Accounting software startup Karbon raises $93 million

Stuart McLeod, co-founder of Karbon. Source: provided.

Australian accounting software startup Karbon has raised US$66 million ($92.5 million) in funding, as money continues to flow into tech companies supporting small businesses.

The Software-as-a-Service (SaaS) startup is led by co-founders John Freeman and Stuart McLeod, who also founded payroll software solution Paycycle, which was sold to Xero in 2011.

Now based in the United States, it provides software to help small and medium-sized accountants manage their practices.

Led by prominent US venture capital firm Tidemark Capital, the raise follows a US$10 million ($14 million) cash injection in March last year and a US$7 million raise dollars in 2018.

Talk to SmartCompanyMcLeod says the past few years have been good for the company.

The COVID-19 pandemic saw small and medium-sized accountancy businesses shift en masse – like everyone else – to a work-from-home model, which meant technology solutions were increasingly in demand.

Karbon was well placed with a polished platform to deliver them at the time, McLeod says.

“That allowed us to amplify the effects a bit.”

At the same time, the industry is moving towards greater digital capability, particularly in the United States and Canada. The startup has also expanded into the UK market.

While McLeod doesn’t share specific numbers on revenue growth, he says the company is “doubling” year over year and currently has around 3,000 registered customers.

“It’s not really a question of income. It’s just about making sure we’re doing the best we can for the industry,” he says.

A boost for tech SMEs

Funding is mostly tied to hiring, especially in Sydney, where the startup is building its R&D center of excellence, McLeod says.

The company plans to hire around 170 people in 2022.

But getting backing from Tidemark Ventures is more than money in the bank.

Working with these particular investors is “a real privilege and a real honor,” says McLeod.

“We’re thrilled to have the resources of some really smart people and to be able to help what’s traditionally been a fairly unsexy industry.”

It’s not the first major investment in “unsexy” tech supporting small businesses this year — or even this week.

Just yesterday, CBA announced that it had invested in fintech start-up Paypa Plane, to bolster its payment offering for small businesses.

MYOB also recently acquired two startups to add new functionality to its SME management platform.

McLeod attributes this in part to companies “learning to live with” COVID-19 and moving to the “new normal” of remote and hybrid working, requiring increased digital capabilities.

“It definitely has an impact on how companies do business,” he says.

Is Karbon the next Australian success story?

Tidemark has backed a number of extremely successful SaaS startups, including Xero, SiteMinder, and many more.

For Karbon, getting an important part of their funding is an endorsement of the technology and also of its need in the market.

When asked if Karbon is set to be the Aussie’s next world success story, McLeod is modest.

“We’re just headlong, doing what we’re doing. We love our Australian roots…but we’re a global company.

He would like to see more Australian businesses attract international attention and attract international customers, he adds.

“I think it’s great for the country.”

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