ClearTax, a tax filing platform, on Wednesday announced raising $2 million (13.5 crores) in a pre-series A round from the angel arm of Silicon Valley-based Founders Fund and Sequoia Capital. The funds raised will be used for product development and hiring senior level executives.
According to Archit Gupta, Founder and CEO of ClearTax, this investment marks Founders Fund’s debut investment in India. Founders Fund is a San Francisco-based VC firm that is famous for its investments in companies like SpaceX, AirBnB, Facebook and Stripe amongst others. He says
Founders Fund has invested in transformational companies, in the past, looking at a deep technology base and serious ambition. The team at Founders Fund will be a great sounding board for us, allowing us to bounce off ideas for even the most basic problems. Their expertise in building big portfolio companies will help us further, giving the right perspective to our operations.
On the other hand, Archit believes that Sequoia Capital will lend an Indian context to the solutions owing to their expertise in the Asian markets.
Further talking about the funding, Archit says,
This funding bolsters the last round, giving us better runway to move faster in the market. More capital in the bank means swifter movements. It also helps us hire senior talent aggressively and launch newer products. We are very much inclined towards making a differentiated IP and want to lead the market with real innovation.
Last month, ClearTax announced their seed funding of $1.3 million, becoming the first Indian investment for PayPal Co-founder Max Levchin. Other big names included serial investors Scott and Cyan Banister, Dropbox Vice-President Ruchi Sanghvi, and WhatsApp’s Business Head Neeraj Arora.
Having a base of 10,000 chartered accountants while being used by one million tax payers, the firm also announced the launch of their Android mobile app this month. In the first week of the launch, the app received 18,000 downloads, with very few transactions taking place as of now. They don’t have an iOS app yet, since it will serve only four per cent of their total user base.
Being a seasonal business, ClearTax hopes to grow four times in terms of tax filing this year. The platform helps individuals as well as businesses with their tax and TDS filing. With the TDS filing date for this year being May 16, ClearTax saw a total of 5,300 SMEs filling their TDS. The company has seen an increase from 1,200 businesses since last year.
However, Archit is hopeful that the numbers will grow on the B2C side by July, when the tax filing season ends. The firm is targeting to serve three million users, while onboarding 6,000 newer businesses by the end of March 2017.
The firm is also looking to focus on tax savings this year, targeting young age millennial.
“Considering the same income bracket, we recognised that a 24-year-old doesn’t invest much in saving his/her taxes as compared to a 44-year-old, who has higher expenses. The gap we found was not ‘how to’ but rather ‘what to’, pertaining to the decision-making process for these young professionals. We want to help the young millennial make these decisions, while handling their complete investment end-to-end.”
Calling themselves financial instrument agnostic, the firm believes that they will do everything for customers under the regulatory framework, and not push or sell any particular mutual fund over the other.
Further, the savings part of the product is divided into three parts. First, giving the customer options about different avenues of tax savings under Section 80c. This includes insurances, PPF, EPF, tax saving FDs. Second, helping customers to take the right investment decision. Third, helping customers to complete the transaction on the platform.
The platform has already onboarded 15 mutual fund houses as of now.
By the end of 2017, the firm plans to help a million users to save their taxes managing over a billion dollar worth assets as investments. According to guidelines by SEBI, the commission per transaction would range anywhere between 0.7 to 0.9 per cent per transaction.
“Most businesses deal this as a service experience, but we want to approach it from a product side. This is because there are already multiple players selling mutual funds as a service. We don’t want to become agents since we have a strong reputation at risk.”
Being a niche segment, this sector needs immense domain expertise for disruption with ClearTax being strong about not leaving its niche. Tax savings seems the next obvious step for the firm, with the market still having immense potential for growth.
But while putting immense push on R&D and machine learning capabilities, its still yet to see whether ClearTax’s its new round of funding will help it to come out as a clear winner in this space.