ClearTax, which helps Indians file their tax returns online with minimum stress, is on a roll this year. The Bengaluru-based company, which graduated Y Combinator two years ago, announced a $12 million Series A round today, just one month after closing a $2 million seed round following an initial $1.3 million raise.
ClearTax CEO and founder Archit Gupta told TechCrunch that three announcements over such a short period wasn’t the company’s plan, but that is how the funding materialized.
“It was not visible for us whether we could do a Series A so quickly,” he said in an interview. “2016 has been a year that is slow so we expected it to be more difficult.”
ClearTax counts Founders Fund, Sequoia and notable angels like PayPal founder Max Levchin, early WhatsApp exec Neeraj Arora and AngelList’s Naval Ravikant among its backers, but this new round was provided in its entirety by SAIF Partners. Gupta said that was down to the chemistry he found in SAIF’s Ravi Adusumalli.
The money is likely to last some time and will be used to help grow the ClearTax user base and expand its reach into new financial products.
“Even with 4x our current headcount, we won’t need more capital for three to four more years,” Gupta told us, adding that he anticipates that ClearTax can break even within the next two years. “We bootstrapped for three and a half years, we understand the value of money a lot.”
ClearTax is best known for its online tax service, which is far simpler and faster to use than the service offered by the government. More than one million Indians have filed tax returns using ClearTax, the company said, although that represents just a fraction of the estimated 60 million plus that will use other online services to file this year (India is pushing to make all tax filings online by 2016).
Beyond continuing to improve its core service and increase usage of it, ClearTax is also developing three new financial products to expand its reach.
First is a tax return service for businesses, which is focused around the Indian government move to evolve the country’s outdated and inconsistent VAT regulations to a more standardized GST system. The second is a business tax system for SMEs and independent contractors, which has been in beta for some time.
Finally, the company is building out a tax savings product that will bring the same idiot-proofing that has made ClearTax popular for tax returns to the space of investing. Citing that 60 percent of users are aged between 22 and 30, Gupta said he believes there’s plenty of space to educate the new generation of young professionals and workers on how best to use their money.
“They are worse at tax saving than any other demographic, [but] these tools and instruments to help them don’t exist in India — to me it feels incredibly frustrating,” Gupta (pictured below) explained.
The tax investment product is not unlike a U.S. 401K except that, while those in America must wait until they retire to access to capital, India’s lock-up period is far shorter, at between three to five years.
The idea is to provide information and choice to those who want to invest, while also removing inefficiencies in the process. ClearTax uses information already on file for a user — their tax and salary data — to match them with which of India’s top 20 funds are best for them and their financial situation. It takes a set percentage from an investment in any fund, which is labeled clearly for users to see. Gupta argued that it is a superior approach to brokers, who have “a strong bias for making the maximum commission” regardless of what is actually best for their client.
New products need new hires, of course, and the freshly raised capital will go in part toward increasing ClearTax’s headcount from the current 100 to 300 by the end of this year. Half of the new staff will be product engineers, Gupta explained, and the company is looking both inside India and to the U.S. — particularly Indian expats in Silicon Valley — to fill its vacancies. He added that the company is also open to making acqui-hires and acquisitions to bolster its ranks.
“Now we are starting to see small teams of technologists doing fintech now that it is ‘hot’ in India. If we see a team that is good and it makes sense for us, we’d be happy to explore that given that we have capital. [Overall,] it would really depend on the team,” Gupta said.
Note: An SEC filing reports that ClearTax has raised $24 million, however Gupta told TechCrunch that the information is erroneous and should read $12 million. The company said it is in the process of having the filing amended accordingly.