Tactic, a startup which helps companies manage — and simplify — cryptocurrency finances, comes out of stealth today with $2.6 million in seed funding.
Founders Fund and financial automation startup Ramp co-led the fundraiser for Tactic, an eight-person team based in New York. Elad Gil and Figma co-founder Dylan Field also provided funding.
CEO Ann Jaskiw founded Tactic after learning that the founders of Web3 were managing their accounting in spreadsheets. Existing accounting software vendors, she concluded, “were not designed to handle crypto transactions.”
The core of Tactic’s product, Jaskiw said, is to help a CFO or CFO answer the question, “Where did the money go?” after a quarter.
“Right now, for most finance professionals, their audit trail of crypto transactions is a debit transaction from Silicon Valley Bank, or any bank, in a centralized exchange like Coinbase,” explained Jaskiw. “Tokens leave that central place, and then it becomes a big question mark. What we’re seeing is people spending a lot of time in manual spreadsheets, trying to track transactions that are happening and trying to calculate their wins and losses. It’s just incredibly cumbersome right now.
In general, companies that interact with blockchains struggle to make sense of their fragmented business, according to Jaskiw.
“They tend to manage multiple wallets on different blockchains and hold funds in centralized exchanges or self-custody solutions like Gnosis Safe,” she said.
This is where Tactic comes in.
Tactic says it tackles the problem of accounting for a company’s cryptocurrency holdings and on-chain activity by aggregating data from disparate sources to give companies “a complete view of their sales and activities”. Its software, Jaskiw said, helps companies automatically categorize transactions and apply accounting logic such as calculating US dollar gains/losses and taxable events. Accountants can then reconcile a company’s crypto sub-ledger with traditional accounting software like QuickBooks.
“No matter what they’re building, it can be any on-chain transaction,” Jaskiw said. “But there just isn’t a consistent audit trail if you’re a crypto business. So if you have a normal bank account, you have all your own inputs and outputs, and you can have more than one bank account, but it’s usually in the same place – whereas crypto transactions can span a dozen wallets or different products.
After talking to hundreds of companies, Tactic found decentralized finance or “DeFi” transactions to be the most problematic. For example, according to Jaskiw, a single interaction with a smart contract can generate hundreds of “nested transactions,” all of which must be broken down for accounting purposes.
Tactic, she said, has partnered with accounting firms to help interpret accounting guidelines for DeFi-specific activities such as staking, NFT minting and airdrops.
Since launching in 2021, Tactic says it has recruited “dozens” of clients, ranging from early-stage startups to billion-dollar companies across all industries, including NFTs, protocols and DeFi. The company designs its offering to work with businesses that have “hundreds of thousands” of transaction volumes per month.
“It’s a sore point for everyone,” Jaskiw told TechCrunch. “The bigger an organization gets, the more complex and serious the problem becomes. So that’s where we see the most excitement about it.
She also believes that a The common misconception about the crypto space is that many people try to avoid regulation. Tactic, Jaskiw said, found the opposite to be true.
“A lot of companies, the private C body in the US in particular, are really trying to do the right thing, follow the rules and stay compliant,” she said. “They currently lack the tools and guidance to be able to do this effectively.”
John Dempsey, Vice President of Strategy and Operations at Tactic, says Tactic makes it “easy” for businesses to transact in cryptocurrency, “knowing they can run their financial business cleanly and compliantly” . Dempsey is the former vice president of products at blockchain forensics firm Chainalysis, a blockchain analytics company that shut down last March a $100 million Series D funding, doubling its valuation to over $2 billion.
But Web3 companies aren’t the only ones struggling with this problem.
Crypto is ‘quickly penetrating’ even non-crypto businesses, says Scott OrnCOO of Kruze Consulting, a CPA firm serving startups.
“Crypto is quickly becoming part of the financial infrastructure of many startups. We see 5% to 10% of our non-crypto SaaS companies engaging in crypto transactions — these are SaaS companies that have nothing to do with crypto,” Orn told TechCrunch. “Two years ago, almost no non-crypto businesses were using crypto – that’s pretty incredibly fast growth.”
Meanwhile, he added, crypto introduces a host of accounting issues that should be addressed by software, including properly recording transactions in the general ledger, recording tax planning information, and managing transactions generated by smart contracts.
Crypto transactions can create taxable events, Orn points out.
For example, a business has a contract to get paid for a specific number of crypto tokens, and if those tokens increase in value before the business actually gets paid, it could lead to “huge revenue spikes.”
“It could push a startup towards profitability, which means taxes are due,” Orn added. “And the sale of crypto assets that have increased in value creates a taxable gain. We’ve seen both of these scenarios, and it’s hard to track all of this manually in a high-volume situation. »
Leigh Marie Braswell, director of the Founders Fund, said Tactic’s product is “already saving days for crypto accounting teams every month.”
“We believe Tactic has the potential to become a major player as more and more companies turn to Web3,” she added.
Eric Glyman, CEO and co-founder of Ramp, told TechCrunch that his company invested in Tactic based on the belief that there is a need for “simple, intuitive solutions for businesses transacting with crypto.” .
“We expect demand to only increase in the future,” he said.
Glyman also saw what he described as a “strategic alignment” with Ramp’s long-term vision (Note: the company secured its own funding earlier this year at an $8.1 billion valuation).
“Tactic is designed with the goal of saving businesses time and is unique in that the platform works for businesses that have high transaction volumes,” he said. “And everything we do at Ramp is about saving businesses time and money.”
Tactic plans to use its new capital to grow its product and its team.
“We hI didn’t have to do any external marketing or run ads,” Jaskiw said. “We had a lot of incoming excitement.”