Why Did ScaleFactor the SME Bookkeeping Startup Failed?


Though the pandemic may have been a death knell, ScaleFactor was on rocky ground long before, Forbes found. Technology startups are often rewarded for a “fake it ‘til you make it” mentality by venture capital firms willing to throw money at a product until it meets expectations. But ScaleFactor used aggressive sales tactics and prioritized chasing capital instead of building software that ultimately fell far short of what it promised, according to interviews with 15 former employees and executives. Rathmann says the pandemic wiped out almost half of ScaleFactor’s sales; the startup had reached $7 million in annual recurring revenue at the end of 2019. After raising capital last year, ScaleFactor hired dozens of customer service representatives to improve customer relations, only to lay off 40 of them in February as the company’s bottom line suffered. Rathmann acknowledges the decision may have affected his business once the pandemic hit, as customers demanded more human relationships, rather than automated services.

  • The round was led by Canaan Partners with participation by Citi Ventures, Next Coast Ventures, Flyover Capital, Firebrand Ventures, Broadhaven Capital, and other angel investors.
  • For those who are a good fit, and who are eager to make a fast transition to an accounting team that will be around for years to come, we are temporarily waiving our onboarding fees for former ScaleFactor clients.
  • For these software services, ScaleFactor charged around $6k annually up to $30k for their most premium plans.
  • We recognize, though, that the most important part of the accounting engagement is the human relationship; providing timely, data-driven, and bespoke advice to our clients.
  • “The proliferation of data is making platforms like ScaleFactor increasingly useful,” for small and medium-sized businesses that are looking for actionable insight in real-time, said Laffont.

I love working with small business owners and helping to develop a team of accounting unicorns. Accounting can be hard work, but watching the people who rely on our team thrive is the greatest reward imaginable. Reach out today and mention scalefactor if you’d like to take advantage of this opportunity. When the early universe was about 47,000 years old (redshift 3600), mass–energy density surpassed the radiation energy, although the universe remained optically thick to radiation until the universe was about 378,000 years old (redshift 1100). This second moment in time (close to the time of recombination), at which the photons which compose the cosmic microwave background radiation were last scattered, is often mistaken[neutrality is disputed] as marking the end of the radiation era. Scale factor is a number that is used to draw the enlarged or reduced shape of any given figure.

Why do VCs throw millions in obviously bad companies?

“So the software might look automated, but they actually had all these people on the backend,” the potential investor said. Ahead of yet another funding round, multiple venture capital firms passed on investing, according to people familiar with their decisions, having determined that ScaleFactor was more of a services business than a software platform. Today (June 25th, 2020) ‘automated’ accounting service ScaleFactor announced that it would be permanently shutting down, closing its doors on August 28th, 2020. In an announcement made by the CEO, they noted that half of their team (about 50 people) would be immediately terminated and the other half would help close out operations through the end of August. While some of their actions in closing are commendable– offering 12 weeks of severance, health care through the end of the year, recruiting assistance, and allowing their team to keep their equipment– this announcement must come as a shock… ScaleFactor set out to disrupt the accounting industry by offering “automated accounting,” something many of their competitors have tried to accomplish but have not executed well.

ScaleFactor, the accounting fintech serving the small and medium-sized business market, raised $60 million in venture funding, in its third fundraising round in about a  year. The Austin, Texas-based company had most recently raised a $60 million series C led by Coatue in August 2019, which had given the company a $360 million post-money valuation. Other investors included Canaan Partners and Bessemer Venture Partners; those investors declined to comment or did not respond to requests for comment. The company said it would redistribute a portion of its capital back to investors, but declined to say how much.

ScaleFactor Raises $30 Million to Expand Robot Bookkeeper Service, Eyes Loan Market

The new funding round follows a Series A round last July when raised $10 million. The latest round also includes contributions from returning investors Canaan Partners, Broadhaven Ventures, Firebrand Ventures, and various angel investors. On Thursday, Austin-based ScaleFactor announced it had raised a $30 million Series B funding round to expand its operations, which already serve thousands of small businesses across the country. ScaleFactor founder and chief executive Kurt Rathmann started the company from his living room after working as the CFO for a small business.

To minimize their risk and to maximize the chances of the startup to find the solution, it’s a great idea to try to attract further capital investment that would buy the company time to grow. To make the reality less obvious, instead of calling their workers accountants, they called them customer service officers. They claimed that they were able to automate SME bookkeeping and payroll thanks to a groundbreaking AI that they were developing in-house. Scale factor is defined as the number or the conversion factor which is used to change the size of a figure without changing its shape. The scale factor can be calculated if the dimensions of the original figure and the dimensions of the dilated (increased or decreased) figure are known.

About This Article

However, it seems the only disruption they ultimately caused is to their clients’ and employees’ financial lives – smack dab in the middle of a global pandemic and recession. The cosmological constant is given the symbol Λ, and, considered as a source term in the Einstein field equation, can be viewed as equivalent to a “mass” of empty space, or dark energy. Since this increases with the volume of the universe, the expansion pressure is effectively constant, independent of the scale of the universe, while the other terms decrease with time. Thus, as the density of other forms of matter – dust and radiation – drops to very low concentrations, the cosmological constant (or “dark energy”) term will eventually dominate the energy density of the Universe. Recent measurements of the change in Hubble constant with time, based on observations of distant supernovae, show this acceleration in expansion rate,[14] indicating the presence of such dark energy. Most of these features were supposed to be powered by a combination of artificial intelligence (AI) tools and accounting experts.