From ClearTax to Clear: how the Indian fintech startup ecosystem’s vanguard is slowly becoming a full-stack financial company

Before the Paytms and Zerodhas of India steered conversations around financial technology and rewrote the future of finance in India, there was ClearTax. An iconic startup in its own right, veterans in the industry today say ClearTax, when it was founded, served as a lighthouse in the uncharted waters of financial tech.

It all started with Archit Gupta, an IIT Guwahati alumnus, who, after completing his master’s in computer science from the University of Wisconsin-Madison, went on to work at Data Domain Inc, an IT company based in Silicon Valley. His experience and learnings there, compounded by the company’s massive $2.1 billion acquisition by EMC, bolstered his conviction to set up his own startup.

Once back, he teamed up with his father, Raja Ram Gupta, a chartered accountant, and founded ClearTax in

2011.

The startup’s mission was quaint and simple — making it easy for Indians to file their taxes, every year.

“Taxes is an unglamorous business, which we like a lot as finance and tech geeks,” Archit had told YourStory. The way he saw ClearTax embody that was by using simple and intuitive design and providing a seamless interface for users. All users had to do was upload their Form 16, and a few clicks later, the year’s most tedious task would be done.

At the time it was founded, ClearTax’s main competitor was the Income Tax department’s excel and Java-based software. People’s frustration with its clunky interface was evident when, within 10 days of its public launch, the startup’s portal saw a thousand people rush to file their taxes.

From 2011, to now — over a decade later, in 2021 — ClearTax’s growth journey is a saga of intelligent product launches, pivots, and some hits and misses. But most importantly, it’s a story of an iconic startup brand that refused to hang up its boots as the industry evolved.

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Beyond individual tax filing

ClearTax held its own in the B2C space for a long time. Its software, which extracted information from people’s Form 16 and auto-populated fields, was its flagship product — but it quickly built an ecosystem around it.

Shortly after the startup proved market traction for its tax-filing product, it realised it could do a lot more for people who had complicated tax filings, or needed the help of an expert. It started offering assisted services on the platform, where CAs and tax experts could enrol. It essentially became like a marketplace platform for CAs and tax experts.

Next, it targeted businesses, especially SMEs, which run on tight operational budgets and find it hard to shell out tens of thousands of rupees for CAs to file tax returns.

Both these eventually evolved to a web and mobile platform that helps CAs and tax experts connect with people who need expert services for either filing their individual income tax returns, or for their business.

The proprietary technology ClearTax used to power its software for CAs and tax experts helped them not only check the filing status of their clients, anytime, anywhere, but also comes with a host of useful, intuitive and - more importantly - automated features such as selection of the correct ITR form, eliminating any mismatches, and importing TDS/TCS/self-paid tax entries directly from various tax forms, thereby eliminating any manual data entry, among others.

The startup has over one lakh professional tax practitioners on its platform, including CAs, currently, up from merely 10,000 up until a few years ago.

In 2016 though, things changed following demonetisation and after the government outlined its plan to digitise every single business in India.

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Keeping up with the changing times

The holy trinity of demonetisation, the launch of Jio, and ratification of the GST bill brought, single-handedly, more than a million Indians online. All three events, in succession, helped Indians become more comfortable with online finance, but, at the same time, sent businesses scrambling to understand the new goods and service tax laws.

That spurred ClearTax — and companies like it — into action, and the Bengaluru-headquartered company made a bid to get deeper into the business services space. Corporates, at the time, looked down their noses at the startup, wondering if it could make a dent in a space led by global conglomerates, the likes of EY or Deloitte.

But ClearTax proved its mettle by sticking to its guns and its mission to simplify and demystify the Indian tax system. It pumped most of the money it had raised from investors at the time, into its GST filing division — and its manoeuvre was successful.

Nearly 2,000 iconic Indian brands use ClearTax to file their business taxes today.

Bolstered by its success in the domain, the startup went on to launch a suite of business finance products to help ventures of all sizes process e-invoices and e-Waybills for compliance management, and tax saving.

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Subsequently, in line with what was happening in the small business space vis-a-vis digital business management tools, the startup launched applications companies could use to begin their digital transformations — right from raising invoices, accepting online payments, and applying for credit lines, to transacting with their supply chain partners, accountants, and employees.

For a brand that has singlehandedly revolutionised the way millions of Indians file their taxes today, ClearTax, in recent times, has been trying to shrug off the wide-set perception in the industry, and the consumers’ minds, that it only processes (or helps individuals and businesses process) taxes — so much so that in June this year, it rebranded to ‘Clear’.

A clear signal that the startup is going beyond just taxes, the move has been pivotal for the company, and one that fits in with its overall effort to demystify the world of taxes for Indians.

In July this year, Clear, the freshly unveiled brand, operating from an even more fresh point of view, pushed deeper into the B2B payments and credit space by way of acquisition of yBANQ.

Y Combinator-backed yBANQ helps businesses with payments collection, reconciliation, and automated bookkeeping — and its addition to Clear’s offering has been a way for it to gain a leg-up in the world of business finance.

“We envision building India’s largest B2B business network that connects our customers with their business partners, on a single platform. Through this network, we hope to solve for use cases across procurement, invoicing, payments, and collections,” Archit tells YourStory.

“Ultimately, we want to continue to offer great products nurturing accuracy, security, and reliability — thereby easing people’s and business’ financial lives,” he adds.

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Clear, as it stands today, processes about 10 percent of India’s B2B invoices, with over $300 billion trade value, every year. It also contributes to 10 percent of India’s e-invoice generation.

Focus on personal finance

Following in the footsteps of startups such as Zerodha and Upstox, which democratised the investment space in India, Clear has been sharpening its focus on personal finance too.

Its first offering in the space — Black — is a mutual fund investment platform that simplifies not just tax filing, but also investments for individuals. The app aims to enable users maximise their tax savings by helping them invest in direct mutual funds that give higher returns, as well as attractive tax savings — all on one single platform.

“For people who are new to investing, Black helps you get deep insights on each mutual fund to help you select the right fund to invest. With Black, we are obsessed about simplifying even the practical aspects of money management for the masses,” Archit says.

“If you need assistance to select investment options, or plan financial goals, Black lets you invest in ready-made, expert-curated investment plans," he adds.

The company has signed up over 30 mutual funds already, and plans to add other investment instruments such as stocks, fixed deposits, PPF, cryptocurrency and national pension schemes soon.

Personal credit, by virtue of innovative products such as ⅓ cards, and BNPL offerings, is seeing much traction these days —  and could be a useful hat for Clear to toss its ring in, especially considering the startup is already making a play for SME lending. But for now, the startup says it is focused on expanding and growing its new plays in B2B payments and personal finance.

The startup says it will look at the IPO route in about three years. It posted revenue of Rs 60 crore in FY20, up 163 percent over the previous year, with the number of individuals on its platform jumping five folds to 40 lakh, from 8 lakh.

Archit has said he expects Clear’s growth to moderate marginally in FY21, but is still on track to post a 75 percent growth over the previous corresponding period.

The startup has raised $65 million from investors including Y Combinator, PayPal co-founder Peter Thiel’s Founders Fund, Composite Capital Management, Sequoia Capital and SAIF Partners, since its inception.

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