In a recent development, ‘one-stop-shop’ tax automation startup that helps tech firms like Uber, Zoom and Booking.com manage their tax liabilities and compliance with tax authorities has raised $60m Series B funding.
The round was led by Coatue (which also invested in Causal and Deliverect this year), with support from Index Ventures, OMERS and Dawn Capital and made the Dublin-based startup one of the best-funded tech firms in Ireland. The investors also included FJ Labs and Moving Capital, and it came just six months after their $20m Series A round.
Founded by three Uber alumni, including Davor Tremac (CEO), Filip Sturman (CPO) and Ivan Ivankovic (COO), Fonoa’s global digital tax solution follows 7x revenue growth in 2021 and is looking to launch new products in the next 12 to 18 months.
To do this, the Dublin-based company has increased its headcount by 5x in the last 12 months to 110 employees across 20 countries and 35 nationalities – and plans to double in size by the end of the year with a focus on engineering and sales. Already it has been hiring people from Airbnb, Netflix, Meta, EY, Deloitte and PwC.
Davor Tremac, CEO and founder of Fonoa, said: “As we’ve grown as a business we’ve seen a number of companies wishing to reduce the cost of their operations and improve profitability when it comes to managing their indirect taxes. At the same time, we’ve seen countries across the globe try to close their VAT gaps through new regulations, and so there has been heightened demand for companies to increase their compliance. Fonoa is the only tax software solution built for the digital age.”
As per the company’s press release, the demand for Fonoa’s taxation services has grown as the COVID-19 pandemic prompted an e-commerce boom, with online payments expected to reach $8.5tn in 2022.
Lucas Swisher, General Partner, Coatue, explained: “From the moment we met Davor, Filip, Ivan and the rest of the Fonoa team, we were struck by the simplicity and effectiveness of the Fonoa platform to turn a complex process into a seamless one.”
Hannah Seal, Partner at Index Ventures said: “Dealing with taxes is a bureaucratic maze for companies operating in a single country, let alone building an international business with customers around the world. Fonoa makes it straightforward.”
Jambu Palaniappan, Managing Partner of OMERS Ventures said: “It was clear to us when we did our first investment in Fonoa that the team has built a brilliant platform that solves a genuine (and growing) problem – in an extremely user-friendly way.”
Mina Mutafchieva, partner at Dawn Capital commented: “Scaling across borders is a challenge for any size of organisation and controlling costs has never been more important. Being able to enter new markets with complex tax regimes using Fonoa’s automated tax compliance, is of great value to any size of business, saving both cost and time and providing invaluable governance support in a digital world.”
Hassle-free global tax compliance platform
It all started when the founders experienced first-hand how difficult it is to correctly calculate and report taxes to authorities throughout the world. The existing crop of tax software solutions have not been built for the digital age and require clients to bring on armies of implementation consultants on projects that could take many months to complete. Equally, software developers for these solutions don’t always understand how digital-first businesses operate around the world, meaning customers can’t quickly adapt a tool to their needs in specific countries. They built Fonoa from the ground up and developed a plug-and-play platform that allows customers to automate all relevant aspects to ensure tax compliance globally.
Where previously customers would purchase goods and services within their own country and the company they purchased from would send the VAT to the Government, the growth in companies selling their products and services worldwide has seen governments lose substantial amounts of tax revenue. The OECD estimates that countries around the world on average struggle to collect 44% of these taxes, leaving them with a massive VAT gap in their budgets each year which they are desperate to close. As a result, more than 90 countries across the globe have introduced complex tax rules for digital transactions, shifting the liability to businesses and placing an increased responsibility on them to calculate, collect and remit their taxes globally.
Fonoa takes the hassle out of all these changes and makes it easy and efficient for digital-first companies to understand, report and abide by the tax obligations in every country they work in. The platform verifies the tax status of the buyer and seller, calculates the correct tax to charge and creates a locally compliant invoice after a transaction takes place, while also providing real-time reporting to a country’s government.