With Bitcoin’s market capitalization approaching $1 trillion, and hundreds of billions more in value in a host of other coins and projects, boring old taxes are becoming a big headache – not just for consumers, but the exchanges, businesses dabbling in the sector, and governments getting involved.
While others speculate on the coins themselves in the new gold rush, entrepreneur Austin Woodward’s happy to provide the picks and shovels. His startup TaxBit automates all those gains and losses for the customers of exchanges and power users alike. And with Utah’s largest-ever Series A funding round in the bag, he’s on track to build a buzzy business in the process.
“The entire existence of this asset class that can be so disruptive to our financial sector is at risk because of tax and accounting compliance at scale,” Woodward says. “There’s no NetSuite, Oracle or SAP of cryptocurrency.”
Founded in 2018, TaxBit’s raised $100 million in its Series A financing, led by investment firms Paradigm and Tiger Global. PayPal Ventures, Coinbase Ventures, Winklevoss Capital, the investment firm of the billionaire Winklevoss twins, and others including Bill Ackman and Qualtrics cofounder Ryan Smith joined the round, which takes the Utah-based startup’s total funding raised to more than $107 million.
Initially a consumer-facing product, today TaxBit offers its software to a mix of individual practitioners and, more lucratively for the startup, the businesses that help them invest and trade: crypto exchanges, wallet providers, lending platforms and the like. TaxBit’s software is white-labeled, meaning that users of those tools will sometimes know they’re working in the startup’s software, sometimes not, often accessing it through the “tax center” sections or pages of the companies’ websites. TaxBit has processed more than one million tax forms to date, the company says.
TaxBit got its start as Woodward and his brother, Justin Woodward, began to explore the emerging crypto category while in their previous jobs. Justin was working in a federal judicial clerkship while attending law school at the University of Chicago; Austin was spending nights researching and dabbling in crypto assets while an early employee at Qualtrics, the customer experience company that is one of Utah’s recent tech breakouts. Austin Woodward says one formative moment was when he was responsible for Qualtrics missing payroll in Australia because he sent a wire 10 minutes late that took 48 hours to clear – a problem, he believed, that crypto could solve, alongside others like transaction fees, cross-border payments and the ability for non-accredited investors to buy small pieces of assets like real estate through tokens.
When SAP bought Qualtrics in a shock move for $8 billion just days before it was supposed to go public in November 2018, Austin Woodward, who’d worked closely on its S-1 filings for that process, saw his cue to work on a tax solution in crypto full-time. (Qualtrics eventually went public after all in a spin-out this past January.) With a cousin, Brandon Woodward, focused on front-end development and design, the Woodward brothers moved into their dad’s basement; their father was also their first financial supporter, cutting them an initial check to get going.
Soon, Album Ventures backed TaxBit in a pre-seed round, and as the business scaled to “many thousands” of individual users for its consumer-facing tool, it raised a $5 million seed round in December 2019. In January, the venture arms of Coinbase and PayPal invested in a strategic round alongside its previous investor, Winklevoss Capital. Scant weeks later, Paradigm, the crypto-focused venture fund founded by Sequoia veteran Matt Huang and Coinbase cofounder Fred Ehrsam, had come knocking, as did Tiger Global, a leading growth equity investor in the software world.
“They bring a ton of energy to solving crypto tax,” says Huang. “For the pitch, the whole team got on a Zoom call on a Saturday night, and Austin was almost jumping through the Zoom screen.”
Why raise $100 million so fast? Austin Woodward, TaxBit’s CEO, says the money is to invest in the company’s enterprise tools and international expansion, with the United Kingdom coming first. Eventually TaxBit hopes to offer something like a traditional enterprise resource planning tool for corporations, helping them manage crypto transactions for optimal tax results much like other software tools do for foreign currencies. Governments – both the tax collecting agencies and municipalities that offer crypto as payment – could also prove natural clients. That means hiring from about 40 employees to more than 100 by year’s end, Woodward says, and building out a sales and marketing team that was largely the founders and vice president Michelle O’Connor, a veteran of crypto exchange Uphold, until now.
“We were called the TurboTax of crypto really early in this, and that was glamorous to us for what, two weeks?” Woodward says. “And then we realized we don’t want to be your tool you log into on April 14 because you have to, just to file stuff.”
TaxBit’s story so far reminds at least one person of Qualtrics’ own trajectory – its cofounder and chairman, Smith, now the owner of NBA franchise the Utah Jazz and an investor in TaxBit following the raise. Like the Woodwards, Smith built Qualtrics with his brother and father from home for years, only raising capital when the business was well-launched. “This is my way of getting into crypto,” Smith says. “When building a startup like Qualtrics, you wonder how many people are paying attention. Austin was definitely paying attention.”