This Utah startup just raised $100 million to address the looming tax problem with cryptocurrency
Taxbit : Boring old taxes are becoming a significant headache—not just for consumers, but also for exchanges, firms experimenting in the industry, and governments becoming involved—with bitcoin’s market capitalization approaching $1 trillion and hundreds of billions more in value in a plethora of other coins and initiatives.
While others in the latest gold rush speculate on the coins themselves, entrepreneur Austin Woodward is happy to provide the picks and shovels.
His company, TaxBit, automates all of these gains and losses for both exchange clients and power users.
With Utah’s largest-ever Series A fundraising round under his belt, he’s well on his way to building a buzzy company.
“The very existence of this asset class, which has the potential to be so disruptive to our financial sector, is in jeopardy due to large-scale tax and accounting compliance,”
Woodward argues. “Cryptocurrency has no NetSuite, Oracle, or SAP.”
TaxBit was founded in 2018, and its Series A funding was led by investment firms Paradigm and Tiger Global.
PayPal Ventures, Winklevoss Capital, the wealthy Winklevoss brothers’ investment business, Coinbase Ventures, and others, including Bill Ackman and Qualtrics cofounder Ryan Smith, participated in the round, bringing the Utah-based startup’s total funding raised to over $107 million.
TaxBit’s software is now available to a combination of individual practitioners and, more lucratively for the startup, the businesses that enable them invest and trade: crypto exchanges, wallet providers, loan platforms, and the like.
TaxBit’s software is white-labeled, which means that users of such products may or may not realise they’re using TaxBit’s software, which is frequently accessed through the “tax centre” sections or pages of the companies’ websites. TaxBit claims to have handled more than one million tax forms to far.
While working at their prior employment, Woodward and his brother, Justin, began to investigate the developing crypto market.
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.
Justin was working in a federal judicial clerkship while attending law school at the University of Chicago; Justin 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.
One formative experience, according to Austin Woodward, was when he was responsible for Qualtrics’ missing payroll in Australia because he sent a wire ten minutes late that took 48 hours to clear—a problem that crypto could solve, along with others such as transaction fees, cross-border payments, and the ability for non-accredited investors to buy small pieces of assets such as real estate through tokens.
Austin Woodward, who had worked closely on Qualtrics’ S-1 filings for that process, viewed it as his cue to work full time on a tax solution in crypto when SAP bought it for $8 billion just days before it was set to go public in November 2018.
(Qualtrics did, after all, go public in a spinoff this past January.) The Woodward brothers relocated into their father’s basement, with their cousin Brandon Woodward focusing on front-end development and design.
Their father was also their first financial supporter, writing them an initial check to get them started.
Soon after, Album Ventures invested in TaxBit in a pre-seed round, and the company raised a $5 million seed round in December 2019 as it grew to “many thousands” of individual users for its consumer-facing application.
Coinbase and PayPal’s venture arms, as well as prior investor Winklevoss Capital, participated in a strategic round in January.
Only a few weeks later, Tiger Global, a leading growth equity investor in the software industry, and Paradigm, a crypto-focused venture firm headed by Sequoia veteran Matt Huang and Coinbase cofounder Fred Ehrsam, had gone knocking.
“They put a lot of effort into resolving crypto tax,” Huang says. “On a Saturday night, the entire team got on a Zoom call for the pitch, and Austin was almost jumping through the Zoom screen.”
Why is it necessary to raise $100 million in such a short period of time?
According to Austin Woodward, CEO of TaxBit, the funds will be used to expand the company’s enterprise products and worldwide operations, with the United Kingdom being the first stop.
TaxBit eventually wants to offer something akin to a typical enterprise resource planning tool for businesses, assisting them in managing bitcoin transactions for optimal tax results in the same way that other software solutions assist with foreign currencies.
Governments—both taxing authorities and municipalities that accept cryptocurrency as payment—could be natural clientele.
That means expanding the sales and marketing team, which has mostly consisted of the founders and vice president Michelle O’Connor, a veteran of crypto exchange Uphold, until now, from approximately 40 to more than 100 by the end of the year, according to Woodward.
“Early on in this, we were dubbed ‘the TurboTax of crypto,’ and it was glamorous to us for what—two weeks?” According to Woodward.
“And then we realised we didn’t want to be the tool you log into on April 14 solely to file paperwork.”
TaxBit’s tale thus far reminds at least one individual of Qualtrics’ own trajectory—Smith, the company’s founding and chairman, is now the owner of the NBA’s Utah Jazz and a TaxBit investor following the fundraising.
Smith, like the Woodwards, founded Qualtrics from the ground up with his brother and father, only obtaining finance once the company was well-established.
Smith explains, “This is my method of getting into crypto.” “You wonder how many people are paying attention when you’re building a startup like Qualtrics. Austin appeared to be paying attention.”