In the previous chapter I told the Taxy.io story from the first ideas and team members to the first revenues. Read here how we grew our company to the innovation leader for tax advice automation solutions in Germany.
With an MVP and first paying clients from the tax industry and a well-functioning and growing team we had enough “traction” to start fundraising for our seed round.
In this 7-digit financing round — that we closed seamlessly after our EXIST phase in April 2019 — we decided to combine the seed fund TechVision Fonds (that has a great understanding of b2b and AI based business models and a freshly set up 40 mio. € seed fund), our state’s public bank and a group of business angels with decades of experience from the tax and law world in addition to a profound entrepreneurial background.
In short, we combined “deep pockets” with “smart money”, as I embraced this concept in a past article.
Of course, any entrepreneur aiming for venture capital has to answer the question if she/he can accept another mighty player next to her/him, with whom all important decisions have to be agreed upon— as opposed to the previous, freer “founders decide it all” management approach. But for us it was clear that our research intensive business model can either bloom thanks to early capital injections or perish and be overtaken by competition if developed too slowly.
A part of Team Taxy in our freshly decorated Cologne office #neuralnet
Thanks to our enhanced resources, we could finally hire the team members (data scientists, backend developers, tax experts, marketing support) we needed to further develop our solutions and leverage a huge market potential.
Simultaneously to our research and development activities we increased sales efforts with regards to tax and law firms, finance departments of large corporations and finance software providers in both Germany and Austria. The Austrian tax regulation has a ~95% similarity to the German system and after participating successfully at the LegalTech Hub Vienna accelerator program in 2019 as one of five selected legaltech startups from Europe, our network in our neighbor market reached a similar strength to the one in our home market.
Product development is a continuously iterative process, and so is go-to-market. To deliver a software solution with a distinct customer benefit, the right approach of delivering a product, implementing it, charging the client and providing after-sales services (and leveraging cross-selling potential) is at least as important as the pure software development. And by repeating this process with several clients we learned and improved a lot from the early days:
Talk to the right clients, distinguish push and pull. We’ve heard a lot of “that sounds very interesting” at the end of a meeting, but that doesn’t mean that this potential client wants to sign a contract. Pushing a potential client who doesn’t have the commitment (from the management) and the drive/conviction (from the specific counterpart) will only increase the effort you need to eventually close. Focus on “pull clients” that really want to innovate with you and want to invest the necessary budget in return of your product’s benefit.
Talk to the right person within the organization, otherwise it will cost you a lot of time and opportunity costs. We now seek for the head of tax, head of tax transformation, head of digitalization/technology, in best case at partner level. Entering through the IT department, even head of IT, hasn’t shown much success, as the IT department primarily sees more work (understandably) whereas the head of tax sees benefit.
Keep the entry barriers for new clients as low as possible. In the beginning we required a costly project for new clients to figure out if our solution works well with their data. A little known company with a totally new product but unclear benefits is not the best sales introduction. ;-) Therefore we now offer free demo versions (with synthetic data), public product videos, publish transparently in professional journals about the fantastic advantages and offer an easy technical on-boarding process with standardized modules and app stores.
In general, the higher the numbers of iterations (i.e. number of different clients, different sales processes), the faster the learning curve.
One special aspect of our business is that clients are usually large corporations (see “Elephants” in pointnine/Christoph Janz’s classification), so sales processes can take 4–10 months but if successful provide a neat 6-digit annual contract value. Compared to other SaaS business models, where clients are for example freelancers or SME and buy a cloud accounting software with a few clicks and pay a few euros, we coup with a totally different approach. So a high number of iterations and a steep learning curve can only be achieved by the parallelization of client projects (which leads to complexity, but this can be managed, too…).
At this point I have to recommend the first book of Tinker and Nahm “Survival to thrival — Building the Enterprise Startup”.
Our current products and how we achieve already now more than 20% time savings are best described in the following whitepaper or in our article of the next Handelsblatt’s REthinking:Tax (coming Sept 30th 2020).
2020 started with high speed. New colleagues joined Team Taxy monthly, the topline grew by 25–30% from month to month, and we started looking into adjacent markets to keep up with the “momentum”.
Of course, the “Corona Crisis” also affected us and changed a lot how we do business — how that turned out and what we learned is told in a separate tale here.
However, the tax advice industry proved to be a mostly stable one and we could continue rising on our trajectory. Moreover, our fundamentals didn’t change in said crisis, we are still a team working hard on helping companies coup with tax regulation.
So when we were awarded with the German Founder Award (Deutscher Gründerpreis, Top10) in March 2020 it was a great motivator during tough times and a public appreciation for intensive team work.
With loyal customers on board and a highly filled sales pipeline we continued with our growth strategy and plans to address the general law sphere (after tax law) and English speaking clients (after German speaking ones) which will lead to an 18-fold boost in market size in the future.
Exciting times behind, exciting times ahead: Taxy.io’s journey has just begun.