Sales tax compliance is not a typical sexy startup area. So, it was a surprise when a number of smart, insider angels -- including Roy Rubin (founder of Magento, which he sold to eBay), and Dan Rose (VP of Partnerships at Facebook)--put their money behind TaxJar (www.taxjar.com), a San Diego startup developing sales tax compliance software. Mark Faggiano is the CEO and founder of the company, and spoke to us about what the big deal is about sales tax software compliance.
What is TaxJar?
Mark Faggiano: Taxjar is a software as a service for small businesses, to help them with their post transaction, sales tax compliance, which is everything that happens after sales tax is collected. We also work with marketplaces and shopping cart software, and seller platforms, anyone who does not want to build out their own sales tax infrastructure, to calculate how much sales tax needs to be collected.
What's the story behind the company?
Mark Faggiano: I have started a handful of companies previously, and my team has worked together in all kinds of shapes and forms going on more than ten years. We've all had this shared passion in solving complex problems for small businesses, things that get in the way of you wanting to grow, if you're a small business person. It turns out, sales taxes are the biggest, administrative burden for people who have to deal with it. We get a big charge out of taking on that kind of a challenge, and our product eliminates that burden. That's what we're trying to do, and that's what our motivation is.
People don't typically wake up and suddenly decide to start a tax related startup. How come you decided to tackle sales tax compliance?
Mark Faggiano: Good question. We have built tax related products before, and built products that people liked. As is inevitable when people do that, people ask you to expand your services. One of the two biggest things that people had asked us for was sales tax compliance. Honestly, I didn't pay much attention to it, I was so focused on other business at the time. However, a couple of years ago I decided to look into it for the first time and see what it was all about, and why exactly it was a pain in the butt. Within hours, I realized the problem was very, very real. We spent a lot of time researching this, and came out officially in June.
Is there a specific kind of customer who most benefits from your softare?
Mark Faggiano: Our typical customers are e-commerce merchants, folks that sell online for a living, or have an e-commerce presence as part of their current business. They're typically multi-channel sellers, and they not only sell on Ebay, they also sell on Amazon.com, they have their own website, and on weekends they might go to a craft fair or market and sell things in person.
How are you different from other companies tackling sales tax compliance? It seems like there are some big companies doing similar things?
Mark Faggiano: There are other solutions that exist out there, but they are all way, way up-market from where we are. The customers we are going after are largely ignored when it comes to compliance. We are trying not only to be the first-to-market provider, but one that everyone feels comfortable referring to their friends. We'd like to build out our brand equity so that people know we are going to be here for a long time.
When did you decide to go out for a funding round?
Mark Faggiano: We launched the product, and decided to see if we'd have a product-market-fit. It really didn't take us long to figure out that we quite definitely had the right product for this market we're going after. We had self funded the business up to that point, and because we had various strategic relationships already with folks that invest, and people who have started companies on their own--and who have had some very successful exits--it was kind of a very natural pipeline. We were able to go and explain what we were doing, and the response was very positive. We were able to raise the money relatively quickly, which we were super excited about.