Codat Raises $40M Series B Led by Tiger Global

Codat Secures $40 Million in Funding to Expand Fintech Data Connectivity

Codat, a company specializing in APIs that connect small-business financial data with external services, has announced the successful completion of a $40 million funding round. This investment was spearheaded by Tiger Global.

Recent Funding and Growth

Approximately a year prior, Codat secured $10 million in a Series A round led by Index. While the company also received strategic investments between rounds, details regarding these were not disclosed in a recent interview.

The company refrained from revealing specifics concerning valuation changes over the past year. However, Codat reported a tripling of its annual recurring revenue (ARR) from the close of 2019 to the end of 2020, as shared with TechCrunch.

Projected Revenue and Expansion

CEO Pete Lord indicated the company is positioned to achieve a similar growth rate this year. This would represent a ninefold increase in revenue by the end of 2021 compared to figures from two years ago.

Codat’s API facilitates the connection of corporate data originating from SMB systems – including platforms like QuickBooks and iZettle – to external providers. This service addresses a clear need: enabling small businesses to quickly and digitally share financial information with potential lenders when applying for loans.

Target Market and Client Base

Unsurprisingly, Codat primarily serves financial service companies and vertical SaaS businesses. The vertical SaaS sector represents a significant market opportunity, marking the second relevant announcement TechCrunch has covered this week.

Developing a “Plaid for SMB data” is a substantial undertaking, and Codat has been actively expanding its team to meet the challenge. The company has grown from around 50 employees at the time of its Series A funding to nearly 150, with plans to reach approximately 250 by year-end.

Beyond the API: Additional Products

Codat offers a suite of products extending beyond its core API service. These include a data visualization tool designed to present single-company data in an easily understandable format.

Furthermore, the company launched “Insights,” a service that enables cross-referencing of data ingested from various sources. Currently, Codat bundles these additional software components with its API, prioritizing maximizing usage of its primary service rather than implementing separate charges.

Future Considerations for Codat

Two key questions arise regarding Codat’s future trajectory. The first concerns the potential for introducing fees for its non-core services that enhance the utility of its API.

The second relates to the size of the companies whose data Codat aims to connect. While currently focused on SMBs, the company is gradually expanding to accommodate larger organizations seeking to share their data through its API.

The Interplay of Growth and Pricing

These questions are interconnected. Codat’s revenue model is based on the number of companies connected through its API. Given the significantly larger number of SMBs compared to large corporations, targeting this segment remains strategically sound.

Offering value-added services alongside the API further supports this SMB-centric approach. However, as Codat’s service evolves, it may encounter data from larger enterprises.

Should this occur, the current pricing model may become less suitable. Alternative pricing strategies, such as charging based on the volume of data passed rather than the number of companies connected, could be considered.

Ongoing Expansion and Future Outlook

Codat is currently hiring in San Francisco, New York, and London. The impact of this new investment from Tiger Global on the company’s future growth remains to be seen.