Despite all the talk of doom and gloom about the economy, entrepreneurship is actually on the rise in the U.S.: In 2024, an average of 430,000 new business applications were submitted every month, marking a 50% rise from 2019.
But the number of accountants these new businesses will need to maintain their books, file taxes and do related accounting work is dipping. Nearly 75% of CPAs are expected to retire in a decade, and fewer graduates are choosing accounting because it simply doesn’t pay as much as fields like technology and finance.
Serial entrepreneur David Phillips sees an opportunity to fill this growing gap with his latest venture Fondo, which uses software, AI, and accounting experts to offer a bookkeeping platform aimed at startups and small- and medium-sized businesses.
Phillips founded Fondo in 2020 after selling his coding school startup, Hackbright, to Capella University in 2016. He’s also an angel investor, having invested in over 85 startups, including Rippling, Flexport and Liquid Death.
The four-year-old startup, which operates on a subscription-based model, has already secured approximately 1,200 customers, reached annual recurring revenue of $6 million, and is profitable, Phillips said. Its customers include Eleven Labs, Karat, PostHog, Campus and Limitless AI.
“To date, we have saved our customers over $75 million in Delaware Franchise Tax and helped them receive over $16 million back from the IRS in tax credits,” Phillips said.
To double down on its traction, the company recently raised an oversubscribed $7 million seed round led by Money Forward, a Tokyo-based fintech company, with participation from Y Combinator, Motley Fool Ventures, Next Coast Ventures, a16z Scout Fund, Index Ventures Scout Fund, and Twenty Two Ventures. The round values the company at $66 million.
Fondo is definitely not alone in identifying the opportunity here. A host of companies including Pilot, Digits, Finally and Bench provide accounting services to small and medium-sized businesses.
But Phillips feels Fondo differentiates itself by offering an “all-in-one solution” aimed at high-growth startups. “Traditionally, founders use separate services for each function, resulting in inefficiencies and a higher risk of errors,” he said. “Fondo combines these in one platform to simplify financial and tax operations for startups.”
The outfit will use the proceeds to invest in products and automation. It is also building an AI agent for its internal team and customers, who can use it to extract insights and analysis about their financial statements, accounts, cash flow and more, Phillips said.
Fondo currently has about 70 employees, and is hiring across product, engineering, accounting and other roles.
“We’re focused on building a robust product that evolves with the needs of startups. This includes expanding our analytics and reporting capabilities, adding integrations with other tools that founders use, and enhancing our tax-saving options. We’re also looking at ways to support startups as they scale internationally, navigating the complexities of global compliance,” Phillips said.