The idea for Anrok, a startup that handles sales tax compliance for software purchases, came to founder Michelle Valentine during a run around San Francisco with a friend who ran a finance department. The company experienced significant growth, with revenue increasing by 260% in the past year. This growth caught the attention of investors, leading to a $30 million Series B funding round led by Khosla Ventures, valuing the startup at $250 million.
The demand for tax compliance software stems from a 2018 Supreme Court decision that mandates e-commerce transactions be subject to sales tax. Valentine explains that the shift to remote work has increased the need for solutions to address tax liabilities in different states and countries. The growing opportunity to bring in more tax revenue has driven the growth of Anrok’s business, attracting hundreds of software companies as clients.
Anrok launched an expanded product last March to handle sales tax compliance in 80 countries, allowing them to sign on larger customers with a global presence. The company charges a flat-rate subscription fee for its software, along with a cut on each taxable transaction. This approach has made Anrok stand out in the startup world, attracting significant VC attention despite not being an AI-focused company.
The investment in Anrok by Khosla Ventures came amid a fast-paced bidding war, highlighting the growing interest in startups that prioritize compliance from the outset. Valentine envisions using AI as an accelerant for software’s rising tide, citing a Bloomberg study that predicts generative AI will be a $1.3 trillion market by 2032. This potential for significant sales tax collection is seen as a crucial factor governments will care about.
Valentine’s goal is to expand Anrok’s team from 55 to 80 employees by the end of the year, reflecting the company’s rapid growth and success. With a focus on helping businesses navigate the complex world of sales tax compliance, Anrok is well-positioned to capitalize on the increasing demand for software solutions in this space. The potential for continued growth and success in the market bodes well for the future of the company.
