Benjamin Franklin famously said, “nothing in this world can be said to be certain, except for death and taxes”, and online businesses are no exception. With easy access to global markets, these companies have grown rapidly — often unchecked by regulation. But at some point, like all of us, they just need to pay their taxes.
Online businesses could manage this process manually for every buyer and seller, but at scale, this just isn’t feasible. Existing manual processes quickly break down — imagine, say, Uber processing taxes and invoices for 15 million rides per day.
A surge in government oversight (especially in Europe) has brought this issue to the fore. Regulators are waking up to the huge contribution that online commerce should be making to public finances and are busy trying to address this gap. This means cracking down on compliance, demanding businesses follow local rules for applying tax, structuring invoices and declaring revenue, and in many cases requiring tax reporting in real-time.
In practice, most internet businesses don’t have the time, manpower or tools to deal with this challenge. Finance teams can choose to build an in-house solution, but building and maintaining an in-house tax compliance product requires heavy engineering resources, and CTOs don’t have the spare devs to build and support custom software.
This leaves tax, like many other parts of backend ecommerce infrastructure for online businesses, as a huge, mostly unaddressed issue, creating a large and fast-growing $7b market across Europe and the US alone.
Enter Fonoa. Their API-powered, modular solution helps fast-moving, large-volume online businesses automate all aspects of tax. From determining and calculating which taxes apply to transactions to generating locally compliant invoices and reporting to relevant authorities, their platform automates tasks that competitors still do manually — or not at all.
When scanning the market for a player up to the task, Fonoa stood out to us right away. Their product is a step improvement from existing offerings because of their hyperfast customer onboarding, a full end-to-end offering, and a broad global coverage.
Firstly, Fonoa can onboard customers in weeks, in contrast with the months required by incumbents. The quicker onboarding process is driven by a proprietary automated review of existing tax invoices to develop custom logic & rules. Secondly, Fonoa has the most complete offering, with an end-to-end product for online businesses, compared with point solutions within tax. Finally, Fonoa’s geographic roots in Europe mean they have the best non-US coverage in the market so customers can start processing transactions real time and out-of-the-box in 100+ jurisdictions. And the US is next on the product roadmap.
It’s no surprise then that Fonoa has established itself as the go-to solution for marketplace, SaaS and digital content leaders, attracting category leaders like Zoom, Spotify, Careem, and Booking.com.
Their approach comes from direct experience. Founding team Davor Tremac, Filip Sturman and Ivan Ivankovic felt the pain of dealing with cross-border taxes first-hand while leading and managing the rapid expansion at Uber in Southern Europe, one of its most successful divisions. Tasked with building a cross-jurisdictional tax compliance solution to keep the growth on track, they realised that the problem they were solving was one that every online business faced. When they left Uber to start their own project, their former employers weren’t just encouraging — Uber became Fonoa’s first customer.
In addition to building a deeply technical product which is incredibly easy for the end-user to work with, Davor and his team have been working tirelessly to recruit , including world-class executive talent from Checkout, GitLab, and Twilio alongside other fellow Uber alumni.
We are delighted to be participating in Fonoa’s $60m Series B round, alongside Coatue, Index, OMERS, FJ Labs and Moving Capital, as they bring their solution to more businesses. As the world of digital-first business accelerates, the Fonoa team has the tech and understanding to break through the roadblocks, making taxes simple, automated and borderless, and helping their customers grow at the speed of their ambition.