Kintsugi Doubles Valuation Less Than 3 Months After Raising Series A

See the TechCrunch article here: https://techcrunch.com/2024/11/14/sales-tax-automation-startup-kintsugi-doubled-its-valuation-this-year/

By Rebecca Szkutak 6:17 AM PST · November 14, 2024

A 2018 Supreme Court ruling eliminated the requirement that an e-commerce retailer needed a physical location in a state in order for said state to be able to collect sales tax on purchases made by residents. While the decision was a boon for states, it created a headache for e-commerce sellers.

Kintsugi is looking to offload and automate calculating and filing sales tax for companies. The San Francisco-based company’s AI technology connects to a company’s billing and payment systems and figures out in which states they are liable to pay sales tax. It then registers users in the correct states. From there, the system can automatically calculate and remit what a company owes in sales tax to keep companies in compliance.

Kintsugi raised a $6 million Series A round earlier this year led by Link Ventures that valued it at a $40 million post valuation in April. The company has since reopened its Series A round, taken on additional $4 million in capital led by Airwallex, and has doubled its valuation to $80 million.

Pujun Bhatnagar, Kintsugi co-founder and CEO, said that he got interested in the sales tax space while working as a senior machine learning engineer at Meta in 2018. Bhatnagar told TechCrunch that both his father and grandfather worked in taxation their entire careers. Bhatnagar found himself in 2018 wondering what he wanted to do with his life. It just so happened to be around the same time as the Supreme Court ruling, which opened up a whole new market that was worth exploring, he said.

“It’s basically an amalgamation of 52 different types of little countries, which have their

own laws and jurisdictions when it comes to local governments,” Bhatnagar said. “And 48 of these jurisdictions have sales-tax-related laws.”

To really understand the problem, Bhatnagar said he started doing sales tax for e-commerce and SaaS companies by hand for a year and a half to really understand the pain points before writing any code. He made Kintsugi’s first few employees calculate sales tax by hand, too.

From there they built a platform and algorithm to modernize and automate sales tax compliance. Bhatnagar said that building the model in-house has made their results more accurate than competitors that rely on large, all-encompassing language models. He said that the company keeps humans in the loop to monitor for accuracy, too.

The company was formally founded in 2022 and launched its website in August 2023. Bhatnagar said inbound interest was immediate, and Kintsugi has been able to grow its customer base to more than 1,100 users in the past year. It has earned $1 million in revenue.

Kintsugi isn’t unique in wanting to modernize the sales tax process for companies. Competitors include Anrok, which has raised more than $50 million in venture money, and CereTax, which has raised $19 million in venture capital, in addition to numerous legacy companies that outsource the process to folks in countries like India. This is the same type of work that Bhatnagar’s family had worked on.

Bhatnagar thinks that part of the reason demand has been so high for Kintsugi is its approach to landing customers. The company allows potential customers to sign up for free and test out whether they like it. If they choose to proceed, they can pay $100 per tax filing or create a custom plan. Bhatnagar added that some of their competitors charge hefty fees just for onboarding to their platforms.

“We are the only company in the space that has a ‘get started’ button, that has a ‘we will do your sales tax analysis for free [button],’” Bhatnagar said. “And that’s not going to be just done once. You can create a free account, and every seven minutes the report is going to be updated for you. And that’s a value prop that we want to provide to founders for free, even if they decide to not pay a single dime for Kintsugi.”

Kintsugi plans to use its new capital to keep expanding its tech and to help the company gear up to expand into Canada and Europe.

“We are a bunch of nerds,” Bhatnagar said. “We are not trying to sell any snake oil. Connect your data, see the results.”