Kintsugi Valuation Doubles in 6 Months - AI Sales Tax Startup

Kintsugi Secures $18 Million to Revolutionize Sales Tax Compliance

Kintsugi, a Silicon Valley startup focused on automating sales tax compliance for businesses, has successfully closed an $18 million funding round. The investment was spearheaded by Vertex, a leading provider of global indirect tax technology solutions. This new capital will be utilized to broaden the accessibility of Kintsugi’s AI-powered tax calculation and filing services to a wider range of small and medium-sized enterprises.

The Growing Need for Tax Automation

The surge in e-commerce activity and international trade, coupled with the increasing intricacy of tax laws, is fueling a significant demand for automated tax solutions globally. Kintsugi addresses this need with software designed to seamlessly integrate with various revenue streams.

These integrations include popular platforms like Shopify, Stripe, Chargebee, QuickBooks, and custom API implementations. This connectivity provides a comprehensive view of revenue, enabling instant and accurate tax calculations.

A Vision for Simplified Compliance

“Our ambition is to replicate the transformative impact Uber had on the taxi industry and Stripe on credit card processing, but within the realm of compliance across 171 nations,” stated Pujun Bhatnagar, co-founder and CEO of Kintsugi, during an exclusive discussion.

Industry Shift and Kintsugi’s Rise

Established in 2023, Kintsugi recognized the pivotal 2018 Supreme Court decision as a catalyst for change within the industry. This ruling empowered states to mandate sales tax collection from online retailers, even without a physical presence within their borders.

While established companies like Avalara benefited from this shift, Kintsugi is differentiating itself by leveraging advancements in artificial intelligence to gain market share.

Cost-Effective and User-Friendly Solution

“We offer a solution that is half the cost of Avalara and effectively replaces the need for a traditional CPA,” explained Bhatnagar to TechCrunch. “A typical user can install our application in approximately seven clicks and three minutes, determine their sales tax obligations, and then complete their monthly filings in under three minutes.”

Flexible Pricing and Features

Businesses can initially calculate their sales tax liability without charge, with fees applied only when utilizing the filing services. Furthermore, Kintsugi provides an automated remittance option for seamless, automatic sales tax filing based on data collected from various revenue channels.

Impressive Growth and Customer Base

Kintsugi achieved $3 million in annual revenue last year and projects to exceed $10 million by the close of 2025. The company also boasts an exceptionally low churn rate of 0.1%, serving a diverse customer base of 2,400 businesses.

These clients range from pre-revenue startups to established companies generating between $50 million and $80 million, and even those with revenues reaching $500 million.

Vertex’s Strategic Investment

Vertex, based in Pennsylvania, views Kintsugi as a complementary asset to its existing focus on large multinational corporations and complex mid-market businesses.

“Vertex maintains strong relationships with some of the world’s largest marketplaces and e-commerce businesses, but we currently do not serve smaller companies,” noted Chirag Patel, chief strategy officer at Vertex, in a statement to TechCrunch. “Kintsugi’s specialization and scalability make it an ideal partner.”

Investment Details and Valuation

The agreement encompasses a $15 million minority investment, representing a 10% ownership stake in Kintsugi, along with intellectual property sharing and a revenue-sharing commercial partnership. An additional $3 million was secured from existing investors.

This funding round has increased Kintsugi’s post-money valuation to $150 million, a significant increase from its $80 million valuation in November.

Investing in AI Innovation

Alongside its investment in Kintsugi, Vertex is committing $10 million to $12 million to further AI development. The company intends to integrate Kintsugi’s intellectual property to accelerate these advancements.

“We are already investing in AI, but as a public company, we face quarterly performance pressures,” Patel explained. “Leveraging the innovation occurring at Kintsugi will allow us to expedite our progress.”

Strong Financial Performance and Expansion Plans

Kintsugi currently maintains profit margins exceeding 93%, as reported by Bhatnagar to TechCrunch.

With a team of 95 employees, the startup has already expanded its operations from the U.S. to Canada and Europe. Future plans include launching services in South America, Africa, and key Asian markets, including India and China.

Customer Demographics and Future Growth

Currently, 45% of Kintsugi’s customer base consists of SaaS companies, processing 5.5 million transactions with a total value of $7.7 billion. The partnership with Vertex is expected to broaden Kintsugi’s reach across diverse industry sectors.