Apr
07
2021
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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.”

Dec
10
2020
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Boast.ai raises $23M to help businesses get their R&D tax credits

Nobody likes dealing with taxes — until the system works in your favor. In many countries, startups can receive tax credits for their R&D work and related employee cost, but as with all things bureaucracy, that’s often a slow and onerous task. Boast.ai aims to make this process far easier, by using a mix of AI and tax experts. The company, which currently has about 1,000 customers, today announced that it has raised a $23 million Series A round led by Radian Capital.

Launched in 2012 by co-founders Alex Popa (CEO) and Lloyed Lobo (president), Boast focuses on helping companies — and especially startups — in the U.S. and Canada claim their R&D tax credits.

“Globally, over $200 billion has been given in R&D incentives to fund businesses, not only in the U.S. and Canada, but the U.K., Australia, France, New Zealand, Ireland give out these incentives,” Lobo explained. “But there’s huge red tape. It’s a cumbersome process. You got to dive in and figure out work that qualifies and what doesn’t. Then you’ve got to file it with your taxes. Then if the government audits you, it’s like a long, laborious process.”

Image Credits: Boast.ai

After working on a few other startup ideas, the co-founders decided to go all-in on Boast. And in the process of working on other ideas, they also realized that AI wasn’t going to be able to do it all, but that it was getting good enough to augment humans to make a complex process like dealing with R&D tax credits scalable.

“The way I think to bootstrap a company is three things,” Lobo explained. “One, customers are looking for an outcome. Get them that outcome in the fastest, cheapest way possible. Two, when you’re doing that, you may have to do a lot of manual work. Figure out what those manual touch points are and then build the workflow to automate that. And once you have those two things, then you’ll have enough data to start working on artificial intelligence and machine learning. Those are the key learnings that we learned the hard way.”

So after doing some of that manual work, Boast can now automatically pull in data using tech tools like JIRA and GitHub and a company’s financial tools like QuickBooks, Gusto and (soon) ADP. It then uses its algorithms to cluster this data, figure out how much time employees spend on projects that would qualify for a tax credit and automate the tax filing process. Throughout the process — and to interact with the government if necessary — the company keeps humans in the loop.

“So all our [customer success] team is engineers,” Lobo noted. “Because if you don’t have engineers they can’t inform the decision-making process. They help figure out if there are any loose ends and then they deal with the audits, communicating with the government and whatnot. That’s how we’re able to effectively get SaaS-like margins or more.”

Ideally, a tool like Boast pays for itself and the company says it has secured more than $150 million in R&D tax credits since launch. Currently, it’s also doubling growth year over year, and that’s what made the founders decide to raise outside money for the first time. That funding will go toward increasing the sales team (which is currently only four people strong) and improving the platform, but Lobo was clear that he doesn’t want to be too aggressive. The goal, he said, is not to have to raise again until Boast can hit the $30 to $50 million revenue mark.

Once fully implemented, Boast also effectively becomes a system of record for all R&D and engineering data. And indeed, that’s the company’s overall vision, with the tax credits being somewhat of a Trojan horse to get to this point. By the middle of next year, the team plans to offer a new product around R&D-based financing, Lobo tells me.

Over the years, the Boast team also focused on not just growing its customer base but also the overall startup ecosystem in the markets in which it operates, with a special focus on Canada. The Boast team, for example, is also the team behind the popular annual Traction conference in Vancouver, Canada (Disclosure: I’ve moderated sessions at the event since its inception). A thriving startup ecosystem creates a larger client base for Boast, too, after all — and coincidently, the team met its investors at the event, too.

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