Silicon Valley-based startup Kintsugi has raised $18 million in new funding led by global indirect tax technology solution provider Vertex, to further develop its AI-powered sales tax compliance platform for small and medium businesses (SMBs). The investment will enable Kintsugi to expand its reach and provide more SMBs with automated tax calculation and filing capabilities.

The growing demand for tax automation solutions, driven by the surge in e-commerce and cross-border trade, has created a significant opportunity for Kintsugi's innovative approach. The startup's software integrates with revenue-generating points, such as Shopify, Stripe, and Quickbooks, to provide a 360-degree view of revenue and instantly calculate taxes. This streamlined process allows businesses to focus on their core operations while ensuring compliance with complex tax regulations.

Kintsugi's co-founder and CEO, Pujun Bhatnagar, envisions a future where the startup's AI-enabled capabilities become the industry standard for sales tax compliance, much like Uber's impact on the taxi industry and Stripe's influence on credit card payments. "Our goal is to do it for the compliance piece in 171 countries," Bhatnagar stated in an exclusive interview.

The startup's growth is attributed, in part, to the 2018 Supreme Court ruling that allowed states to require online sellers to collect sales tax, even if they don't have a physical store in the state. This shift has driven demand for automated tax compliance solutions, with companies like Avalara capitalizing on the trend. However, Kintsugi's AI-powered approach has enabled it to carve out a significant market share, offering a more cost-effective and efficient solution for SMBs.

Kintsugi's platform allows businesses to calculate their sales tax liability for free, with charges applied only for tax filing. The startup also offers an auto-remit feature, which enables businesses to file sales tax automatically after calculating the data. With a 0.1% churn rate and a customer base of 2,400 businesses, ranging from pre-revenue startups to companies generating $500 million in revenue, Kintsugi has demonstrated its value proposition.

The investment from Vertex, a Pennsylvania-based company, is strategic, as it complements Vertex's focus on large enterprise multinational companies and complex mid-market businesses. "We at Vertex have relationships with some of the largest companies in the world who run marketplaces, who run e-commerce businesses, and we're not today in the business of servicing small companies," said Chirag Patel, chief strategy officer at Vertex. The partnership will enable Kintsugi to leverage Vertex's expertise and resources to expand its reach and develop its AI capabilities further.

The terms of the agreement include a $15 million minority investment, representing a 10% ownership interest in Kintsugi, as well as IP sharing and a commercial partnership based on a revenue-sharing model. Vertex has also committed to investing $10-$12 million in AI advancements, which will be leveraged to accelerate innovation at Kintsugi. The startup has also raised an additional $3 million from its existing investors, valuing the company at $150 million post-money, up from $80 million in November.

Kintsugi's expansion plans include entering new markets in South America, Africa, and the Eastern world, including India and China. With a strong profit margin of over 93% and a team of 95 employees, the startup is well-positioned to capitalize on the growing demand for tax automation solutions. The partnership with Vertex is likely to further accelerate Kintsugi's growth, enabling the startup to become a leading player in the sales tax compliance space.