Taxdoo, a company that has developed an “automated platform for financial compliance” specifically for businesses engaged in cross-border e-commerce, has secured $21 million in a new round of investment.

This Series A funding round was led by venture capital firm Accel, with additional investment from Visionaries Club, 20VC, and current investor HTGF. The newly acquired capital will be used to support Taxdoo’s expansion plans – including moving into new international markets – as well as to increase its workforce, invest in research and development, and enhance its sales and customer support teams. Harry Nelis of Accel has taken a seat on Taxdoo’s board of directors.

The participation of Harry Stebbings’ 20VC is particularly interesting, given that the fund, initially focused on U.S.-based startups at various stages, was not expected to conflict with Stebbings’ position as a partner at European VC firm Stride. Taxdoo is headquartered in Hamburg, Germany. Stebbings explained via WhatsApp that “20VC primarily invests in the U.S., but is also able to invest in Europe, specifically excluding the U.K. and Paris, where Stride operates.”

The company was established in May 2016 by Christian Koenigsheim, Matthias Allmendinger, and Roger Gothmann, all of whom had recently completed their PhDs in finance at the University of Hamburg. Taxdoo aims to simplify the complex tax and compliance challenges faced by cross-border e-commerce businesses selling on platforms like Amazon, eBay, and Shopify through the use of automation. These businesses often struggle with increasing complexities related to VAT, accounting, and other compliance requirements, compounded by fragmented data across numerous online systems.

Taxdoo consolidates this data into a unified platform and then employs its proprietary technology to automate data ingestion at the transaction level, calculate taxes, and manage filings throughout Europe. The platform also facilitates collaboration between customers and their tax advisors, and streamlines other compliance tasks, such as Intrastat reporting.

“Selling products across European borders has become increasingly straightforward from a marketing and logistics perspective, but the resulting compliance obligations – such as accounting and VAT – present a significant challenge for sellers,” explains Christian Koenigsheim of Taxdoo.

“Managing these issues manually with spreadsheets is highly prone to errors. To address this, we’ve leveraged our specialized knowledge to automate the entire process – from collecting data to submitting VAT returns in various countries and integrating transactions into the seller’s accounting software.”

Koenigsheim states that a typical Taxdoo client generates approximately €5-10 million in annual revenue by selling products on various marketplaces and through their own online store. “Our largest clients are global consumer brands with annual revenues exceeding €150 million,” he notes.

These clients include direct-to-consumer brands such as air up and YFood, as well as e-commerce companies like OmniDeal and sellvin. “We also collaborate with tax professionals, ERP system providers, and e-commerce agencies to assist them in managing these complex issues for their clients,” Koenigsheim adds.

“Our core strength lies in our ability to automate the complete workflow from beginning to end. This begins with gathering data from diverse sources, including marketplaces, online stores, and ERP systems, using our automated connectors. Our system [then] analyzes the data in accordance with all relevant regulations and prepares the necessary returns across the EU, which are submitted by an international network of tax partners utilizing our user-friendly software solution.”

Taxdoo’s data can also be transferred to a seller’s accounting system, simplifying collaboration with local tax advisors.

The potential market for Taxdoo’s services is expanding rapidly, driven in part by the increased digitization spurred by the pandemic and the overall growth of e-commerce. Taxdoo cites statistics indicating that cross-border transactions now account for roughly 25% of all e-commerce transactions in Western Europe and Scandinavia, and this percentage is continuing to rise.

Harry Nelis of Accel commented: “As e-commerce continues to flourish and companies of all sizes seek to expand their international reach, there is a growing demand for integrated financial and tax compliance solutions. Taxdoo’s founders possess a unique combination of expertise in tax, finance, and software, and we are excited to partner with them in building Taxdoo into a leading company in this category.”