ScaleFactor,
the accounting fintech serving the small and medium-sized business
market, raised $60 million in venture funding, in its third fundraising
round in about a year.
To date Austin, Texas-based
ScaleFactor has raised $100 million, completing a $10 million Series A
round in July of 2018 and a $30 million Series B round in January.
Coatue Management, an early investor
in Square and Shopify, led the Series C round, which also included
existing investors Bessemer Venture Partners, Canaan, and Broadhaven
Ventures. New investors Vulcan, Stripes Group and NextPlay Capital also
participated.
ScaleFactor makes online financial
software that enables small and medium-sized businesses to automate
back-office tasks including bookkeeping and payroll. Business customers
pay a flat fee to access the digital tools and services with packages
starting at around $6,000 and reaching as high as about $30,000 a
year.
Aiming to level the playing field,
ScaleFactor and it’s backers say it's giving small and medium-sized
businesses digital tools and insight typically reserved for large
enterprises.
“Why is it SMBs can’t have on-demand
bookkeeping services just like larger corporations without having a team
of 50 finance people and access to the best accounting services,” said
Thomas Laffont, senior managing director at Coatue Management. “If you
think of platforms like Shopify and Square, their taking individuals or
small merchants and giving them the capabilities to do what was
previously only for large companies. That’s a huge trend we believe
ScaleFactor plays in.”
As part of the investment, Coatue gets
a seat on the board, giving ScaleFactor access to a hedge fund that
invested in Uber, Lending Club, Reddit, and Lyft in addition to Square
and Shopify. “The proliferation of
data is making platforms like ScaleFactor increasingly useful,” for
small and medium-sized businesses that are looking for actionable
insight in real-time, said Laffont.
ScaleFactor founder and chief
executive Kurt Rathmann started the company from his living room after
working as the CFO for a small business. Trained at KPMG, Rathmann was
frustrated by the small business constraints he faced when it came to
managing accounting and financing. Obsessing about how to meld the two
became his pastime, leading him to form the company in 2014.
Six years
later ScaleFactor has more than 1,000 customers and big names in tech
investing as backers.
The company offers an easy to use
digital platform that houses all of the business’ financial data. That
gives business owners a complete view of their finances in real-time.
With a News Feed like scrolling feature on the app, customers can decide
in real-time to make business actions whether that's to pay an invoice
or initiate payroll. Its digital chatbot Marge is also on hand to
answer questions on the go. “You can be on the run and really need the
EIN number. Marge can text it back in three or four seconds,” said
Rathmann, noting ScaleFactor products are all focused on saving small
businesses time and helping them grow.
“In working with thousands of
companies over the years, we’ve learned small business owners care about
two factors above everything else: saving time and scaling their
businesses.”
While ScaleFactor has its roots in
accounting and financial management software, its expanding its
services, which is where most of the proceeds from the fundraising will
go. Rathmann said the business is evolving into a relationship one in
which customers are coming to ScaleFactor for advice on other aspects of
the business such as insurance. To capitalize on the deepening
relationship between ScaleFactor and its customers, he said the company
is developing a lending product that will be available in the fourth
quarter.
The accounting platform provider is
part of a growing list of fintechs that are going after the small and
medium-sized business market. Ignored by the big banks for years,
fintechs correctly bet small and medium-sized businesses were in need of
digital services. Venture capitalists are fawning over these fintechs,
throwing hundreds of millions of dollars their way. Some already
command billion-dollar valuations. Rathmann says ScaleFactor is headed
that way as well. “Were are growing quickly. We’re not a unicorn yet but
that’s the next step for us,” said the executive.
“We’re really excited
about the diverse viewpoints now being brought to the company. We’re
just getting to the net wave of what ScaleFactor will be.”
Source. Forbes, Donna Duscalso, August 8, 2019
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