Tag: EC Fintech

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Steady’s Adam Roseman and investor Emmalyn Shaw outline what worked (and what was missing) in the Series A deck

When it comes to Steady, the platform that helps hourly workers manage their income, maximize their income, and access deals on things like benefits and financial services, the strengths of the business are clear. But it took time for founder and CEO Adam Roseman to clearly define and communicate each of them in his quest for fundraising.

To date, Steady has raised just under $30 million with investors that include Loeb.nyc, Recruit Strategic Partners, Propel Ventures and Flourish Ventures. In fact, Flourish’s Emmalyn Shaw sits on the board, having led the company’s Series A round in 2018.

As a partner at a $500 million fintech fund, her expertise in not only how fintech companies should think about fundraising but what it takes for them to be successful is invaluable. Lucky for us, we got the chance to sit down with both Steady CEO Adam Roseman and Emmalyn Shaw for a recent episode of Extra Crunch Live.

The duo were gracious enough to walk us through Steady’s Series A deck, explaining the importance of highlighting the strengths of the business. They went into detail on how Steady was successful in that during that fundraising process, and what the company could have done differently to be more effectively.

Shaw and Roseman also gave some fantastic advice for founders during the Pitch Deck Teardown, wherein speakers give their expert feedback on decks submitted by the audience. (If you’d like to have your pitch deck featured on an episode of Extra Crunch Live, hit up this link.)

Relationships first

Roseman shared that the best investors are ones that not only understand the business but understand you as a founder and a person. He explained that he and Shaw had plenty of time to get to know each other before the Series A deal.

“I’ve been a part of businesses in the past as an entrepreneur and on boards where it’s been the worst situation, especially when they don’t understand your business,” said Roseman. “Flourish took the time to understand it through and through and was entirely aligned. That makes for the best long-term partnership.”

While it’s a cliche, it remains true that investors often place bets based on a team and not an idea or a product. But what exactly makes a great team or founder? According to Shaw, it’s about vision and passion.

“In Adam’s case, he has a direction connection to what Steady is trying to do,” said Shaw. “That makes a huge difference in terms of commitment because you have ups and downs. They bring experience in terms of understanding the space, how to penetrate and scale and a deep understanding of fintech.”

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Our favorite companies from Y Combinator’s W21 Demo Day: Part 1

It’s that time again! Today is Demo Day for Y Combinator’s latest accelerator batch — its largest to date, with more than 300 teams getting a minute each to pitch their companies to an audience of investors.

This is the third time YC has held its Demo Day via a Zoom livestream and the second time the entire program was entirely virtual. YC president Geoff Ralston outlined their thinking for this latest batch — and how/why they’ve expanded the program to over 300 companies — in a post this morning.

Want to see all of the companies? YC has a catalog of the entire Winter 2021 batch here (minus those that haven’t publicly launched), filterable by industry and region.

If you don’t have time to skim through it all, we’ve aggregated some of the companies that really managed to catch our eye. This is part one of two, covering our favorites from the companies that launched in the first half of the day.

As Alex Wilhelm put it last time we did one of these, “we’re not investors, so we’re not pretending to sort the unicorns from the goats.” But we do spend a lot of time talking with startups, hearing pitches and telling their stories; if you’re curious about which companies stood out, read on.

Prospa

Prospa is building a neobank for small companies in Nigeria. The startup charges customers $7 per month and has reached $50,000 in monthly recurring revenue. That’s some pretty darn good traction. We found Prospa notable because Nigeria’s economy and population are rapidly growing, neobanks have succeeded in a number of markets thus far, and the company’s clear business model and early traction stood out.

And Prospa isn’t targeting a small market. It said during its presentation that there are 37 million so-called “microbusinesses” in its target country. That’s a lot of scale to grow into, and it’s really nice to hear from a neobank that isn’t going to merely pray that interchange revenues will eventually stack to the moon.

— Alex

Blushh

Image Credits: Blushh

Blushh, built by a team of ex-Google, Amazon, Harvard and BCG professionals, is creating a directory of short, sensual audio stories for women in Asia. The startup believes that there is a massive unmet need for adult content created for women, instead of men, signing up 100 paying subscribers within its first month on the market.

During their pitch, co-founder Soy Hwang said Blushh wants to do for sexual wellness what “Spotify and Audible did for music and audio books.” This startup stands out because it is taking on an untapped market ridden with stigma and lack of innovation. It’s a risk on several levels, and considering the fact that many venture capitalists today still have a “vice” clause that prevents them from investing in sex tech, it will be key to see how Blushh funds itself to keep growing.

— Natasha

BrioHR

TechCrunch caught up with BrioHR a few weeks ago when the startup announced that it had closed a $1.3 million round. During its presentation, the company announced that it had reached $13,000 in monthly recurring revenue (MRR), or $156,000 in annual recurring revenue (ARR).

The company is building human resources software for companies in Southeast Asia, a market it considers fraught with old software and outdated business processes. The company is doing two things. First, building software to help manage and pay workers. The latter part of its work requires lots of localization, so it’s rolling out more slowly than the rest of its software.

If Southeast Asia is as fertile ground for modern HR software as the United States has been shown to be, BrioHR could find more than enough room to grow. I’m excited to see how far the company can scale its ARR with the round that we recently covered.

— Alex

Charge Running

Strava walked so Charge Running could, well, run. The startup, founded by a former Navy SEAL, app connoisseur and kinesiology specialist, is an app that offers live virtual running classes. The consumer play is being framed by the team as a “Peloton for running” with motivation and social engagement during the run.

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Social+ payments: Why fintechs need social features

John S. Kim Contributor
John S. Kim is CEO of Sendbird, makers of a customizable chat and messaging API service for mobile and web applications.

Social+ companies are upping the stakes for everyone by giving consumers multiple benefits at once: products that serve a purpose but also meet our need for belonging to a community.

But what exactly is a social+ company? One for which social engagement is an inextricable component of the product. That is to say: If you removed the social element, the product would cease to make sense. You can find plenty of examples in gaming (Fortnite), fitness (Strava, Peloton), commerce (Pinduoduo), audio (Clubhouse) and more. As noted in Andreessen Horowitz’s recent series Social Strikes Back, “The best version of every consumer product is the one that’s intrinsically social.”

Social+ products are seeing mass adoption because they marry community with functionality.

The benefits of a social+ company

Social+ products are seeing mass adoption because they marry community with functionality. Users form meaningful connections — and engage in value-adding conversations — within the context of the goal they’re trying to achieve. Whether it’s shopping for a deal or growing their assets, social+ products help users gain new knowledge, find motivation, garner status, form friendships and generally feel like they’re part of something.

Companies that base their business model on social+ products enjoy a variety of benefits:

Growth

When the social aspect of a product is integral to its function, users will often drive growth on their own steam, inviting their friends and family to join the community.

Members of highly engaged communities are inspired and fired up by their interactions with other members, and when they’re fired up about something, they talk about it. Participating in these communities makes users feel like they’re part of something, which can have a powerful effect on your growth.

Retention

Relationships matter. The relationship your users have with your brand is ultimately what will determine whether they stick with you or leave you for a competitor offering the same service — particularly at a more attractive price. If you provide your customers with access to a community they relate to and resources that make their lives easier, they’re more likely to be loyal.

The beauty of social+ is that embedding social interaction within your product or app allows you to own that conversation and build a community around your brand. In the absence of built-in communities, these users are forced to turn to places like Reddit or WhatsApp to discuss, among other things, the relative advantages of competitors’ apps.

Harnessing the creativity of your users

User-generated content (UGC) is the lifeblood of any social+ product, driving user engagement and fostering connections among users. UGC means the company can harness the creativity and popularity of its users and doesn’t have to expend as many resources creating content users find valuable. Plus there’s the added bonus that authentic UGC — whether it’s a screenshot or a meme — lends the product far greater credibility than any marketing initiatives you could launch.

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No taxation without innovation: The rise of tax startups

Ashley Paston Contributor
Ashley Paston is an investor at Bain Capital Ventures, where she invests primarily in financial technology and services companies. 
More posts by this contributor

In New York City, if you order a toasted bagel with cream cheese at a deli, you have to pay sales tax. Ask for that same bagel unprepared? You won’t. In Illinois, candy is subject to sales tax, but candy with flour is considered a regular grocery item. Meaning: A Kit Kat is tax-free, but M&Ms will cost you extra. And in Colorado, your daily coffee cup is considered essential packaging, while the lid is not, making it subject to a nonessential packaging tax.

These examples may seem trivial, but they illustrate the idiosyncrasies of sales tax — a fee consumers pay on their purchases that must ultimately be reconciled with the appropriate jurisdictions. Though sales tax is arguably the most complex type of indirect tax, businesses must also contend with other indirect taxes such as use tax, property tax and value-added tax (VAT).

Given the market needs for tax compliance, it’s somewhat shocking how poorly companies are being served by the majority of legacy software companies.

Such taxes may be easy to understand conceptually, but their calculation is convoluted in practice — particularly for sales tax, which is governed by more than 11,000 unique jurisdictions in the U.S. alone. There is no reliable methodology businesses can use to calculate annual remittances based on previous years’ accounting formulas because local tax code changes as much as 25% every year.

For large corporations, sales tax compliance drives sky-high financial planning and analysis spending, and small businesses face an even worse predicament because they can neither afford outsourced tax preparation nor have the expertise to handle this filing. No matter a company’s size, failure to pay the correct amount of sales tax can result in severe penalties and even bankruptcy.

Now, a new legion of startups is emerging to help companies manage the intricacies of indirect taxes, including TaxJar, Taxdoo and Fonoa.

Why does this matter now?

Smaller businesses have, until fairly recently, managed to limp through tax season by selling goods and services locally, and thus operating within relatively consolidated tax jurisdictions. But e-commerce changed this in at least two profound ways.

The first is that even the smallest businesses have transformed from simple brick-and-mortar ventures to complex entities transacting in multiple places online, including via their own storefronts and websites, third-party vendors such as Amazon and Etsy, and wholesale channels. Previously, a small business may have calculated a single type of sales tax — traditionally for storefront enterprises. Now, they may have to calculate different taxes across an increasing number of channels and their resulting tax codes.

Second, e-commerce expanded companies’ geographic reach, allowing them to sell across state and country lines. Until recently, this was an unqualified advantage to small businesses, which benefited from outdated laws requiring most businesses to pay taxes only where they had established nexus, or physical presence. But the 2018 Supreme Court case of South Dakota v. Wayfair put an end to that, with the court ruling that businesses with digital revenue levels above a certain threshold must pay taxes in all states and municipalities in which they sell.

To a large extent, businesses have met the resulting increase in their tax obligations either sloppily or not at all. But the economic fallout from the pandemic is making such noncompliance far less tenable as state and local governments face fiscal shortfalls. With states traditionally relying on sales tax as a primary source of revenue (second only to federal receipts), local governments are beginning not only to enforce their tax codes more vigilantly but also to create new laws that broaden the scope of taxable goods and services.

Given that the financial losses of the pandemic are projected to extend for years, it is unlikely states will revert to their previously relaxed standards of enforcement. Instead, it is far more plausible that COVID-19 will prove an opportunity for states to find new ways to capitalize on sales taxes related to e-commerce.

Small and medium businesses need more options for tax compliance

Posted on

No taxation without innovation: The rise of tax startups

Ashley Paston Contributor
Ashley Paston is an investor at Bain Capital Ventures, where she invests primarily in financial technology and services companies. 
More posts by this contributor

In New York City, if you order a toasted bagel with cream cheese at a deli, you have to pay sales tax. Ask for that same bagel unprepared? You won’t. In Illinois, candy is subject to sales tax, but candy with flour is considered a regular grocery item. Meaning: A Kit Kat is tax-free, but M&Ms will cost you extra. And in Colorado, your daily coffee cup is considered essential packaging, while the lid is not, making it subject to a nonessential packaging tax.

These examples may seem trivial, but they illustrate the idiosyncrasies of sales tax — a fee consumers pay on their purchases that must ultimately be reconciled with the appropriate jurisdictions. Though sales tax is arguably the most complex type of indirect tax, businesses must also contend with other indirect taxes such as use tax, property tax and value-added tax (VAT).

Given the market needs for tax compliance, it’s somewhat shocking how poorly companies are being served by the majority of legacy software companies.

Such taxes may be easy to understand conceptually, but their calculation is convoluted in practice — particularly for sales tax, which is governed by more than 11,000 unique jurisdictions in the U.S. alone. There is no reliable methodology businesses can use to calculate annual remittances based on previous years’ accounting formulas because local tax code changes as much as 25% every year.

For large corporations, sales tax compliance drives sky-high financial planning and analysis spending, and small businesses face an even worse predicament because they can neither afford outsourced tax preparation nor have the expertise to handle this filing. No matter a company’s size, failure to pay the correct amount of sales tax can result in severe penalties and even bankruptcy.

Now, a new legion of startups is emerging to help companies manage the intricacies of indirect taxes, including TaxJar, Taxdoo and Fonoa.

Why does this matter now?

Smaller businesses have, until fairly recently, managed to limp through tax season by selling goods and services locally, and thus operating within relatively consolidated tax jurisdictions. But e-commerce changed this in at least two profound ways.

The first is that even the smallest businesses have transformed from simple brick-and-mortar ventures to complex entities transacting in multiple places online, including via their own storefronts and websites, third-party vendors such as Amazon and Etsy, and wholesale channels. Previously, a small business may have calculated a single type of sales tax — traditionally for storefront enterprises. Now, they may have to calculate different taxes across an increasing number of channels and their resulting tax codes.

Second, e-commerce expanded companies’ geographic reach, allowing them to sell across state and country lines. Until recently, this was an unqualified advantage to small businesses, which benefited from outdated laws requiring most businesses to pay taxes only where they had established nexus, or physical presence. But the 2018 Supreme Court case of South Dakota v. Wayfair put an end to that, with the court ruling that businesses with digital revenue levels above a certain threshold must pay taxes in all states and municipalities in which they sell.

To a large extent, businesses have met the resulting increase in their tax obligations either sloppily or not at all. But the economic fallout from the pandemic is making such noncompliance far less tenable as state and local governments face fiscal shortfalls. With states traditionally relying on sales tax as a primary source of revenue (second only to federal receipts), local governments are beginning not only to enforce their tax codes more vigilantly but also to create new laws that broaden the scope of taxable goods and services.

Given that the financial losses of the pandemic are projected to extend for years, it is unlikely states will revert to their previously relaxed standards of enforcement. Instead, it is far more plausible that COVID-19 will prove an opportunity for states to find new ways to capitalize on sales taxes related to e-commerce.

Small and medium businesses need more options for tax compliance