As the online marketplace continues to grow with the passage of time, enterprises and high-volume online merchants are becoming increasingly common. But managing taxes is a problem shared by both offline and online enterprises of all sizes both due to complex tax laws and a general lack of tax education. A CNBC poll done in 2016 revealed that 25% of small business owners have no idea about the effective tax rates.
Due to the gap in knowledge about taxes, business owners end up spending tens of thousands of dollars annually on tax administration and its proper management. But that is not all, many enterprises tend to waste their resources to relieve their tax-related burdens which ultimately results in draining their workforce. Davor Tremac, Filip Sturman, and Ivan Ivanković felt the need for global tax automation through API and thus collaborated to establish Fonoa.
CEO and co-founder of Fonoa, Davor Tremac says “In the digital world, businesses and customers transact on a global scale. Country borders are no longer a limiting factor, and technology drives global trade at an ever-increasing speed,” he said. “Combined with the increased scrutiny by regulators, dealing with tax matters in a more automated and trusted way has become an ever-more pressing issue.”
Fonoa was founded in 2019 The Dublin-based company wrapped up Series A funding with participation from OMERS Ventures and Index Ventures. Fonoa is helping clients like Uber, Lime, and Zoom through its easy-to-use platform to scale across international markets and stay tax compliant.
Let’s unpack how Fonoa is simplifying the maze of tax pain points for global online merchants so that they grow and scale in a tax-compliant way in the remainder of this article.
Three Ex-Uber Alumni, the challenges with tax reporting, and Fonoa’s origin
The co-founders of Fonoa Technologies Limited, Davor Tremac, Filip Sturman, and Ivan Ivanković are all ex-Uber colleagues. Tremac used to be the general manager at Uber Croatia prior to realizing his entrepreneurial instincts and coming across the difficulties with creating tax reports for global authorities. Tremac was joined by Uber Croatia’s Senior Operations Manager Ivan Ivanokovic. Ivankovic reciprocated Tremac’s idea about finding a solution to make global tax reporting, calculation, and management easier for enterprises.
Before joining the Croatian arm of Uber, Tremac was a Mechanical Engineer with an MBA from IESE Bussiness School, University of Navarra. He joined McKinsey & Company as an engagement manager and slowly worked up to become a Bussiness Analyst. The entrepreneur in Tremac woke up during his time at the McKinsey’s in the form of Gourmeo. The company was founded by Davor Tremac in 2011 to provide a platform exclusively for fine dining by partnering with some of the best restaurants.
But after switching from McKinsey’s to Uber Croatia, Tremac became aware of the issues with tax liabilities and how it crippled internet-based merchants’ global-scale growth by diverting their focus and consuming a considerable amount of their resources on a yearly basis. As General Manager for 4 years at Uber, Tremac slowly but surely made up his mind about a software-based solution to automate taxes for businesses and luckily, he found his co-founders in colleagues Ivankovic and Sturman.
The second co-founder of Fonoa who is also the current Chief Product Officer is Filip Sturman, used to work as a business operator in the most competitive region at Uber, Uber Eats, and Trivago between Croatia, Spain, and Germany. Sturman was always interested in scaling internet-based companies and also invested in some undisclosed ones before coming onboard the idea of Fonoa.
Another co-founder of Fonoa and the chief operating officer is Ivan Ivanković, the top student at the University Vern who finished Operations Management Course from Wharton. Ivan dedicated 4 years and his skills as a Senior Operations and Logistics Manager at Uber. Just like Tremac, Ivanković also founded a company called Squee, in collaboration with 2 of his friends back in 2012. Squee was a web-based iOS app that allowed people to share, find, and buy designer products.
The trio first hand saw the struggle and wanted to do something about it utilizing each of their skills to help companies properly calculate, determine, and complete their tax obligations. But they wanted it to happen in a way without wasting a lot of company resources and maintain their focus on scaling all over the internet efficiently. Under their leadership, Fonoa has grown from a 10 to 60 people company with several notable customers across the globe.
CPO of Fonoa, Filip Sturman asks “But, why is Fonoa important? If you want to launch a business today, there are plenty of products out there to help you get going - from Stripe for payments to Twilio for customer engagement. How come figuring out taxes is so hard? Why isn’t there an easy way to implement a solution to handle all your taxes on products and services sold worldwide?”
The company finally launched in 2019 with just 6 employees who were totally unprepared for the global pandemic. Fonoa’s CEO, Tremac gave a statement on the pandemic's effect on the company's growth. He said that it accelerated Fonoa’s development significantly due to the explosive growth in online commerce. This means that Fonoa saw a more encouraging number of sales as online transactions increased globally.
CEO of Fonoa, Davor Tremac said “Combined with the increased scrutiny by regulators, dealing with tax matters in a more automated and trusted way has become an ever-more pressing issue. We built a one-stop solution that handles the complexities of tax globally, allowing digital businesses to focus on growing their core business.”
During its early phases, the company signed up Teachable, GoStudents, Uber, and Zoom as their clients who utilize Fonoa’s platform for automated tax-related services. Now this company is supporting tax automation transactions across the globe in some 100 countries. Though the headquarters was chosen to be in Dublin, the co-founders have turned Fonoa into a remote startup with several teams distributed in different parts of the world and working for the same goal.
Fonoa Products & Solutions
Lookup is one of Fonoa’s useful services using which companies may find out whether they need to charge sales tax, GST, or VAT. It is done only after verifying the tax IDs of the suppliers and customers that they have. Lookup comes in handy for all e-commerce enterprises (whether big or small) to remain tax compliant in a proper way.
Tax services from Fonoa include automatic calculation about sales tax and getting to know how much VAT, GST, and other such taxes are supposed to be levied on a global scale by client companies who opt for these services for a quick solution to their tax problems. These modular and API-first products are there to help automate the entire process conveniently.
Invoicing is another aspect related to tax which is not readily doable for a lot of companies and web-based startups that open up to accept international customers. Through Fonoa’s invoicing, it is easy to generate and send invoices that are appropriately compliant based on the local regulations. More than 100 countries all over the world are supported by Fonoa’s platform as of now.
CEO and co-founder of Fonoa, Davor Tremac says “Fonoa’s APIs “easily” integrate with a customer’s existing data so they don’t have to spend hours figuring out tax matters manually”.
Companies can explore, schedule, and automate tax reporting tasks with the help of Fonoa’s platform as per their convenience. Once chosen, this option automatically reports sales transactions by generating a compiled document that is ready to be sent to concerned authorities in real-time. Since the whole process is automated, you can rest assured that Fonoa would send sales reports when it is due.
Apart from its exclusive products, Fonoa also provides specific industry-based solutions including tax automation for an online marketplace to help them break boundaries and assess the correct tax rates to be applied on any type of transaction. This solution also takes care of the tax compliance requirements for any marketplace which is a huge obstacle for some online startups these days.
For any software business which is struggling to meet its tax requirements, Fonoa’s specifically created SaaS solutions are a life-saver. Since many software-based companies operate all over the globe, addressing international customers, tax complexities are bound to exist. But Fonoa’s API-based tax solutions help these companies understand their customers from a tax perspective so that they can contribute to the company’s revenue growth.
- Gig Economy
The gig economy is still thriving in various countries around the world where freelance marketplaces exist and are even preferred to other alternatives. Fonoa has a solution for freelance marketplaces as well by making sure that they can freely manage freelancers without having to worry a lot about tax liabilities and sharing the reality of the tax activities related to the gig economy.
- Digital content
Accelerated by pandemic, now there are several digital content platforms in the international market that cater to users from many different countries. These platforms need to stay tax compliant based on the requirements of different country’s regulatory scenarios. Fonoa helps such digital content platforms (whether they are on-demand video, or gaming, learning, music streaming, etc) to manage the compliance factor across all users.
Micromobility platforms are usually left in the dark about tax obligations especially if some of the 3rd parties are based in different countries. Fonoa helps business owners by letting them know that if you have a micromobility business then charging and cleaning small-sized vehicles like scooters is a taxable activity. Being taxable services means it requires ID verification before you transact with them.
Competitors, Market Growth, Investors, and Partners
The tax management software to which Fonoa belongs was worth approximately $5.2 billion back in 2018 before the platform launched as per a source. Another estimate says that this particular space is bound to increase to a whopping $11.1 billion by the year 2026. Though Fonoa is not alone in this market, being a remote-first automated taxation solution gives it an edge that would help each and every type of business.
Despite its humble beginnings, the co-founders managed to take it to the top and now Fonoa has employed 51-100 people residing in over 14 countries, in its venture-capital-backed company. After raising sufficient funds, Fonoa plans to focus on the expansion of its team even further. In a short span of time, Fonoa has helped several subscription-based companies to understand their global tax obligations.
CEO of Fonoa, Davor Tremac said about the company’s growth during the pandemic “More sales happening online means more work for us as each online transaction has to have a tax component,”
Fonoa technologies raised funds twice through funding rounds and the participation of investors like FJ Labs, OMERS Ventures, Moving Capital, Index Ventures, Allison Barr Allen, etc. Fonoa is seeing $4-5 million estimated annual revenue. A direct competitor of this platform is Vic.ai, a software startup that automates accounting and financial services.
“Fonoa’s solutions have helped Zoom with expanding our global marketplace offerings by assisting with tax determination, invoicing, and tax compliance,” said Richard Alexander, global VAT lead, in a statement.
Other competitors include Candis, Botkeeper, and Auditoria. Details of each of these companies are as follows;
Candis: It is a developing startup based in Berlin focussing on AI-based taxation automation that is led by co-CEO, Christopher Becker. Recently, Candis raised $13.9 million (total funding: $14.1 million) during its Series B funding round led by Viola Ventures. Another notable existing investor of Candis is Rabo Frontier Ventures.
Botkeeper: Botkeeper is an automated classification, data entry, and reporting solutions platform whose co-founder and CEO is Enrico Palmerino. The company raised $25 million in Series B funding last year (led by Point 72 Ventures) to accelerate engineering and product development. This Boston-Massachusetts-based company has received a total of $89.5 million in funding since inception.
Auditoria: CEO and co-founder, Rohit Gupta-led AI startup Auditoria automates repetitive accounting tasks. This year in March, the company raised $15.5 million during the Series A funding round led by Venrock. Auditoria was also launched in the same market as Fonoa in the same year with around 25 employees. Other investors in Auditoria are Engineering Capital, Firebolt Ventures, and Neotribe Ventures.
$25 Million and 2 Funding Rounds
Since it was launched back in 2019, Fonoa has been funded tw
ice by a total of 9 interested investors most of which are venture capital funds. Its seed funding round took place last year in November while the Series A round was planned for this year in the same month.
Fonoa’s last valuation is close to $1.5 billion while its benchmark valuation is estimated at $1.71 billion as of November 15th. The post-money valuation of the company according to Oddup’s calculations is $1.7 billion. The Oddup score, which is calculated based on numerous algorithmic calculations by our expert team, given to Fonoa is quite low (62.12).
Seed - $4.5 Million
Last year when Fonoa announced the seed round in November, the lead investor who alone participated was Index Ventures which is known for backing companies like Deliveroo and Revolut. A total of $4.5 million were raised during the seed round which was spent on rebuilding and developing the platform to accommodate even bigger internet-based enterprises.
Hannah Seal, principal at Index Ventures said “This focus on enabling growth, not simply back-office automation, attracted us to Fonoa in the first place,” Seal wrote via e-mail. “Having run Uber in multiple markets, the team has a deep understanding of the challenges of scaling across borders and has developed products that allow companies to add and expand new geographies seamlessly.”
Series A - $20.5 Million
After successfully onboarding companies like Zoom, Uber, and Lime, etc as its clients, Fonoa announced another funding round this year for Series A. This time around, a total of 8 new investors including OMERS Ventures, Moving Capital, Gautam Gupta (former COO and CFO at Opendoor and Uber), Kevin Hartz (founder at Eventbrite), etc participated to make it successful and raise $20.5 million. This round of funds was led by OMERS Ventures while Index Ventures participated as an existing investor.
Jambu Palaniappan, the managing partner at OMERS Ventures, described Fonoa’s product as “the best and most complete offering in the market.” he added, “They are focused on the full tax stack from validations to real-time reporting and have put technology rather than consulting at the core of their product,” he wrote via email. “With governments around the world more concerned than ever about compliance, now is the perfect time for Fonoa to build a globally relevant platform.”
Future plans for Fonoa
According to the CEO statement, the recent funding received by the company would be spent on team hiring and to achieve expansion of services to 140 countries by the end of the year. The $25 million raised through two funding rounds is going to be crucial for the company’s forthcoming success and growth. Once prepared, Fonoa technologies would be ready to automate taxes for the entire internet economy.
CEO of Fonoa says “Today, automation options are limited and manual processes remain the norm - forcing companies with cross-border transactions to rely on costly and complex solutions to manage their international tax footprint. We built a one-stop solution that handles the complexities of tax globally, allowing digital businesses to focus on growing their core business,”
Fonoa’s team is actively hiring global talents across a multitude of open positions to help in its international-scale development. Special attention is on hiring distributed teams and staff across the U.S. Latin America, Asia, Europe as soon as possible. There is no doubt that Fonoa is working on something substantial and necessary for the future of online enterprises operating globally. Under the guidance of its co-founders, Fonoa seems to have what it takes to transform how digital companies would take care of their tax responsibilities.