Accounting software startup Karbon banks $93 million

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

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

Now headquartered in the US, it provides software to help small and medium-sized accounting businesses run their practices.

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

Speaking to SmartCompany, McLeod says it’s been a strong few years for the business.

The COVID-19 pandemic saw small and medium-sized accounting firms switch en masse — like everyone else — to a work-from-home model, meaning tech solutions were increasingly in demand.

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

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

At the same time, the industry is progressing to be more digitally enabled, especially in the US and Canada. The startup has also expanded into the UK market.

While McLeod doesn’t share any specific revenue growth figures, he does say the business is “doubling” year-on-year, and currently has about 3000 customers on the books.

“It’s not really about the revenue. It’s just about making sure that we do the best we can for the industry,” he says.

A boost for SME tech

The funding is mainly pegged for hiring, particularly in Sydney, where the startup is building out its R&D Centre of Excellence, McLeod says.

The business expects to hire about 170 people in 2022.

But securing backing from Tidemark Ventures is about more than cash in the bank.

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

“We’re super thrilled that we have the resources from really smart people and that we can assist what is traditionally a pretty unsexy industry.”

This is not the first major investment into ‘unsexy’ tech supporting small businesses this year — or even this week.

Just yesterday, CBA announced it had invested in fintech startup Paypa Plane, to bolster its payments offering for small businesses.

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

McLeod partly puts this down to businesses “learning to live with” COVID-19, and transitioning into the ‘new normal’ of remote and hybrid work, requiring increased digital capabilities.

“It is definitely impacting the way that businesses do business,” he says.

Is Karbon the next Aussie success story?

Tidemark has backed a slew of wildly successful SaaS startups, including the likes of Xero, SiteMinder and many, many more.

For Karbon, securing a significant chunk of funding from them is an endorsement of the tech and also the need for it in the market.

When asked whether Karbon is set to be the next global Aussie success story, McLeod is modest.

“We’re just heads-down, doing what we’re doing. We love our Australian roots … but we’re a global company.”

He would like to see more Aussie businesses gaining international attention and international customer, he adds.

“I think it’s great for the country.”