Fonoa have raised $60 million in order to expand their global tax solutions.
Investors in the Series B investment round led by Coatue “include Dawn Capital, Index Ventures, OMERS Ventures, FJ Labs, Moving Capital.”
The funding, which comes just six months after a $20m Series A round, “underlines the success we have had in transforming the way digital companies including Uber, Zoom, Booking.com, Spotify, Teachable and Remote.com stay tax compliant.”
The company’s platform is reportedly “the first digital tax solution with global coverage, providing a plug-and-play modular platform that helps businesses convert a costly and complex process into an automatic and seamless one.”
Using a simple API solution, they determine and “calculate the right amount of tax a business should pay, in the right place, at the right time.” This results in greater profitability “for customers who can reduce their operating costs and increase their tax compliance at the same time.”
Fonoa was “founded by three Uber alumni – Davor Tremac, Filip Sturman, Ivan Ivankovic – who experienced first-hand how difficult it is to correctly calculate and report taxes to authorities throughout the world.”
The existing crop of tax software solutions “have not been built for the digital age and require clients to bring on armies of implementation consultants on projects that could take many months to complete.”
Equally, software developers for these solutions “don’t always understand how digital-first businesses operate around the world, meaning customers can’t quickly adapt a tool to their needs in specific countries.”
They built Fonoa “from the ground up and developed a plug-and-play platform that allows customers to automate all relevant aspects to ensure tax compliance globally.”
Where previously customers would purchase goods and services within their own country and the company they purchased from would send the VAT to the Government, the growth in companies selling their products and services worldwide “has seen governments lose substantial amounts of tax revenue.”
The OECD estimates that countries around the world on average “struggle to collect 44% of these taxes, leaving them with a massive VAT gap in their budgets each year which they are desperate to close.”
As a result, more than 90 countries across the globe “have introduced complex tax rules for digital transactions, shifting the liability to businesses and placing an increased responsibility on them to calculate, collect and remit their taxes globally.”
The firm claims it takes “the hassle out of all these changes and makes it easy and efficient for digital-first companies to understand, report and abide by the tax obligations in every country they work in.”
Their platform “verifies the tax status of the buyer and seller, calculates the correct tax to charge and creates a locally compliant invoice after a transaction takes place, while also providing real-time reporting to a country’s government.”
The demand for their services “has only increased – with the company experiencing 7x revenue growth across 2021 – as the COVID-19 pandemic prompted a transformative shift in e-commerce shopping habits.”
With taxes part of almost every online payment, “more and more businesses are set to benefit from our platform, as online payments are expected to reach $8.5tn in 2022.”
To serve this demand, the team will “use the funding to improve the features of our product and continue our global expansion.”
They will also “launch new products in the next 12 to 18 months.”
To do this, they – the company which has increased its headcount by 5x in the last 12 months to 110 employees across 20 countries and 35 nationalities – “will double in size by the end of the year with a focus on engineering and sales.”
With new employees joining from companies such as Airbnb, Netflix, Meta, EY, Deloitte and PwC, they will be able “to embed this knowledge and tailor [their] platform even further to suit more business models and industries including SaaS, the gig economy and content creation.”