With $3.3M already in the pocket, ClearTax raises $12M in Series A funding within 2 months

On Thursday, tax filing platform ClearTax announced raising $12 million in Series A funding from SAIF Partners. The announcement comes just weeks after they raised a pre-Series A round of $2 million from Silicon Valley-based Founders Fund and Sequoia Capital.

According to Founder and CEO Archit Gupta, the funds have been raised to strengthen their plans for hiring a senior management team and developing newer products. He says,

The funds will bolster, accelerate, and seal our plans for the future, helping us take long term decisions while going back to our fundamental focus. Also, it felt right to raise funds from SAIF at this point of time. We are not a gross negative margin business, but it is always good to have capital securing you the extra mile. This eliminates the fear of running out of funds, and focus solely on building the business.

Since the last two months, the firm has raised over $15 million in funding from various investors, including PayPal Co-founder Max Levchin, serial investors Scott and Cyan Banister, Dropbox Vice-President Ruchi Sanghvi, WhatsApp’s Business Head Neeraj Arora, Founder’s Fund, and Sequoia Capital.

Deployment of funds

The firm plans to deploy the funds in three major fields -- rolling out new products, expansion of existing offerings, and hiring more talent for execution.

In terms of product roadmap, the platform has a B2C tax filing platform, ClearTax, for individuals. On the B2B side, it owns ClearTDS, for TDS returns, and TaxCloud for CAs and enterprises to file their tax returns.

Expanding their existing offerings, ClearTax is working on machine learning and deep learning technologies to add better predictability and decision making capabilities to their line of products. This will also be seen in their new line of product for tax savings, which will optimise and guide an individual to save taxes. The product is already being tested by a few hundred users on the platform and is all set to launch this July.

With the current funding, the firm also plans to launch two more B2C products and three more B2B products for businesses (in the next 15 months). Dropping a hint, Archit says that on the B2B side they look forward to launching their GST software along with an automated engine to help businesses manage their compliances seamlessly.

On hiring, the firm also plans to beef up its engineering team count to more than 100 members. With a team of 80 members as of now, Archit is hopeful that the total team strength will rise to 300 by the end of this year. Moreover, having six people in their senior management team, with top hires from Flipkart and InMobi, the firm has rolled out offers to hire five more members to its core leadership.

ClearTax is also looking to hire top talent from Silicon Valley to steer its machine and deep learning capabilities.

Too soon, too much?

But having closed their pre-series A round towards the end of May, what urged this founder to raise another big round of $12 million? Archit says that there is always uncertainty about raising the Series A round. He sees this as one of the possibilities for grabbing the investment. Further, more capital means an aggressive approach to market with resources to execute the plans further. Archit says,

You can’t see the complete execution of the product entirely if you burn out your capital in 12 months. To give you an example, if we are looking at launching four sub-products on a certain product, the additional funding helps us to work out the entire product, without stopping mid-way due to lack of funds. Therefore, our ability increases on focusing on larger outcomes.

Noting other fundamental differences, the founder also says that more capital helps them gun for Silicon Valley hires and immediately role out work for the desired plans. Hence, giving them the ability to bet higher.

The founder also notes that they are well funded for the next 24 months to bring forward the desired plans for the business.

Targeting on future growth, by fiscal year 2017-18, the firm aims to get five million individuals and entities to file their taxes on ClearTax. It also aims to help a million individuals save their taxes.

Working with 5,600 small and medium enterprises, the platform plans to take this number to 100,000 enterprises with guided advice from 80,000 experts and CAs on the platform. There are 10,000 experts on the platform.

As a part of the funding, Ravi Adusumalli, Managing Partner, SAIF Partners, will join the board of ClearTax. Being a part of the team, Ravi is expected to put discipline in place, while laying out the progress roadmap for the company.

For SAIF, it was their belief in the product which made them invest in the company, according to the investors.

The market

When there are talks of funding slowdown, a $12 million solely-led round seems like a big bet for an investor. But this funding also points to the fact that fintech is one of the hottest sectors for investments this year.

According to data from YourStory Research, companies like Traxcn have already announced funding twice in the first quarter of 2016.

Talking about market competition, ClearTax competes with players like Makeyourtax.com (50 per cent owned by Taxmantra). However, Makeyourtax still seems to be at a nascent stage, while ClearTax is trying to hoard more capital and become a market leader.

But this round has definitely given the much needed push to ClearTax to go and realise their plans for the next two years.