Boast.ai, a startup developing software that automates the process of claiming R&D tax credits, today raised $23 million in venture capital. The company says it will put the funds toward development of its AI-powered platform to better serve clients, launch new products, and expand into new markets.
Each year, the federal governments of the U.S. and Canada provide more than $15 billion in innovation incentives to private companies. In fact, it’s estimated that nearly a third of U.S. patents rely directly on U.S. government-funded research. But filling out the applications to receive this funding is often a cumbersome process — and yet another barrier for companies squeezed by the pandemic as venture capitalists pull back on early-stage investments.
Boast.ai, which has offices in Vancouver, Toronto, and Calgary, in addition to its San Francisco headquarters, was cofounded in 2011 by Alex Popa and Lloyed Lobo. Popa previously managed the R&D tax practices for large accounting firms, while Lobo formerly ran product and growth for a number of venture-backed tech startups.
“To get R&D government tax credit, a company needs to incur a year of R&D and development expenses, compile all the information to file with their taxes, and then wait for government processing times,” Lobo told VentureBeat via email. “Time is an expensive resource for startups and small businesses, particularly during a pandemic, when there is much uncertainty and critical business needs to handle.”
Boast.ai aims to automate the government grant application process with a machine learning-powered tax credit platform. The company’s software and teams of accountants gather data from existing technical and financial systems to help identify, categorize, and time-track eligible projects, with the goal of larger claims, lower risk, and less time invested from teams. Among the data sources Boast.ai draws on are payroll, development platforms like GitHub and Jira, and accounting, which its systems leverage to produce time-tracking documents and tax forms, along with audit evidence, timelines, and balance sheets.
“Using proprietary algorithms, we make sense of unstructured data,” Lobo said. “Boast.ai helps identify, categorize, time-track R&D tax credit-eligible projects and costs, and automate the application process.”
Boast.ai specifically targets three types of tax credits: the U.S. Research & Experimentation Tax Credit (R&D Tax Credit), the Canadian government’s SR&ED Tax Credits (SR&ED), and Interactive Digital Media Tax Credits (IDMTC). The R&D Tax Credit, which was made permanent in 2015, is a general business tax credit for companies that incur R&D costs germane to salaries, subcontractor-related expenses, and materials in the U.S. The SR&ED is a program that covers up to 70% of R&D expenditures for creating or improving existing products, processes, principles, methodologies, and materials in Canada. As for the IDMTC, it provides a refundable 17.5% tax credit on eligible salaries and wages for Canadian employees involved in producing video games, educational software, entertainment software, and simulators.
Boast.ai claims to have helped secure over $200 million in R&D funding for more than 1,000 customers to date, including Lendesk, Oral4D, and Policy Works. The startup also says it has been doubling growth year-over-year since launch, with annual recurring revenue in the “eight figures” and an over 80% gross margin.
“The pandemic has accelerated the need for capital with millions of entrepreneurs struggling, but accessing government incentives still remains a laborious process,” Popa said. “We’re democratizing access to capital so entrepreneurs can grow their business without dealing with red tape.’”
Radian Capital led the series A round announced today. Boast.ai currently has 35 employees.