capital, Pioneer Fund, NOMO VC, Liquid2 and Hyphen Capital.
Launched in March, Pry now has more than 200 customers and claims it has grown 35% month-over-month since YC’s Demo Day. It was founded by Alex Sailer, Tiffany Wong, Hayden Jensen and Andy Su.
Before starting Pry, Su was co-founder of InDinero, another YC alum that started as a “Mint for small businesses” before pivoting to a full-service accounting company. InDinero launched while he was still a student at UC Berkeley, and Su eventually became responsible for its financial planning.
Pry Financials’ team. Image Credits: Pry Financials
He told TechCrunch that most startups can’t afford accounting software like Workday Adaptive Planning. Instead, they sometimes work with outsourced CFO services, but mostly rely on spreadsheets for everything: three-way forecasts, predicting runway, hiring and contractor budgets and investor updates.
“I was the chief technical officer and over the years, I also took on the finance function, so it was kind of a dual CTO/CFO role. This was 2010 through 2020 and as technology grew, the engineering and product teams got all sorts of new tools every six months or so, whereas the finance team was just stuck in Excel,” he said.
Started as a side project while Su was still at InDinero, Pry starts at just $50 a month and replaces those spreadsheets with easy-to-understand dashboards for accounting, financial planning and scenario modeling. The dashboards connect to QuickBooks, Xero or bank accounts, so numbers are continuously updated.
Pry’s clients typically start using it after they raise seed funding, because “for most first-time founders, that’s the most amount of money you have ever received, so you need to spend more time managing it and reviewing it every month. And you’re spending a lot of time on payroll each month,” Su said. Second-time founders, meanwhile, sign up for Pry because they are sick of Excel spreadsheets.
“Reviewing a spreadsheet is mind-numbingly hard,” said Su. “If you see a number that’s off, you get this weird formula if you didn’t do it yourself. Then you basically have to write a long email to the financial analyst who wrote it and hope that they get back to you before closing time.” For founders who need to update lenders or investors every month, this means a lot of work.
Pry makes the process more efficient by turning three-way reports — combinations of balance sheets, profit and loss statements and cashflow — into Financial Report dashboards, and then adding features like hiring plans, financial modeling and scenario planning.
The scenario planning feature serves as a sandbox, giving startup teams and their investors a way to predict how different situations will impact finances: for example, how much runway they have if they raise a certain amount of funding or adjust product pricing.
Fundraising dashboards created with Pry Financials. Image credits: Pry Financials
“We’re improving upon and trying to make decisions about the company in a collaborative way. The analogy we have is Git branching, where you have your main plan, and want to try something like a new revenue model or acquiring a business, but don’t want to mess with your current strategy,” said Su. “What you can do is create a completely new branch with, say, a new pricing strategy. You can make all the changes you want and then switch back to your old branch without worrying about overriding or conflicting with it.”
Those speculative branches are also continuously updated with the company’s most recent bank account and payroll information, so founders don’t need to recreate them from scratch if they want to revisit a potential scenario later.
Pry plans to build more complex predictive tools and also integrate industry standards, like statistic and benchmarks, into templates to help founders understand what targets they should set.
Because Pry is easier to manage than a set of Excel spreadsheets, Su said it’s helped startups spot important things. For example, one founder was able to find a way to save $15,000 by catching a tax issue. Pry also helps everyone at a startup understand its finances’ even if they haven’t worked with accounting spreadsheets before. The platform will add roles and permissions soon, so founders can give or restrict access to different people, like leaders of specific departments.
Su said Pry does not compete with the accounting services many startups rely on until they can hire a head of finance, but makes it easier for startups to collaborate with them since they can share their dashboards.
“Usually early on, you can outsource to a CFO firm. That’s the norm in the business and it works pretty well for most companies. You get a part-time CFO to work really hard for a month and get your fundraising structure done,” said Su, adding “we fit into that ecosystem well.”
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Blue dot raises $32M for AI that helps businesses manage their tax accounting
Artificial intelligence has become a fundamental cornerstone of how a lot of business software works, providing a useful boost in reading, understanding and using the often-fragmented trove of data that organizations generate these days. In the latest development, an Israeli startup called Blue dot, which uses AI to help companies handle their tax accounting, is announcing $32 million in funding to continue its growth, specifically addressing the demand from companies for more user-friendly tools to help read and correctly itemize expenses for tax purposes.
“The tax sector is very complicated, and we are playing in a very large space, but it’s a huge revolution,” Blue dot’s CEO and co-founder Isaac Saft said in an interview. “Business and enterprise accounting is just not going to look the same in the future as it does today.”
The funding is being led by Ibex Investors in partnership with Lutetia Technology Partners, with past investors La Maison Partners, Viola and Target Global also contributing. Blue dot rebranded only last week from its original name, VATBox (part of the funding will be used to help Blue dot move deeper into the U.S. market, where the concept of VAT is not quite so ubiquitous: there is no national sales tax and states determine the rates themselves).
PitchBook notes that under its previous name, the startup last raised money in 2017, a $20 million Series B led by Viola at a $120 million post-money valuation.
While Blue dot is not disclosing valuation today, it’s likely to be significantly higher than this based on some of its engagements. In addition to customers like Amazon, tobacco giant BAT and Dell, it also has a partnership with one of the bigger names in expense accounting, SAP Concur, which uses Blue dot to power its expense data entry tool to automatically read charges and figure out how to itemize them so that employees or accountants don’t need to go through the pain of that themselves.
As Saft describes it, part of what is propelling his company’s business is the bigger trend of consumerization and the role that it has played in enterprise services: the working world has picked up a lot of technology tools, led by the smartphone, to help them organize their personal lives, and a lot of what they are being “served” through technology is increasingly personalized with lower barriers of entry, whether its on e-commerce sites, entertainment or social media. In the working world, people can often be frustrated as a result with how much work something like expenses can involve — a process that gets ever more complicated the more strict tax regimes become.
Blue dot’s approach is to essentially view the tax accounting process as something that can be improved with AI to make it easier for people to use — whether those people are workers itemizing their expenses, or accountants auditing them and running those through even bigger accounting processes. With a machine learning system that both takes into account a company’s own internal compliance and company policies, and the wider tax and regulatory framework, Blue dot helps “read” an expense and figure out how to notate it, how much tax should be accounted and where, and so on.
This is especially important as the process of entering and managing expenses gets pushed out to the people spending the money, rather than dedicated accountants handling that work on their behalf. An awareness of how modern offices are functioning today and evolving is one reason why investors were interested here.
“We believe Blue dot can change the way organizations worldwide manage accounting and its tax implications for their expenses,” Gal Gitter, a partner at Ibex, said in a statement. “There’s been a major market shift away from centralization of enterprise functions, including procurement. As that accelerates, more companies will be looking for ways to replace costly and complex manual processes with digital, automated solutions that use data and AI to essentially enable transactions to report themselves, which Blue dot delivers.”
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R&D tax credits are due July 15. Neo.tax wants to help startups apply and raised $3M to do it
All founders love “free” money, but with the pandemic going on, the necessity of free money has taken on a whole new meaning this year. First, there was the scramble to secure PPP loans a few weeks back for U.S.-based startups, and then the second wave of PPP loans when Congress offered a second tranche of funding. Two weeks ago, I covered a company called MainStreet, which is helping startups apply for local economic development credits that cities offer to businesses relocating to their regions.
In the same vein, neo.tax wants to help startups secure R&D research credits from the federal government — which tend to be fairly easy to acquire for most software-based startups given the current IRS rules for what qualifies as “research.”
The free money is good, but what sets this startup apart is its ambitious vision to bring machine learning to company accounting — making it easier to track expenses and ultimately save on costs.
It’s a vision that has attracted top seed investors to the startup. Neo.tax announced today that it raised $3 million in seed funding from Andy McLoughlin at Uncork Capital and Mike Maples at Floodgate, with Michael Ma at Liquid 2 Ventures and Deena Shakir at Lux Capital participating. The round closed last week.
Neo.tax was founded by Firas Abuzaid, who spent the past few years focused on a Ph.D in computer science from Stanford, where he conducted research in machine learning. He’s joined by Ahmad Ibrahim, who most recently was at Intuit launching small business accounting products; and Stephen Yarbrough, who was head of tax at Kruze Consulting, a popular consultancy for startups on accounting and financial issues. Leonardo De La Rocha, who was creative director of Facebook Ads for nearly five years and currently works at Intuit, is an official advisor to the company.
Neo.tax’s co-founders Stephen Yarbrough, Firas Abuzaid and Ahmad Ibrahim. Image Credits: Neo.tax
Or in short, a perfect quad of folks to tackle small business accounting issues.
Neo.tax wants to automate everything about accounting, and that requires careful application of ML techniques to an absolutely byzantine problem. Abuzaid explained that AI is in some ways a perfect fit for these challenges. “There’s a very clearly defined data model, there’s a large set of constraints that are also clearly defined. There’s an obvious objective function, and there’s a finite search space,” he said. “But if you wanted to develop a machine-learning-based solution to automate this, you have to make sure you collect the right data, and you have to make sure that you can handle all of the numerous edge cases that are going to pop up in the 80,000 page U.S. tax code.“
That’s where neo.tax’s approach comes in. The software product is designed to ingest data about accounting, payroll and other financial functions within an organization and starts to categorize and pattern match transactions in a bid to take out much of the drudgery of modern-day accounting.
One insight is that rather than creating a single model for all small businesses, neo.tax tries to match similar businesses with each other, specializing its AI system to the particular client using it. “For example, let’s train a model that can target early-stage startups and then another model that can target Shopify businesses, another one that can target restaurants using Clover, or pizzerias or nail salons, or ice cream parlors,” Abuzaid said. “The idea here is that you can specialize to a particular domain and train a cascade of models that handle these different, individual subdomains that makes it a much more scalable solution.”
While neo.tax has a big vision long term to make accounting effortless, it wanted to find a beachhead that would allow it to work with small businesses and start to solve their problems for them. The team eventually settled on the R&D tax credit.
“That data from the R&D credit basically gives us the beginnings of the training data for building tax automation,” Ibrahim explained. “Automating tax vertical-by-vertical basically allows us to be this data layer for small businesses, and you can build lots of really great products and services on top of that data layer.“
So it’s a big long-term vision, with a focused upfront product to get there that launched about two months ago.
For startups that make less than $5 million in revenue (i.e., all early-stage startups), the R&D tax credit offers up to a quarter million dollars per year in refunds from the government for startups who either apply by July 15 (the new tax date this year due to the novel coronavirus) or who apply for an extension.
Neo.tax will take a 5% cut of the tax value generated from its product, which it will only take when the refund is actually received from the government. In this way, the team believes that it is better incentive-aligned with founders and business owners than traditional accounting firms, which charge professional services fees up front and often take a higher percentage of the rebate.
Ibrahim said that the company made about $100,000 in revenue in its first month after launch.
The startup is entering what has become a quickly crowded field led by the likes of Pilot, which has raised tens of millions of dollars from prominent investors to use a human and AI hybrid approach to bookkeeping. Pilot was last valued at $355 million when it announced its round in April 2019, although it has almost certainly raised more funding in the interim.
Ultimately, neo.tax is betting that a deeper technical infrastructure and a hyperfocus on artificial intelligence will allow it to catch up and compete with both Pilot and incumbent accounting firms, given the speed and ease of accounting and tax preparation when everything is automated.
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Silverfin wants to modernize accounting software with its cloud service
Meet Silverfin, a startup focused on accounting software. This isn’t about helping small startups handle accounting tasks themselves. Silverfin wants to build the cloud service for small and big accounting firms — Salesforce, but for accounting.
The startup just raised a Series B funding round led by Hg — Index Ventures led the previous Series A round. While terms of the deal are undisclosed, a source told me the round is worth approximately $30 million.
In order to improve productivity, Silverfin tries to automate the most time-consuming aspect of accounting — data collection. The company helps you connect with your clients’ accounting software directly to import their data, such as Xero, QuickBooks, Sage and SAP.
After that, Silverfin standardizes your data set and lets you add data manually so the platform can become the main data repository.
Once your data is in the system, you need to process it. Silverfin lets you configure automated workflows and templates so that anybody in the accounting firm can enrich data and check for compliance issues. Like Salesforce and other software-as-a-service products, multiple people can communicate on the service and look at all past edits and changes.
You can then visualize financial data, generate reports and statements. It opens up new possibilities for accounting firms. They can charge advisory services thanks to analytics tools and an alert system.
The startup was founded in Ghent, Belgium, but it has now expanded to London, Amsterdam and Copenhagen. Silverfin has attracted 650 customers, including big accounting firms in Europe and North America.
By targeting the most demanding customers first, Silverfin doesn’t need to replace Xero or QuickBooks altogether. It can integrate with those existing software solutions first. There’s an opportunity to go downmarket later and convince smaller companies that don’t necessarily have a big accounting team.
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ZenBusiness raises $15M to help founders launch and grow ‘worry-free’
There are two sides to starting a new business. On one side, entrepreneurs need creativity, imagination — a dream, essentially — to find, build, and market a new product to users and consumers. But on the other side, they have to deal with the regulatory state and all the minutia that comes with running any business in the 21st century.
That includes such delightful topics as choosing a particular model for incorporation, ensuring that a business has the right licenses to operate, and tracking all the legal changes happening in 50 state legislatures every year. It can be inordinately complicated (and expensive!) to ensure that your business is ready and legal.
That’s where ZenBusiness comes in. The Austin-based startup wants to empower entrepreneurs to build businesses large and small by dramatically simplifying the processes required to launch a business and then grow it.
When I last chatted with the company 18 months ago, they had just raised a $4.5 million seed round and had launched its platform. Today, it’s announcing that it has raised a new $15 million series A round led by return backer Greycroft, along with returning investors Lerer Hippeau and Revolution’s Rise of the Rest fund, alongside new investors Rosecliff Venture Partners, Interlock Partners and Recruit Strategic Partners.
The company launched with a product that was essentially an automated registered agent for new entrepreneurs. Under state incorporation laws, companies must designate a so-called “registered agent” to receive official notices from regulatory agencies, and so ZenBusiness chose this strategic point for entry into the market.
When I last chatted with CEO Russ Buhrdorf, he described rolling up this market as one of the key initial targets for the company:
ZenBusiness is the brainchild of Ross Buhrdorf, who joined vacation rental marketplace HomeAway five months after its inception as founding CTO, and stayed for a decade until its acquisition by Expedia in 2015 for $3.9 billion. Buhrdorf intended to take a year off, but “didn’t quite make it a year” he told me.
He explained to me that HomeAway in many ways followed a rollup playbook, “raising $400 million and acquired 26 companies.” Bringing that rollup lens while exploring new spaces, he ran into the corporate legal services market, which offers help to companies to keep them in compliance with the law. Buhrdorf liked what he saw. “It’s different in all 50 states, highly-regulated, which is great for technology, it is overpriced, and they underserve their customers.” He says the space is “completely ripe for disruption.”
Since that time, the company has expanded its product to help entrepreneurs get beyond merely incorporating to actually building out their business by recommending services like banking, lending, tax preparation, website building, and more. The hope is to provide a “worry-free” guarantee to entrepreneurs so that they can get those early critical logistics out of the way and back to actually operating and growing their business.
“Small businesses come through this funnel, they don’t necessarily know exactly what to do. So we curate that solution, and then we provide them with the basics for them to get up and running and to be successful,” Buhrdorf said.
He explained that the company has built out some tools itself such as a simple webpage creator, but in the long run, he hopes to partner with other providers who integrate into the ZenBusiness platform. For instance, ZenBusiness has partnered with Xero as the company’s main accounting provider, while also backstopping that offering with accountants working at ZenBusiness. The idea is that the automated tooling plus a little human touch can help most owners handle the day-to-day challenges of running a business.
The ZenBusiness team in 2018. Photo via ZenBusiness.
Buhrdorf is particularly focused on keeping the product very self-service and automated to allow it to focus on these smaller customers. “Many of the companies that you cover that are in the enterprise space, who provide solutions for medium-sized businesses, they have to charge, they have to have sales forces, it’s very competitive there,” Buhrdorf said. “What we’re after is the segment that’s underserved, it’s the long tail of the small business segment.”
ZenBusiness has expanded its services, and it is hoping to use the fresh infusion of capital to invest in building out community features that will allow small business owners to swap tips with each other and help one another grow their businesses (presumably with some guidance from ZenBusiness community managers and experts).
The company is now 40 employees predominantly in Austin with a small office in Peru. Since we last checked in, the company has transitioned to become a public benefit corporation, which Buhrdorf said was an attempt to better align the company’s charter with its mission orientation to help small business entrepreneurs.
Update: The funding total was changed from $10m to $15m. Sorry about that.
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Zuora to acquire Leeyo to help customers cope with upcoming accounting rules changes
Zuora, the company that helps customers deal with subscription billing, and counts cloud companies like Box, Okta and DocuSign as customers, announced its intent to acquire Leeyo Software, Inc., a privately funded, boot-strapped startup that helps automate revenue recognition. The company did not reveal a purchase price. Leeyo is not just any revenue recognition company, though, because it… Read More
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To expand, the company is increasing the size of its sales force and building out its app so that it can be used for internal corporate audits, in the hopes that it can become a killer app for finance teams at Fortune 500 companies.