TaxJar, a company that automates sales tax collection for eCommerce businesses, just raised $60 million from Insight Venture Partners, with the assistance of our friends at SurePath Capital Partners. TaxJar’s last funding round was a $2 million seed round in 2014. The company launched its first product in 2013.
TaxJar says it will use the funds to continue to expand its entirely virtual team, which now includes 60 people. The company also plans to ramp up product development, research and go to market for its newest offering, TaxJar Plus, which is aimed at mid-market companies.
TaxJar reports having 15,000 small business customers, which means the latest raise amounts to an investment of about $4,000 per existing customers. TaxJar generates $84 per year ($17/month) per customer from its basic program, though it’s new Plus product aims to generate higher fees from larger businesses with more complex needs.
Looking at it another way, it’s remarkable that a completely virtual company with 60 employees can raise this kind of money. It’s latest raise amounts to $1 million per employee.
Any way you slice it, this investment is an enormous vote of confidence in TaxJar’s product, as well as its ability to scale deeper into the SMB space as well as upmarket. While small business software is a challenging space in many ways, the beauty of it is that the U.S. SMB market is so vast that multiple players can have success without having to dominate their segment of the market.
This investment also is a big bet that there is a tremendous upside in enabling SMBs to sell online, which TaxJar does by making a complex process, collecting state sales tax, simple.
In a blog post explaining their decision to take on such a big funding round, TaxJar founder and CEO Mark Faggiano said the company has been profitable for two and a half years and only took on money if they could adhere to the principals that got them to where they are.
“Knowing that we could continue on the same path growing a profitable business ourselves, we were very clear with any potential partner that there were, and always will be, some non-negotiables for us: Our culture, remaining 100% remote, taking care of the team, putting our customers first, and, retaining control of the future of TaxJar,” Faggiano wrote.
Faggiano also said in the post that the company’s limited use of outside capital to this point means they have had to learn to be capital efficient, which will pay dividends moving forward as they deploy the $60 million to grow the company.
The emphasis on having a 100% remote organization is interesting. One of the themes underscoring our work at the Tech Adoption Index is that with the emergence of an app ecosystem that businesses can use to start and operate a company, much of the operational infrastructure once considered essential no longer is. The office is one of these elements. TaxJar is a living example of how to run a business in the age of the business app.